<PAGE>
Filed pursuant to Rule 424(b)(3)
Registration No. 333-30506
PROSPECTUS
2,600,000 Shares
Logo of Astex
Common Stock
----------------
We are offering 2,500,000 shares and the selling stockholders are selling
100,000 shares of our common stock with this prospectus. We will not receive
any of the proceeds from shares of our common stock sold by the selling
stockholders. Our common stock is traded on the Nasdaq National Market under
the symbol "ASTX." The last reported sale price of our common stock on the
Nasdaq National Market on March 29, 2000 was $32.875 per share.
----------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 4.
----------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----------
<S> <C> <C>
Public Offering Price.................................... $31.000 $80,600,000
Underwriting Discounts and Commissions................... $ 1.705 $ 4,433,000
Proceeds, before expenses, to ASTeX...................... $29.295 $73,237,500
Proceeds, before expenses, to the selling stockholders... $29.295 $ 2,929,500
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We have granted the underwriters a 30-day option to purchase up to an
additional 390,000 shares from us to cover any over-allotments. FleetBoston
Robertson Stephens Inc. expects to deliver the shares of common stock to
investors on April 4, 2000.
----------------
Robertson Stephens
CIBC World Markets
Needham & Company, Inc.
Adams, Harkness & Hill, Inc.
The date of this Prospectus is March 30, 2000
<PAGE>
Electronics Applications
[Photo of Astron]
ASTRON, a fully-integrated atomic fluorine source, provides highly efficient
chamber cleaning and exhaust gas abatement.
[Photo of Liquozon]
Liquozon, a complete ozonated water delivery subsystem, reduces the cost of
cleaning wafers in wet semiconductor manufacturing processes.
[Photo of Semozon]
Semozon, a complete solution manufactured by ASTeX, is our integrated ozone
delivery subsystem that helps OEM customers implement lean manufacturing
practices.
[Graphic depiction of the semiconductor process steps supplied by ASTeX
reactive gas solutions]
Leading semiconductor equipment manufacturers choose ASTeX Reactive Gas
Solutions for many critical process steps.
Metal Layer Fabrication
Insulating Layer Fabrication
Metal Deposition
Lithography
Metal Etch
Strip
Wet Clean
Dielectric Deposition
Lithography
Dielectric Etch
Strip
Wet Clean
[Photo of SmartSet]
SmartSet, a microwave power source combined with a reactive gas source,
provides flexibility of packaging and integration to OEMs who buy their
reactive gas solutions as components.
[Photo of CPS]
CPS, a fully-integrated source for various reactive gases, reduces time-to-
market for OEM customers.
[Photo of Gladiator]
Gladiator, a four-channel microwave and radio frequency power source,
reduces costs by completely integrating all power requirements for advanced
process chambers in a single subsystem.
ASTeX Complete Process Systems for Magnetic Disk Heads and Advanced
Electronic Packaging
[Photo of PQ Series III]
PQ Series III uses a patented, large-area scalable reactive gas source to
achieve high-rate uniform cost- effective etching for magnetic disk head
production.
[Photo of Series V]
Specialized electronic packaging applications require the unique thermal and
electrical properties of CVD diamond, which is produced in our Series V systems
that have advanced microwave-powered reactive gas sources.
<PAGE>
[Diagrams of semiconductor fabrication and advanced packaging processes showing
the process steps in which ASTeX current and developing products are used.]
ASTeX In Semiconductor Processing
Semiconductor Fabrication
Bare Wafer
EPI
Ion Implant
Deposition
CMP
Lithography
Clean
Strip
Etch
Advanced Packaging
Bump Fabrication
Sort & Test
Dice
Direct Attach
Final Test
Current Products
Developments
No ASTeX Products
<PAGE>
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 information different than that contained in this prospectus. We are
not, and the underwriters are not, making an offer to sell and seeking offers
to buy, these securities in any jurisdiction where the offer or sale is not
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of these securities.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information...................................... iv
Incorporation of Certain Documents by Reference.......................... iv
Prospectus Summary....................................................... 1
Special Note Regarding Forward-Looking Statements........................ 4
Risk Factors............................................................. 4
Use of Proceeds.......................................................... 13
Capitalization........................................................... 14
Price Range of Common Stock.............................................. 15
Dividend Policy.......................................................... 15
Selected Consolidated Financial Data..................................... 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 17
Business................................................................. 25
Management............................................................... 38
Principal and Selling Stockholders....................................... 42
Underwriting............................................................. 44
Experts.................................................................. 45
Legal Matters............................................................ 45
Index to Consolidated Financial Statements and Financial Statement
Schedule................................................................ F-1
</TABLE>
----------------
Our trademarks, Applied Science and Technology(R), Inc., ASTeX(R), ASTRON(R)
and Plasma Dome(R) have been registered with the United States Patent and
Trademark Office. CPS(TM), Gladiator(TM), Liquozon(TM), PQ Series III(TM),
Semozon(TM), Series V(TM), Shamrock(TM), SmartMatch(TM), SmartPower(TM) and
SmartSet(TM) are our trademarks or service marks. All other trademarks or trade
names referred to in this prospectus are the property of their respective
owners.
iii
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any document we file at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. 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 room. Our SEC filings are also
available to the public 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.
This prospectus is only part of a Registration Statement on Form S-3 that we
have filed with the SEC under the Securities Act of 1933 and therefore omits
certain information contained in the Registration Statement. We have also filed
exhibits and schedules with the Registration Statement that are excluded from
this prospectus, and you should refer to the applicable exhibit or schedule for
a complete description of any statement referring to any contract or other
document. You may:
. inspect a copy of the Registration Statement, including the exhibits and
schedules, without charge at the public reference room, or
. obtain a copy from the SEC upon payment of the fees prescribed by the
SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus and information 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 made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until all of the shares of common stock that are part of this offering are
sold. The documents we are incorporating by reference are:
. our Annual Report on Form 10-K for the year ended June 26, 1999, filed
on September 25, 1999;
. our Proxy Statement, filed on October 20, 1999;
. our Quarterly Report on Form 10-Q for the quarter ended September 25,
1999, filed on November 10, 1999;
. our Quarterly Report on Form 10-Q for the quarter ended December 25,
1999, filed on February 8, 2000; and
. the description of our common stock contained in our Registration
Statement on Form SB-2 (Registration No. 33-96098-B) declared effective
by the SEC on November 9, 1993, including any amendments or reports
filed for the purpose of updating such description.
You may request a copy of these filings at no cost by writing or telephoning
our Chief Financial Officer at the following address and number:
Applied Science and Technology, Inc.
35 Cabot Road
Woburn, Massachusetts 01801-1053
(781) 933-5560
This prospectus is part of a Registration Statement that we filed with the
SEC. You should rely only on the information incorporated by reference in or
provided in this prospectus and the Registration Statement. We have authorized
no one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front of this document.
iv
<PAGE>
PROSPECTUS SUMMARY
This summary is not complete and does not contain all of the information
that you should consider before buying shares in this offering. You should read
the following summary together with the more detailed information and
consolidated financial statements, and the notes to the financial statements
appearing elsewhere in this prospectus. This prospectus contains forward-
looking statements that involve risks and uncertainties. Our actual results
could differ materially from those anticipated in those forward-looking
statements as a result of the factors described under the heading "Risk
Factors" and elsewhere in this prospectus.
Our Business
We are a worldwide leader in the design, development, manufacture and
support of high performance reactive gas modules and power supplies used in
semiconductor device manufacturing and medical markets, as well as etch and
deposition systems for semiconductor advanced packaging, telecommunications and
magnetic sensors. Our modules create reactive gases used to deposit and etch
thin films during various steps in the manufacture of semiconductor devices.
Our modules help manufacturers improve yields, reduce overall production costs
and improve time to market. Our systems provide etch and deposition solutions
to high-growth end markets, including semiconductor packaging,
telecommunications and magnetic sensors.
Reactive gas processes provide important advantages relative to other types
of chemical processes, including higher precision and efficiency, lower cost,
and minimal damage to key materials. Reactive gases are used in many process
steps in semiconductor device fabrication including etch, strip, deposition,
chamber clean and wafer clean. Advances in semiconductor fabrication technology
will continue to be characterized by shrinking feature size and an increasing
number of process steps, which create more opportunities for the use of
reactive gases. Our expertise in designing and manufacturing these products
allows us to address the advancing technology needs of our customers and to
capitalize on the desire of our OEM customers to outsource technology solutions
to their supply partners.
The semiconductor industry has grown significantly over the past decade.
According to Dataquest, a leading market research firm, the semiconductor wafer
fabrication equipment industry will grow from $17.5 billion in 1999 to $34.0
billion in 2001. Many factors drive this growth in equipment purchases,
including capacity expansion, advanced packaging techniques and shrinking line
widths.
Since 1987, we have supplied products to the semiconductor industry, earning
a reputation for advanced process technology and manufacturing excellence. We
maintain sales, service and/or manufacturing offices throughout the world. Our
customers include semiconductor OEMs and end users.
Our objective is to be the premier worldwide supplier of reactive gas
solutions for the semiconductor capital equipment market and establish a
leadership position providing differentiated etch, strip and deposition
solutions to selected high growth markets. We intend to pursue the following
strategies:
. Extend the use of our core technologies in the semiconductor processing
market;
. Leverage our technology leadership into systems sales in new markets;
. Capitalize on our global sales and service to accelerate worldwide
growth;
. Continue to build collaborative development relationships with key
customers; and
. Grow through strategic acquisitions.
Our Address
Our principal executive offices are located at 35 Cabot Road, Woburn,
Massachusetts 01801-1053 and our telephone number is (781) 933-5560. Our
corporate web site is www.astex.com.
1
<PAGE>
The Offering
Except as otherwise indicated, all information in this prospectus assumes no
exercise of the underwriters' over-allotment option. The calculation of the
shares of common stock outstanding in the table below is based on the number of
shares outstanding as of March 25, 2000.
<TABLE>
<C> <S>
Common stock offered by ASTeX.............. 2,500,000 shares(1)
Common stock offered by selling 100,000 shares
stockholders..............................
Common stock outstanding after the offering 14,266,592 shares(2)
..........................................
Use of proceeds............................ We expect to use the proceeds of
this offering for general working
capital purposes, including
expansion of sales and marketing
activities, new product
development, purchases of
laboratory and manufacturing
equipment, expansion of
manufacturing capacity at several
of our manufacturing facilities,
and potential acquisitions and
joint ventures.
Risk factors............................... An investment in the common stock
involves risks. See "Risk
Factors" on page 4 to read about
the risks you should consider
before buying shares of the
common stock.
Nasdaq National Market symbol.............. ASTX
</TABLE>
- --------
(1) Unless we specifically state otherwise, the information in this prospectus
does not take into account the sale, pursuant to the underwriters' over-
allotment option, of up to 390,000 shares of common stock which the
underwriters have the option to purchase from us.
(2) The common stock outstanding after the offering does not include up to
3,200,644 shares of common stock issuable upon exercise of options
previously awarded or which may be awarded in the future. Currently,
options to purchase 1,480,404 shares (exercisable at a weighted-average
exercise price of $13.09) are outstanding. For more information about these
potential future issuances of shares of common stock, see "Risk Factors--
Future Sales of Our Stock Could Depress Its Market Price."
2
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Years Ended Six Months Ended
-------------------------------------------- ------------------
July 1, June 29, June 28, June 27, June 26, Dec. 26, Dec. 25,
1995 1996 1997 1998 1999 1998 1999
------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:(1)
Total revenue........... $20,005 $39,135 $47,967 $83,436 $78,209 $28,954 $61,668
Total cost of sales and
revenue................ 11,813 23,364 30,557 54,987 55,555 23,280 37,507
------- ------- ------- ------- ------- ------- -------
Gross profit............ 8,192 15,771 17,410 28,449 22,654 5,674 24,161
Operating expenses:
Selling, general and
administrative
expenses............. 4,553 7,105 6,908 11,075 13,223 6,048 9,776
Research and
development expenses,
net.................. 2,840 5,043 7,343 11,253 9,745 4,568 6,092
Other operating
expenses(2).......... -- 9,702 1,500 212 2,260 1,497 --
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 7,393 21,850 15,751 22,540 25,228 12,113 15,868
------- ------- ------- ------- ------- ------- -------
Earnings (loss) from
operations............. 799 (6,079) 1,659 5,909 (2,574) (6,439) 8,293
Net earnings (loss)..... $ 1,128 $(7,298) $ 938 $ 4,021 $(1,251) $(3,918) $ 5,792
======= ======= ======= ======= ======= ======= =======
Earnings (loss) per
share:
Basic................. $ 0.19 $ (1.16) $ 0.14 $ 0.50 $ (0.13) $ (0.46) $ 0.50
======= ======= ======= ======= ======= ======= =======
Diluted............... $ 0.19 $ (1.16) $ 0.14 $ 0.47 $ (0.13) $ (0.46) $ 0.48
======= ======= ======= ======= ======= ======= =======
Weighted average common
shares:
Basic................. 5,834 6,307 6,686 8,053 9,398 8,594 11,501
======= ======= ======= ======= ======= ======= =======
Diluted............... 5,988 6,307 6,777 8,529 9,398 8,594 12,182
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 25, 1999
----------------------
Actual As Adjusted(3)
------- --------------
<S> <C> <C>
Consolidated Balance Sheet Data:
Working capital.......................................... $47,876 $120,658
Total assets............................................. 91,183 163,965
Long-term debt, excluding current maturities............. -- --
Total liabilities........................................ 15,997 15,997
Stockholders' equity..................................... 75,186 147,968
</TABLE>
- --------
(1) The consolidated statement of operations data includes the results of
operations of each of the acquired companies since the date of its
acquisition. See note 11 of notes to consolidated financial statements.
(2) In fiscal 1996 other operating expenses consisted of a charge of $6,813
for goodwill impairment and $2,888 for acquisition related charges,
primarily for in-process research and development. In fiscal 1997, such
charges consisted of in-process research and development associated with
the acquisition of CPI. In fiscal 1998, such charges consisted of in-
process research and development associated with the acquisition of
Sorbios. In fiscal 1999, such charges relate to various restructuring
actions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(3) Adjusted to reflect the sale of 2,500,000 shares of Common Stock offered
by us in this prospectus at an offering price of $31.00 per share and
after deducting the underwriting discounts and estimated offering expenses
and excludes a $10,000 seven-year term loan received by the Company in
March 2000 used to fund the acquisition of certain real estate. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
3
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain forward-
looking statements including, without limitation, statements concerning the
future of the industry, product development, business strategy (including the
possibility of future acquisitions), continued acceptance and growth of our
products and dependence on significant customers. These statements can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "anticipate," "estimate," "continue" or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition or state other forward-looking
information. When considering forward-looking statements, you should keep in
mind the risk factors and other cautionary statements in this prospectus. The
risk factors noted below and other factors noted throughout this prospectus
could cause our actual results to differ significantly from those contained in
any forward-looking statement.
RISK FACTORS
Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
buy our common stock. If any of the following risks actually occur, our
business, results of operations and financial condition would likely suffer. In
these circumstances, the market price of our common stock could decline, and
you may lose all or part of the money you paid to buy our common stock.
Semiconductor Industry Business Cycles Have a Large Effect on Our Operating
Results
Our business depends heavily upon capital expenditures by manufacturers of
semiconductors. The semiconductor industry is highly cyclical, with periods of
capacity shortage and periods of excess capacity. In periods of excess
capacity, the industry sharply cuts purchases of capital equipment, including
our products. Thus, a semiconductor industry downturn or slowdown substantially
reduces our revenues and operating results and could hurt our financial
condition.
During portions of 1998 and 1999, excess capacity in the semiconductor
industry caused semiconductor manufacturers to sharply cut their capital
spending. The excess supply was caused primarily by a period of over-investment
in the industry, as well as by cyclical demand factors. The shift in demand to
low-priced personal computers and currency devaluations in Asia further reduced
profits of semiconductor manufacturers. The downturn in capital spending
reduced our sales during these periods, resulting in significant losses. We
expect that we will continue to depend significantly on the semiconductor
capital equipment industry for the foreseeable future.
Our Operating Results Often Have Large Changes from Quarter to Quarter
Sharp swings in demand cause large changes in our quarter-to-quarter
results. A number of factors contribute to these sharp changes in demand. For
instance, our OEM customers keep inventories of our products and may stop
buying from us during periods of weak demand for their products until they have
reduced their inventories.
Other factors which cause changes in our quarter-to-quarter results include:
. changes in or cancellation of our customers' product plans and programs;
. delays in, or cancellation of, significant system purchases by customers;
. changes in the mix of our products and their gross margins;
. delays in the development, introduction and production of our products;
. new product introductions by competitors and competitive pricing
pressures;
4
<PAGE>
. the time required for us to adjust our operating expenses to respond to
changes in sales;
. the timing of our acquisitions and their effect on our financial results;
. component shortages resulting in manufacturing delays; and
. pressure by customers to reduce prices, shorten delivery times and extend
payment terms.
Our Stock Price Is Volatile and It May Drop Unexpectedly
Our market segment seems particularly vulnerable to abrupt changes in
investor sentiment. Stock prices of companies in the semiconductor equipment
industry, including ours, can swing dramatically with little relationship to
operating performance. During the past 24 months, our stock has traded at per
share prices as high as $41.938 and as low as $3.125. Objective factors which
could cause our stock price to change sharply include:
. changes in our quarterly operating results for the reasons set out in
the previous risk factor;
. changes in research analysts' expectations for us or our industry or our
failure to meet research analysts' estimates;
. changes in the general economic conditions or developments in the
personal computer, data storage or semiconductor industry which affect
investor confidence; and
. announcements by us or our competitors of technological innovations or
new or enhanced products.
We could be subject to class action litigation due to stock price volatility
which, if it occurs, will distract our management and could result in
substantial costs or large judgments against us. In the past, securities class
action litigation has often been brought against companies following periods of
volatility in the market prices of their securities. We may be the target of
similar litigation in the future. Securities litigation could result in
substantial costs and divert our management's attention and resources, which
could cause serious harm to our business, financial condition and results of
operations.
We Depend on a Few Customers for the Majority of Our Revenues
A few customers account for a large part of our revenues. Sales to our ten
largest customers accounted for 75% of revenues in the first six months of
fiscal year 2000, 76% of revenues in fiscal year 1999, 72% of revenues in
fiscal year 1998, and 76% of revenues in fiscal year 1997. Sales to our largest
customer, Applied Materials, accounted for approximately 50% of revenues in the
first six months of fiscal year 2000, 45% of revenues in fiscal year 1999, 40%
of revenues in fiscal year 1998, and 38% of revenues in fiscal year 1997. We
expect that sales to Applied Materials will continue to be a large part of our
revenues in the future.
Our customers may cancel orders with few penalties, including orders entered
into under long-term supply agreements with us. If Applied Materials or another
major customer reduces orders for any reason, our revenues, operating results,
and financial condition will be hurt.
We Are Subject to Lengthy Sales and Product Acceptance Cycles
We sell the majority of our products to OEMs that incorporate our products
into the equipment they sell. OEMs consider using our products when their
products are being developed. We must make a significant capital investment to
develop products for our OEM customers well before their products are
introduced and before we can be sure that we will recover our capital
investment through sales to the OEMs in significant volume. We are also at risk
during the development phase that our product may fail to meet our customers'
technical or cost requirements and may be replaced by a competitive product or
alternate technology solution. If that happens, we may be unable to recover our
development costs. If our customers fail to introduce their products in a
timely manner or the market does not accept their products, our business and
our financial results would be hurt.
During any quarter, we are subject to a significant change in our operating
results due to the timing of systems sales. During any quarter, a significant
portion of our revenue may be derived from the sale of a relatively small
number of systems. Our systems range in price from $250,000 to $3.0 million.
Also
5
<PAGE>
sales cycles for larger systems orders can be much longer than sales cycles
for components. Any new systems introduced by us may not achieve a significant
degree of market acceptance or, once accepted, may fail to sell well for any
significant period.
Future Acquisitions or Investments Could Disrupt Our Ongoing Business,
Distract Our Management and Employees, Increase Our Expenses and Adversely
Affect Our Business
We anticipate that a portion of any future growth may be accomplished by
acquiring existing businesses. The success of any acquisitions will depend
upon a number of factors, including our ability to integrate acquired
personnel, operations, products and technologies into our organization, to
retain and motivate key personnel of acquired businesses and to retain
customers of acquired firms. We cannot assure you that we will be able to
identify suitable acquisition opportunities, obtain any necessary financing on
acceptable terms or integrate acquired personnel and operations. These
difficulties could disrupt our ongoing business, distract our management and
employees, increase our expenses and materially and adversely affect our
results of operations. Any future acquisitions would involve certain other
risks, including the assumption of additional liabilities, potentially
dilutive issuances of equity securities and diversion of management's
attention from other business concerns. Furthermore, we may issue equity
securities or incur debt to pay for any future acquisitions. If we issue
equity securities, your percentage ownership of our company would be reduced.
We Are Growing and May Be Unable to Manage Our Growth Effectively
We have been experiencing a period of growth and expansion. This growth and
expansion is placing significant demands on our management and our operating
systems. We need to continue to improve and expand our management, operational
and financial systems, procedures and controls, including accounting and other
internal management systems, quality control, delivery and service
capabilities. In addition, we will need to continue to attract and retain
additional management, research and development and manufacturing personnel to
handle possible future growth.
In order to manage our growth, we may also need to spend significant
amounts of cash to:
. fund increases in expenses;
. take advantage of unanticipated opportunities, such as major strategic
alliances or other special marketing opportunities, acquisitions of
complementary businesses or assets, or the development of new products;
or
. otherwise respond to unanticipated developments or competitive pressures.
If we do not have enough cash on hand, cash generated from our operations
or cash available under our credit facility to meet these cash requirements,
we will need to seek alternative sources of financing to carry out our growth
and operating strategies. We may not be able to raise needed cash on terms
acceptable to us, or at all. Financing may be on terms that are dilutive or
potentially dilutive. If alternative sources of financing are required but are
insufficient or unavailable, we will be required to modify our growth and
operating plans to the extent of available funding.
We May Have Difficulty Managing Cycles of Growth and Downturns
We have recently had a cycle of rapid growth followed by a downturn. These
expansions and contractions strain our management, manufacturing, financial
and other resources. In an expansion, our systems, procedures, controls and
existing space may not be adequate and we may face difficulties in hiring and
training needed personnel. In a contraction, it may be costly to maintain
current levels of personnel and overhead. If we fail to manage growth or
downturns effectively, our future financial condition, revenues and operating
results could be hurt. Our severe business cycles exacerbate the difficulties
of attracting and retaining highly qualified personnel who are vital to our
success.
6
<PAGE>
We Are Highly Reliant on Key Management
Our success depends to a significant degree upon the continued contributions
of our key management, engineering, sales and marketing, customer support,
finance and manufacturing personnel. The loss of any of these key personnel,
who would be extremely difficult to replace, could harm our business and
operating results. During downturns in our industry, we have often experienced
significant employee attrition, and we may experience further attrition in the
event of a future downturn. Although we have employment and noncompetition
agreements with key members of our senior management team, including Messrs.
Post, Chisholm, Hurley, Burg and Ross, these individuals or other key employees
may nevertheless leave our company. We do not have key person life insurance on
any of our executives. Competition for management in our industry is intense,
and we may not be successful in attracting and retaining key management
personnel.
Our Markets Are Very Competitive and Competing Technologies May Render Some or
All of Our Products or Future Products Noncompetitive
The markets for our products are very competitive. Many of our current and
potential competitors have much greater resources than we have. A number of
established semiconductor equipment manufacturers, including some of our
significant customers, have expended significant resources in developing
improved reactive gas systems and components. We may not be successful in
selling our products to our customers, regardless of the performance or the
price of our products. Our competitors may develop superior or lower priced
products. Moreover, our customers' own markets are highly competitive. Our
customers buy our products only when they are successful in selling their own
products. Consequently, if our customers fail to compete effectively, our sales
could be hurt.
Rapid Technology Change May Make Our Products Obsolete
Technology changes rapidly in the markets we serve. Our success will depend
upon our ability to anticipate these changes, enhance our existing products and
develop new products to meet customer requirements and achieve market
acceptance. We may not be able to do those things correctly or soon enough. If
we fail in these efforts, our products will become obsolete, which will hurt
our operating results and financial position.
We Must Achieve Design Wins to Retain Our Existing OEM Customers and to Obtain
New OEM Customers
The constantly changing nature of semiconductor fabrication technology
requires OEMs to continually design new systems. We often must work with these
manufacturers early in their design cycles to modify our equipment to meet the
requirements of the new systems. Manufacturers typically choose one or two
vendors to provide the products for use with the early system shipments.
Selection as one of these vendors is called a design win. We must achieve these
design wins in order to retain existing customers and to obtain new customers.
Once a manufacturer chooses a supplier of modules or systems, it is likely
to retain that supplier for an extended period of time. Our sales and growth
could experience material and prolonged adverse effects if we fail to achieve
design wins. In addition, design wins do not always result in substantial sales
or profits.
We believe that OEMs often select their suppliers based on factors such as
long-term relationships. Accordingly, we may have difficulty achieving design
wins from OEMs who are not currently customers. In addition, we must compete
for design wins for new systems and products of our existing customers,
including those with whom we have had long-term relationships.
Development of New Products is Risky and We May Not Be Successful in
Anticipating Market Trends
We expect to spend a significant amount of time and resources developing new
products and refining existing products and systems. In light of the long
product development cycles inherent in our industry, these expenditures will be
made well in advance of the prospect of deriving revenue from the sale of new
systems.
7
<PAGE>
Our ability to commercially introduce and successfully market new products is
subject to a wide variety of challenges during this development cycle,
including start-up bugs, design defects and other matters that could delay
introduction of these systems. In addition, since our customers are not
obligated by long-term contracts to purchase our products, our anticipated
product orders may not materialize, or orders that do materialize may be
cancelled. As a result, if we do not achieve market acceptance of new
products, we may not be able to realize sufficient sales in order to recoup
research and development expenditures. We may also divert sales and marketing
resources from our current products in order to successfully launch and
promote our new products. This diversion of resources could have a further
negative effect on sales of our current products.
The success of our product development efforts depends on our ability to
anticipate market trends and the price, performance and functionality
requirements of semiconductor device and equipment manufacturers. In order to
anticipate these trends and ensure that critical development projects proceed
in a coordinated manner, we must continue to collaborate closely with our
largest customers. Our relationships with these and other customers provide us
with access to valuable information regarding trends in the semiconductor
device industry, which enables us to better plan our product development
activities. If our current relationships with our large customers are
impaired, or if we are unable to develop similar collaborative relationships
with important customers in the future, our long-term ability to produce
commercially successful products will be impaired.
Our industry is characterized by the need for continual investment in
research and development as well as customer service and support. As a result
of our need to maintain our spending levels in these areas, our operating
results could be materially harmed if our revenues fall below expectations. In
addition, because of our emphasis on research and development and
technological innovation, our operating costs may increase further in the
future. We expect our level of research and development expenses to increase
in absolute dollar terms for at least the next several years.
We Conduct Manufacturing At Only A Few Sites
We conduct the majority of our manufacturing at our facilities in Woburn
and Wilmington, Massachusetts and Colorado Springs, Colorado. Future natural
or other uncontrollable occurrences at any of our manufacturing facilities
that negatively impact our manufacturing processes may not be fully covered by
insurance and could have a material adverse effect on our operations and
results of operations.
Economic Problems in Asia May Hurt Our Sales
Asia is an important region for the markets we serve and has accounted for
a large part of our revenues. In recent years, Asia has experienced serious
economic problems including currency devaluations, debt defaults, lack of
liquidity and recessions. Our revenues depend upon the capital expenditures of
semiconductor manufacturers, many of whom have operations and customers in
Asia. Serious economic problems in Asia would likely result in a significant
decrease in the sale of equipment to the semiconductor industry. Economic
difficulties in this region could also damage the economies of the U.S. and
Europe and ultimately the domestic demand for our products. Therefore, weak
economic conditions in Asia would likely negatively impact our future
financial condition, revenues and operating results.
Our Dependence on Sole and Limited Source Suppliers Could Affect Our Ability
to Manufacture Products and Systems
We rely on sole and limited source suppliers for a few of our components
and subassemblies that are critical to the manufacturing of our products. This
reliance involves several risks, including the following:
. the potential inability to obtain an adequate supply of required
components;
.reduced control over pricing and timing of delivery of components; and
. the potential inability of our suppliers to develop technologically
advanced products to support our growth and development of new systems.
8
<PAGE>
We believe that in time we could obtain and qualify alternative sources for
most sole and limited source parts. Seeking alternative sources of the parts
could require us to redesign our systems, resulting in increased costs and
likely shipping delays. We may be unable to redesign our systems, which could
result in further costs and shipping delays. These increased costs would
decrease our profit margins if we could not pass the costs to our customers.
Further, shipping delays could damage our relationships with current and
potential customers and have a material adverse effect on our business and
results of operations.
Our Dependence upon International Sales and Non-U.S. Suppliers Involves
Significant Risk
We do business worldwide, both directly and through sales to United States-
based OEMs, who sell their products internationally. International sales
accounted for 19% of revenues in the first six months of fiscal year 2000, 20%
of revenues in fiscal year 1999, 23% of our revenues in fiscal year 1998, and
21% of revenues in fiscal year 1997. International sales will continue to
account for a significant percentage of our revenues. In addition, we rely upon
non-U.S. suppliers for certain components. As a result, a major part of our
revenues and operating results is subject to the risks associated with
international sales. International sales and our relationships with suppliers
may be hurt by many factors, including:
. changes in policy or applicable U.S. or foreign laws which result in
burdensome government controls, tariffs, restrictions, embargoes or
export license requirements;
. political and economic instability in our target international markets;
. difficulties of staffing and managing our international operations or
representatives;
. shipping delays;
. less favorable foreign intellectual property laws, which make it harder
to protect our technology from appropriation by competitors;
. longer payment cycles common in foreign markets;
. difficulties collecting our accounts receivable because of the distance
and different legal rules; and
. potential additional U.S. and foreign taxes which increase the amount of
taxes we have to pay.
We May Incur Foreign Currency Exchange Rate Losses
Our foreign sales are typically made in U.S. dollars. A strengthening in the
dollar relative to the currencies of those countries where we do business would
increase the prices of our products as stated in those currencies and hurt our
sales in those countries. If we lower our prices to reflect a change in
exchange rates, our profitability in those markets will go down. In the past,
there have been significant fluctuations in the exchange rates between the
dollar and the currencies in those countries in which we do business. We have
not historically tried to reduce our exposure to exchange rate fluctuations by
using hedging transactions. However, we may choose to do so in the future. We
may not be able to do so successfully. Accordingly, we may experience economic
loss and a negative impact on earnings and equity as a result of foreign
currency exchange rate fluctuations.
Patents and Proprietary Information May Not Be Adequate to Protect Our Business
We rely on our patent and trade secret rights to protect our proprietary
technology. As of February 15, 2000, we own 26 U.S. patents and two foreign
patents, and have 24 pending U.S. patent applications and 12 pending foreign
applications in various stages of prosecution. The earliest of our key patents
expires in 2007. We own the commercial rights to proprietary technology
developed under various U.S. government contracts and grants, including
federally funded research contracts. The U.S. government also has certain
rights to such proprietary technology developed under these contracts and
grants. We also have joint development agreements with industrial and
commercial partners which may result in sole or joint ownership rights to
proprietary technology developed under those agreements. However, we cannot be
sure that additional patent applications
9
<PAGE>
will be filed, that patents will issue from these applications or that any of
our patents will withstand challenges by others. Our patents may not provide us
with meaningful protection from competitors, including those who may pursue
patents which may block our use of our proprietary technology. In addition, we
rely upon unpatented trade secrets and seek to protect them, in part, through
confidentiality agreements with employees, consultants and our customers and
potential customers. If these agreements are breached, or if our trade secrets
become known to or are independently developed by competitors we may not have
adequate remedies for such breach.
If a competitor's products infringed our patents, we may sue to enforce our
rights in an infringement action. These suits are costly and would divert funds
and management and technical resources from our operations. Furthermore, we
cannot be certain that our products or processes will not infringe any patents
or other intellectual property rights of others. If they do infringe the rights
of others, we may not be able to obtain a license from the intellectual
property owner on commercially reasonable terms or at all.
Our efforts to protect our intellectual property may be less effective in
some foreign countries where intellectual property rights are not as well
protected as in the United States. Currently, a significant portion of our
revenue is derived from sales in foreign countries, including certain countries
in Asia, such as Taiwan, Korea and Japan. The laws of some foreign countries do
not protect our proprietary rights to as great an extent as do the laws of the
United States, and many U.S. companies have encountered substantial problems in
protecting their proprietary rights against infringement in such countries,
some of which are countries in which we have sold and continue to sell
products. There is a risk that our means of protecting our proprietary rights
may not be adequate in these countries. For example, our competitors in these
countries may independently develop similar technology or duplicate our
systems. If we fail to adequately protect our intellectual property in these
countries, it would be easier for our competitors to sell competing products in
those countries.
We Are Subject To Governmental Regulations
We are subject to federal, state, local, and foreign regulations, including
environmental regulations and regulations relating to the design and operation
of our power supply products. We must ensure that these systems meet certain
safety standards, many of which vary across the countries in which our systems
are used. For example, the European Union has published directives specifically
relating to power supplies. We must comply with these directives in order to
ship our systems into countries that are members of the European Union. We
believe we are in compliance with current applicable regulations, directives
and standards and have obtained all necessary permits, approvals, and
authorizations to conduct our business. However, compliance with future
regulations, directives and standards could require us to modify or redesign
certain systems, make capital expenditures or incur substantial costs. If we do
not comply with current or future regulations, directives and standards:
. we could be subject to fines;
. our production could be suspended; or
. we could be prohibited from offering particular systems in specified
markets.
Our Management Has Significant Influence Over Stockholder Decisions
Our officers and directors will control the vote of approximately 7.7% of
the outstanding shares of common stock prior to the exercise of any outstanding
options. As a result, they may be able to significantly influence all matters
requiring approval by our stockholders, including the election of directors.
Our Management Has Broad Discretion to Determine How to Use The Funds Raised
from The Sale of The Common Stock and May Use Those Funds in Ways That May Not
Increase Our Operating Results Or Market Value
The net proceeds we receive from our sale of common stock in this offering
have not been allocated for a particular purpose. We intend to use the net
proceeds for general corporate purposes, including acquisitions and working
capital requirements. We may use some or all of the net proceeds for
acquisition, although no
10
<PAGE>
agreement or understanding with respect to any future acquisition has been
reached. Our management will have significant discretion as to the use of the
net proceeds of the offerings and you will not have the opportunity, as part of
your investment decision, to assess whether the proceeds are being used
appropriately. The net proceeds from this offering may be applied to uses that
ultimately may not increase our operating results or our market value.
Our Anti-Takeover Measures May Affect the Value of our Stock
As a Delaware corporation, we are subject to the General Corporation Law of
the State of Delaware, including Section 203, an anti-takeover law enacted in
1988. In general, Section 203 restricts the ability of a public Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder. As a result of the
application of Section 203 and certain provisions in our certificate of
incorporation and bylaws, potential acquirors may be discouraged from
attempting to acquire us, thereby possibly depriving our stockholders of
acquisition opportunities to sell or otherwise dispose our stock at above-
market prices typical of such acquisitions.
We have also adopted a shareholder rights plan which gives holders of common
stock the right to purchase shares of our Series A Junior Participating
Preferred Stock if a potential acquiror purchases or plans to make a tender
offer to purchase 15% or more of our outstanding common stock. The existence of
this plan may make it more difficult for a third party to acquire control of
the Company.
Our Board of Directors is divided into three classes of directors with
staggered terms. Directors are elected to three-year terms and the term of one
class of directors expires each year. The existence of a classified board is
designed to provide continuity and stability to our management and to render
certain hostile takeovers more difficult. The existence of a classified board
may therefore have the effect of making it more difficult for a third party to
acquire control of the Company in certain instances, thereby delaying,
deferring or preventing a change of control that could result in a premium for
our stock. Further, if stockholders are dissatisfied with the policies and/or
decisions of the Board of Directors, the existence of a classified board will
make it more difficult for the stockholders to change the composition and,
therefore, the policies of the Board of Directors in a relatively short period
of time.
We are authorized to issue up to 1,000,000 shares of preferred stock, $.01
par value per share and to determine the price, privileges and other terms of
such shares. The issuance of any preferred stock with superior rights to the
common stock could reduce the value of the common stock. In particular,
specific rights granted to future holders of preferred stock could be used to
restrict our ability to merge with or sell our assets to a third party, thereby
preserving control of the Company by present owners and management and
preventing our holders of common stock from realizing a premium on their
shares.
Future Sales of Our Stock Could Depress its Market Price
The market price of our common stock could drop as a result of sales of a
large number of shares of common stock in the market after the offering, or the
price could remain lower because of the belief that such sales could occur.
These factors also could make it more difficult for us to raise funds through
future offerings of common stock.
As of March 25, 2000 we had 11,766,592 shares of common stock outstanding,
of which 10,656,759 shares are freely tradeable and 1,109,833 shares of which
are owned by certain of our officers and directors and are currently eligible
for sale under Rule 144 of the Securities Act of 1933. The 1,109,833 shares of
common stock owned by certain of our officers and directors are subject to the
volume trading limitations under Rule 144. In connection with the offering, our
officers and directors have agreed that they will not sell any shares of common
stock without the consent of Robertson Stephens for a period of 90 days after
the date of this prospectus.
11
<PAGE>
In addition, we have reserved an aggregate of 4,632,558 shares of common
stock for issuance to employees, officers, directors and consultants pursuant
to our 1987 Stock Option Plan, 1993 Stock Option Plan and 1994 Formula Stock
Option Plan. As of March 25, 2000, options to purchase 3,422,815 shares have
been granted under these option plans, of which 1,029,493 have been exercised,
912,918 have been canceled and 1,480,404 are currently outstanding. All shares
of common stock underlying our option plans are registered and, upon exercise,
are freely tradable subject to volume trading limitations under Rule 144. These
options entitle the holders to purchase shares of common stock at prices per
share that are less than the current market price per share of our common
stock. The holders of these options will usually exercise them at a time when
the market price of our common stock is greater than the exercise price of the
options. The exercise of options and subsequent sale of common stock could
reduce the market price for our common stock and result in dilution to our then
stockholders.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the 2,500,000 shares of common stock
we are offering will be approximately $72,781,618. If the underwriters fully
exercise the over-allotment option, the net proceeds to us will be
approximately $84,206,668. "Net proceeds" is what we expect to receive after we
pay the underwriting discount and other estimated expenses for this offering.
We will not receive any portion of the proceeds from the sale of shares of
common stock by the selling stockholders.
We expect to use the net proceeds for working capital and general corporate
purposes, including new product development, and sales and marketing expansion.
We intend to use a portion of the proceeds to expand our global sales and
service activities, to expand our facilities and purchase additional equipment,
to fund sales and product development joint ventures and to expand our product
development activities for new markets. We are undertaking the offering in part
because we believe that the availability of adequate financial resources is a
substantial competitive factor. We may use a portion of the net proceeds for
strategic acquisitions of businesses, products or technologies complementary to
our business. We do not have any material commitments to make any strategic
acquisition at this time. Prior to using the proceeds in the manner described
above, we plan to invest the net proceeds of this offering in interest-bearing
investment-grade securities.
13
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization at December 25, 1999 on an
actual basis, and on an as adjusted basis to give effect to the sale of the
2,500,000 shares of common stock offered in this offering by us at a public
offering price of $31.00 per share and after deducting underwriting discounts
and commissions and estimated offering expenses to be paid by us:
<TABLE>
<CAPTION>
December 25, 1999
-----------------------
Actual As Adjusted(2)
------- --------------
(in thousands)
<S> <C> <C>
Short-term debt:
Current maturities of long-term debt............... $ -- $ --
Long-term debt:
Long-term debt, excluding current maturities....... -- --
Stockholders equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; issued and outstanding: none actual;
none pro forma.................................... -- --
Common stock, $.01 par value; 30,000,000 shares
authorized; issued and outstanding: 11,667,207
actual; 14,167,207 as adjusted (1)................ 116 141
Additional paid-in capital......................... 71,648 144,405
Retained earnings.................................. 3,668 3,668
Accumulated comprehensive income (loss)............ (246) (246)
------- --------
Total stockholders' equity........................ 75,186 147,968
------- --------
Total capitalization.............................. $75,186 $147,968
======= ========
</TABLE>
- --------
(1) Excludes outstanding options to purchase 1,480,404 shares of common stock
at a weighted-average exercise price per share of $13.09.
(2) Excludes a $10,000 seven-year term loan received by the Company in March
2000 to fund the acquisition of certain real estate acquired in March 2000
for $10,700.
The table should be read in conjunction with our consolidated financial
statements and the related notes appearing elsewhere in this prospectus.
14
<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the Nasdaq National Market under the symbol
"ASTX." The following table sets forth, for the periods indicated, the high and
low closing sale prices per share of our common stock, as reported by the
Nasdaq National Market.
<TABLE>
<CAPTION>
High Low
------- -------
<S> <C> <C>
Fiscal Year (ended June 27, 1998)
First Quarter................................................ $15.583 $10.417
Second Quarter............................................... 18.333 9.750
Third Quarter................................................ 16.000 10.125
Fourth Quarter............................................... 17.250 7.625
Fiscal Year (ending June 26, 1999)
First Quarter................................................ $ 8.125 $ 3.875
Second Quarter............................................... 11.000 3.125
Third Quarter................................................ 14.500 9.875
Fourth Quarter............................................... 21.375 12.500
Fiscal Year (ending July 1, 2000)
First Quarter................................................ $23.125 $16.688
Second Quarter............................................... 34.563 21.375
Third Quarter (through March 29, 2000)....................... 41.938 29.750
</TABLE>
On March 29, 2000, the closing price for our common stock as reported on the
Nasdaq National Market was $32.875. As of January 31, 2000, we had 172 holders
of record of our common stock. There are approximately 2,100 beneficial owners
of our common stock.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock and do not
plan to pay any cash dividends in the foreseeable future. Our current credit
facility arrangements restrict our ability to declare cash dividends without
the lender's prior written consent. Our current policy is to retain all
earnings to finance future growth.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table contains our selected consolidated financial data and is
qualified by the more detailed Consolidated Financial Statements and Notes
thereto included elsewhere in this prospectus. The consolidated statement of
operations data for the fiscal years ended June 26, 1999, June 27, 1998 and
June 28, 1997 have been derived from Consolidated Financial Statements, which
statements have been audited by KPMG LLP, independent public accountants, and
are included elsewhere in this prospectus. The consolidated statement of
operations data for the fiscal years ended June 29, 1996 and July 1, 1995 have
been derived from our consolidated financial statements, which have been
audited by KPMG LLP and are not included in this prospectus. Data as of
December 25, 1999 and December 26, 1998 and for the six months ended December
25, 1999 have been derived from unaudited Consolidated Financial Statements
included elsewhere in this prospectus and, in our opinion, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of operations for the periods presented.
Results for the six months ended December 25, 1999 are not necessarily
indicative of the results to be expected for the full year. This data should be
read in conjunction with the Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere herein.
<TABLE>
<CAPTION>
Fiscal Years Ended Six Months Ended
--------------------------------------------- ------------------
July 1, June 29, June 28, June 27, June 26, Dec. 26, Dec. 25,
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(1):
Total revenue........... $20,005 $39,135 $47,967 $83,436 $78,209 $28,954 $61,668
Total cost of sales and
revenue................ 11,813 23,364 30,557 54,987 55,555 23,280 37,507
------- ------- ------- ------- ------- ------- -------
Gross profit............ 8,192 15,771 17,410 28,449 22,654 5,674 24,161
Operating Expenses:
Research and
development expenses.. 2,840 5,043 7,343 11,253 9,745 4,568 6,092
Selling expenses....... 1,992 3,298 2,950 4,427 5,168 2,375 4,165
General and
administrative
expenses.............. 2,561 3,807 3,958 6,648 8,055 3,673 5,611
Other operating
expenses(2)........... -- 9,702 1,500 212 2,260 1,497 --
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 7,393 21,850 15,751 22,540 25,228 12,113 15,868
------- ------- ------- ------- ------- ------- -------
Earnings (loss) from
operations............. 799 (6,079) 1,659 5,909 (2,574) (6,439) 8,293
Total other income
(expense).............. 730 322 (171) 578 673 236 741
------- ------- ------- ------- ------- ------- -------
Earnings (loss) before
income taxes........... 1,529 (5,757) 1,488 6,487 (1,901) (6,203) 9,034
Income tax expense
(benefit).............. 401 1,541 550 2,466 (650) (2,285) 3,242
------- ------- ------- ------- ------- ------- -------
Net earnings (loss)..... $ 1,128 $(7,298) $ 938 $ 4,021 $(1,251) $(3,918) $ 5,792
======= ======= ======= ======= ======= ======= =======
Earnings (loss) per
share:
Basic.................. $ 0.19 $ (1.16) $ 0.14 $ 0.50 $ (0.13) $ (0.46) $ 0.50
======= ======= ======= ======= ======= ======= =======
Diluted................ $ 0.19 $ (1.16) $ 0.14 $ 0.47 $ (0.13) $ (0.46) $ 0.48
======= ======= ======= ======= ======= ======= =======
Weighted average common
shares:
Basic.................. 5,834 6,307 6,686 8,053 9,398 8,594 11,501
======= ======= ======= ======= ======= ======= =======
Diluted................ 5,988 6,307 6,777 8,529 9,398 8,594 12,182
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 25, 1999
----------------------
Actual As Adjusted(3)
------- --------------
<S> <C> <C>
Consolidated Balance Sheet Data:
Working capital.......................................... $47,876 $120,658
Total assets............................................. 91,183 163,965
Long-term debt, excluding current maturities............. -- --
Total liabilities........................................ 15,997 15,997
Stockholders' equity..................................... 75,186 147,968
</TABLE>
- --------
(1) The consolidated statement of operations data includes the results of
operations of each of the acquired companies since the date of its
acquisition. See note 11A, notes to consolidated financial statements.
(2) In fiscal 1996 other operating expenses consisted of a charge of $6,813
for goodwill impairment and $2,888 for acquisition related charges,
primarily for in-process research and development. In fiscal 1997, such
charges consisted of in-process research and development associated with
the acquisition of CPI. In fiscal 1998, such charges consisted of in-
process research and development associated with the acquisition of
Sorbios. In fiscal 1999, such charges relate to various restructuring
actions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(3) Adjusted to reflect the sale of 2,500,000 shares of common stock offered
by us in this prospectus at an offering price of $31.00 per share and
after deducting the underwriting discounts and estimated offering expenses
and excludes a $10,000 seven-year term loan received by the Company in
March 2000 to fund the acquisition of certain real estate. See
"Capitalization."
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
We provide precision reactive gas solutions to the OEM semiconductor,
medical, and industrial markets, and complete process systems for advanced
packaging, telecommunications and magnetic sensor applications. Our broad
product line is based on a decade of leadership in core technologies, including
precision reactive gas processing, specialized power sources, and system
integration. Depending on our customers' needs, we provide varying levels of
integration, from components to modules to complete process solutions. We help
our customers maximize their competitive advantage by improving time to market
while reducing costs and complexity. During the past five years, we have grown
rapidly, both through internal growth as well as by acquisitions. In January
1996, we acquired Erhorn Technological Operations, Inc. (ETO), a manufacturer
of RF power sources. In May 1997, we acquired Converter Power, Inc. (ASTeX
CPI), a manufacturer of direct current power sources. In October 1997, we
acquired Sorbios GmbH (ASTeX Sorbios), a manufacturer of ozone sources. In
November 1998 we acquired PlasmaQuest, Inc. (ASTeX PlasmaQuest), a manufacturer
of reactive gas sources and systems used for magnetic disk head processing and
advanced electronic packaging applications. In May 1999, we acquired Klee
Corporation (ASTeX Klee), a developer of systems used for advanced electronic
packaging applications. In August 1999, we acquired substantially all of the
assets of the Shamrock product line from Sputtered Films, Inc. The results of
operations for each period presented include the results of operations of each
of the acquired companies since the date of its acquisition.
Results of Operations
The following table sets forth selected financial data for the periods
indicated expressed as a percentage of total revenue.
<TABLE>
<CAPTION>
Years Ended Six Months Ended
-------------------------- ------------------
June 28, June 27, June 26, Dec. 26, Dec. 25,
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Total revenue.................. 100.0% 100.0% 100.0% 100.0% 100.0%
Total cost of sales and
revenue....................... 63.7 65.9 71.0 80.4 60.8
----- ----- ----- ----- -----
Gross profit................... 36.3 34.1 29.0 19.6 39.2
Operating expenses:
Selling expenses............. 6.2 5.3 6.6 8.2 6.8
General and administrative
expenses.................... 8.2 8.0 10.3 12.7 9.1
Research and development
expenses, net............... 15.3 13.5 12.5 15.8 9.9
Other operating expenses..... 3.1 0.2 2.9 5.1 --
----- ----- ----- ----- -----
Total operating expenses....... 32.8 27.0 32.3 41.8 25.8
----- ----- ----- ----- -----
Earnings (loss) from
operations.................... 3.5 7.1 (3.3) (22.2) 13.4
Total other income (expense)... (0.4) 0.7 0.9 0.8 1.3
----- ----- ----- ----- -----
Earnings (loss) before income
taxes......................... 3.1 7.8 (2.4) (21.4) 14.7
Income tax expense (benefit)... 1.1 3.0 0.8 (7.9) 5.3
----- ----- ----- ----- -----
Net earnings (loss)............ 2.0% 4.8% (1.6)% (13.5)% 9.4%
===== ===== ===== ===== =====
</TABLE>
Six Months Ended December 25, 1999 Compared to Six Months Ended December 26,
1998
Revenue. Total revenue increased by 113% to $61.7 million for the six months
ended December 25, 1999 compared to revenue of $29.0 million for the six months
ended December 26, 1998. The increase is primarily due to an increase in our
semiconductor capital equipment business, which grew by 203% to $45.8
17
<PAGE>
million for the six months ended December 25, 1999 compared to the six months
ended December 26, 1998. This growth was driven primarily by the recovery of
the semiconductor capital equipment business, and was reflected across the
entire line of our new and existing semiconductor products. System group
revenue increased to $6.3 million for the six months ended December 25, 1999
compared to $1.3 million for the six months ended December 26, 1998. The
medical and industrial segment of the business decreased by 24% to $9.7 million
for the six months ended December 25, 1999 compared to the six months ended
December 26, 1998 primarily due to declines in volume to several customers and
a price decrease to one customer.
Gross Profit. Gross profit increased to 39% of total revenue for the six
months ended December 25, 1999 compared to 20% of total revenue for the six
months ended December 26, 1998. Gross margin improved due to increased volume,
favorable product mix with higher gross margin, improved manufacturing
efficiencies and a lower fixed cost structure due to plant consolidations
undertaken in fiscal year 1999. Gross margins for fiscal year 1999 were
adversely impacted by a $1.1 million inventory write-down in the first six
months.
Selling, General and Administrative Expenses. Selling expenses increased by
75% to $4.2 million (or 7% of total revenue) for the six months ended December
25, 1999 compared to $2.4 million (or 8% of total revenue) for the six months
ended December 26, 1998. The increase was due to the costs associated with the
creation of the Global Customer Operations organization and increased staffing
of marketing, sales, service and product management functions during the six
months ended December 25, 1999 in order to better meet customer sales and
service needs on a global basis. General and administrative expenses increased
by 53% to $5.6 million (or 9% of total revenue) for the six months ended
December 25, 1999 compared to $3.7 million (or 13% of total revenue) for the
six months ended December 26, 1998. The increase was primarily due to goodwill
amortization, administrative expenses associated with acquisition activity and
the expansion of our management team.
As a result of the consolidation of two facilities, we incurred a
restructuring charge of $1.5 million during the six months ended December 26,
1998 for the costs of severance, abandonment of leasehold improvements and
fixed assets, and for facility costs, primarily consisting of future lease
payments. There was no comparable cost during the six months ended December 25,
1999. However, we have incurred approximately $0.1 million for the relocation
of inventory, equipment and key employees from the former Dallas facility to
Massachusetts.
Research and Development Expenses. Net research and development expense
increased by 33% to $6.1 million (or 10% of total revenue) in the six months
ended December 25, 1999 compared to $4.6 million (or 16% of total revenue) for
the six months ended December 25, 1998. As a percent of revenue, R&D expenses
were lower during the six months ended December 25, 1999 because of higher
sales revenue compared to the six months ended December 26, 1998. On an
absolute dollar basis, research and development expenses rose primarily as a
result of expenditures in connection with support for new modular products and
the development of products for the systems group.
Operating Income (Loss). We had operating income of $8.3 million (or 13% of
total revenues) for the six months ended December 25, 1999 compared to a loss
of $6.4 million (or 22% of total revenue) for the six months ended December 26,
1998. The increase in operating income is due to increased revenues, improved
gross margin and lower operating expenses as a percentage of sales compared to
the six months ended December 26, 1998.
Other Income and Income Taxes. Total other income increased to $741,000 for
the six months ended December 25, 1999 primarily due to interest income earned
on short and long term cash investments from proceeds of our March 1999 public
offering of common stock. We had income tax expense of $3.2 million for the six
months ended December 25, 1999 compared to tax benefits of $2.3 million in the
six months ended December 26, 1998. Earnings during the six months ended
December 25, 1999 were enhanced by a reduced effective tax rate for the second
quarter of fiscal 2000 due to the retroactive reinstatement of the research and
experimentation tax credit.
18
<PAGE>
Fiscal Year Ended June 26, 1999 as Compared to Fiscal Year Ended June 27, 1998
Revenue. Total revenue declined 6% to $78.2 million in fiscal 1999 compared
to $83.4 million in fiscal 1998. This decline is due to the severe downturn in
the semiconductor capital equipment industry as a result of over-capacity,
coupled with a financial crisis in Asia that occurred in the first half of
fiscal 1999. These factors led to a 40% sequential decline in revenues in the
first quarter of fiscal 1999, in comparison to the fourth quarter of fiscal
1998. With a strong recovery in our semiconductor equipment business in the
second half of fiscal 1999, this segment of our business declined by only 3% to
$51.3 million in fiscal 1999 compared to $52.8 million in fiscal 1998. This
strong recovery was due to the strength of our customers' business and the
success of our new products for this segment. The medical and industrial
segment declined by 18% to $22.6 million in fiscal 1999 compared to $27.7
million in fiscal 1998 due to the impact of the financial crisis in Asia. The
systems segment of the business increased 46% primarily due to the acquisition
of ASTeX PlasmaQuest. Research contract revenue was flat at approximately 1% of
total sales in fiscal 1999 and fiscal 1998.
Gross Profit. Gross profit declined by 20% to $22.7 million or 29% of sales
in fiscal 1999 compared to $28.5 million or 34% of sales in fiscal 1998. The
decline is a result of reduced manufacturing volumes and underutilization of
manufacturing capacity in the first half of fiscal 1999, and an inventory
write-down of $1.2 million, primarily due to the unexpected severity of the
downturn in the semiconductor equipment business.
We continue to seek to develop and introduce products having higher gross
profit margins. In addition, in the first six months of fiscal 1999, we
consolidated our Modesto, California facility into our Woburn, Massachusetts
and Colorado Springs, Colorado sites and our Beverly, Massachusetts facility
into Woburn in order to reduce our fixed costs and improve gross margins.
Gross profit as a percent of sales improved in our fourth quarter of fiscal
1999 to 35% compared to 28% in the fourth quarter of fiscal 1998, primarily as
a result of the cost reduction activities, improved utilization of
manufacturing capacity, and the success of new product introductions.
Selling, General and Administrative Expenses. Selling expenses increased 17%
to $5.2 million in fiscal 1999 compared to $4.4 million in fiscal 1998. The
increase is a result of the establishment of the Global Customer Operations
organization and increased staffing to strengthen our global marketing, sales,
service and product management infrastructure. General and administrative
expenses increased by 21% to $8.1 million compared to $6.6 million in fiscal
1998 due to higher information systems costs from implementation of a new
company-wide Enterprise Resource Planning (ERP) system, increased goodwill
amortization, administrative expenses associated with new acquisitions, and
management changes including expanding the senior management team.
Other Operating Expenses. As a result of consolidation of two facilities in
the first six months of fiscal 1999 and the consolidation of the PlasmaQuest
facility in Dallas, Texas to our Woburn, Massachusetts facility, announced in
the fourth quarter, we recorded a $2.3 million restructuring charge in fiscal
1999. The restructuring charge for the consolidation of Modesto, California and
Beverly, Massachusetts consisted of severance related to the termination of 70
full-time employees, abandonment of leasehold improvements and fixed assets,
and facility costs, primarily future lease payments relating to abandoned
facilities. At June 26, 1999 all restructuring costs for these two facilities
have been paid out with the exception of approximately $174,000 for abandoned
facility costs expected to be paid out over the next 9 months. In the fourth
quarter of fiscal 1999, we adjusted the restructuring accrual for the Modesto,
California and the Beverly, Massachusetts facilities and took back into income
approximately $30,000 accrued as an estimate in our first quarter. The
restructuring costs of $763,000 for the Dallas facility are for the severance
of 16 full-time employees, abandonment of leasehold and fixed assets, and
future lease payments relating to abandoned facilities. These costs are
expected to be paid out over the next 18 months. In addition to the $2.3
million restructuring costs, we incurred $393,000 of other transition costs in
fiscal 1999 for moving inventory and equipment and training
19
<PAGE>
personnel. We expect additional transition costs in the first and second
quarter of fiscal 2000 for the Dallas facility of approximately $250,000
primarily for the relocation of inventory and equipment and three key
employees. The total fiscal 1999 expense relating to restructuring, inventory
write-down, and transition costs was $3.7 million. These consolidations are
expected to reduce our fixed and administrative costs by $2.5 million per
year.
There were no acquisition-related charges in fiscal 1999. As part of the
acquisition of ASTeX Sorbios in October 1997, we incurred an acquisition-
related expense of $212,000 for the fair value of acquired in-process research
and development projects.
Research and Development Expenses. Net research and development expenses
decreased by 13% to $9.7 million in fiscal 1999 compared to $11.3 million in
fiscal 1998 as we decreased our overall level of investment in response to the
decline in revenues in the first half of fiscal 1999. Gross spending
(including funded joint development and the direct costs of research
contracts) decreased 15% to $10.2 million in fiscal 1999 compared to $12.0
million in fiscal 1998.
Operating Income. We had an operating loss of $2.6 million in fiscal 1999
compared to an operating profit of $5.9 million in fiscal 1998. The operating
loss is a result of the revenue declines, restructuring, inventory write-
downs, and transition costs and increased operating expenses as a percent of
income.
Other Income and Income Taxes. Total other income increased by 17% to
$673,000 in fiscal 1999 compared to $578,000 in fiscal 1998. A decline in
interest expense and other income in fiscal 1999 compared to fiscal 1998 is a
result of repayment of bank debt and the sale of an investment in another
company which resulted in a one-time gain of $250,000 in fiscal 1998. Interest
income increased in fiscal 1999 due to the interest earned on the cash from
our secondary stock offering in March 1999.
We had a tax benefit of $650,000 in fiscal 1999 compared to a tax expense
of $2,466,000 in fiscal 1998.
Fiscal Year Ended June 27, 1998 as Compared to Fiscal Year Ended June 26, 1997
Revenues. Total revenue increased 74% to $83.4 million for the fiscal year
ended June 27, 1998 from $48.0 million for the fiscal year ended June 26,
1997. This growth was primarily the result of increased revenues from the
acquisitions of ASTeX CPI in May 1997 and ASTeX Sorbios in October 1997,
increased sales to semiconductor capital equipment customers, and increased
sales of specialty power sources. Semiconductor related revenues, including
revenues from ASTeX CPI and ASTeX Sorbios, increased 72% or $22.1 million in
the fiscal year ended June 27, 1998 compared to the fiscal year ended June 26,
1997 with the biggest increase coming from sales of RF power sources.
Specialty power source revenues, including revenues from ASTeX CPI, increased
104% or $13.6 million in the fiscal year ended June 27, 1998 compared to the
fiscal year ended June 26, 1997 with most of the growth due to the revenues
from ASTeX CPI. The ASTeX CPI and ASTeX Sorbios acquisitions added incremental
sales of $12.7 million and $3.5 million respectively compared to the fiscal
year ended June 26, 1997, or 19% of total revenue. Without these acquisitions,
revenues increased 42% to $65.0 million from $45.7 million. Other revenue
consisting of service, spare parts and repairs was approximately 6% of total
revenue in each of the fiscal years ended June 27, 1998 and June 26, 1997.
Gross Profit. Gross profit increased 63% to $28.4 million in the fiscal
year ended June 27, 1998 from $17.4 million in the fiscal year ended June 26,
1997. Gross profit as a percent of total revenue decreased to 34% in the
fiscal year ended June 27, 1998 from 36% in the fiscal year ended June 26,
1997, primarily due to the acquisition of ASTeX CPI whose products have a
lower gross margin than other products sold by us. In addition, gross profit
margins were impacted by volume declines in the fourth quarter of the fiscal
year ended June 27, 1998, resulting in unabsorbed manufacturing costs.
Selling, General and Administrative Expenses. Selling expenses increased
50% to $4.4 million in the fiscal year ended June 27, 1998, but decreased as a
percent of revenue to 5% from 6% in the fiscal year ended
20
<PAGE>
June 26, 1997. Increased selling expenses were primarily a result of the
acquisitions of ASTeX CPI and ASTeX Sorbios. General and administrative
expenses were flat as a percent of revenue at 8%, although our total general
and administrative expenses increased 68% to $6.6 million compared to the
fiscal year ended June 26, 1997, primarily due to acquisitions.
Research and Development Expenses. Net research and development expenses
decreased as a percent of sales to 14% in the fiscal year ended June 27, 1998
from 15% in the fiscal year ended June 26, 1997. Net research and development
expenses increased 53% to $11.3 million. Gross spending (total research and
development spending including funded joint development and the direct costs of
research contracts) increased 38% to $12.0 million. These funds were used to
develop and introduce a number of new products including ASTRON for chemical
vapor deposition (CVD) chamber cleaning, Liquozon for wafer cleaning, RF power
sources for etch and strip and deposition and new laser power sources for
medical applications.
Other Operating Expenses. As a part of the acquisition of ASTeX Sorbios in
the fiscal year ended June 27, 1998, we incurred an acquisition-related expense
of $212,000 for the fair value of acquired in-process research and development
projects. This compares with acquisition-related expenses of $1.5 million
incurred with the acquisition of ASTeX CPI in the fiscal year ended June 26,
1997.
Operating Income. Operating income increased 256% to $5.9 million or 7% of
revenues in the fiscal year ended June 27, 1998 compared to the fiscal year
ended June 26, 1997. Excluding one-time charges for acquisition-related
expenses in both years, operating income increased 94% or $3.0 million. The
increase in operating income is a result of increased sales and lower expenses
as a percent of revenue.
Other Income/Expense and Income Taxes. Interest expense decreased 66% to
$196,000 in the fiscal year ended June 27, 1998 compared to the fiscal year
ended June 26, 1997, while interest income increased 30% to $514,000 in the
fiscal year ended June 27, 1998 compared to the fiscal year ended June 26,
1997. The decrease in interest expense and the increase in interest income are
the result of exercise of warrants issued in connection with our IPO in
November 1993. Other income increased $241,000 in the fiscal year ended June
27, 1998 compared to the fiscal year ended June 26, 1997 due to the sale of an
investment in a company which resulted in a one-time gain of $250,000.
Income tax expense increased to $2.5 million in the fiscal year ended June
27, 1998 from $550,000 in the fiscal year ended June 26, 1997.
Quarterly Results of Operations
The following tables set forth selected unaudited quarterly statement of
operations data for the ten quarters ended December 25, 1999, as well as such
data expressed as a percentage of our total revenue for the periods indicated.
We believe this unaudited information has been prepared substantially on the
same basis as the annual audited financial statements and all necessary
adjustments, consisting of only normal recurring adjustments, have been
included in the amounts stated below to present fairly our unaudited financial
statements. The operating results for any quarter are not necessarily
indicative of the operating results for any future period.
21
<PAGE>
Consolidated Statements of Operations Data
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------------------------------------------
Sept. 27, Dec. 27, Mar. 28, June 27, Sept. 26, Dec. 26, Mar. 27, June 26, Sept. 25, Dec. 25,
1997 1997 1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- -------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue........... $17,421 $22,440 $23,462 $20,113 $12,100 $16,854 $20,942 $28,313 $30,602 $31,066
Total cost of sales and
revenue................ 10,947 14,210 15,254 14,576 10,925 12,355 13,867 18,408 19,420 18,087
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 6,474 8,230 8,208 5,537 1,175 4,499 7,075 9,905 11,182 12,979
Operating expenses:
Selling expenses....... 835 1,183 1,145 1,264 1,202 1,173 1,329 1,465 2,026 2,138
General and
administrative
expenses.............. 1,401 1,886 1,792 1,569 1,865 1,808 1,831 2,550 2,571 3,039
Research and
development expenses,
net................... 2,561 2,850 3,019 2,823 2,324 2,244 2,477 2,700 2,696 3,397
Acquisition-related
expenses.............. -- 212 -- -- -- -- -- -- -- --
Restructuring
expenses.............. -- -- -- -- 1,497 -- -- 763 -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 4,797 6,131 5,956 5,656 6,888 5,225 5,637 7,478 7,293 8,574
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) from
operations............. 1,677 2,099 2,252 (119) (5,713) (726) 1,438 2,427 3,889 4,405
Total other expense
(income)............... (156) (87) (195) (140) (104) (132) (83) (354) (399) (342)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) before
income taxes........... 1,833 2,186 2,447 21 (5,609) (594) 1,521 2,781 4,288 4,747
Income tax expense
(benefit).............. 678 911 869 8 (2,128) (158) 737 899 1,658 1,584
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net earnings (loss)..... $ 1,155 $ 1,275 $ 1,578 $ 13 $(3,481) $ (436) $ 784 $ 1,882 $ 2,630 $ 3,163
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Earnings (loss) per
share:
Basic.................. $ 0.17 $ 0.15 $ 0.19 $ 0.00 $ (0.41) $ (0.05) $ 0.09 $ 0.17 $ 0.23 $ 0.27
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Diluted................ $ 0.14 $ 0.15 $ 0.18 $ 0.00 $ (0.41) $ (0.05) $ 0.08 $ 0.16 $ 0.22 $ 0.26
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Weighted average common
shares
Basic.................. 6,828 8,310 8,488 8,588 8,585 8,603 9,065 11,314 11,427 11,602
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Diluted................ 7,971 8,779 8,922 8,912 8,585 8,603 9,690 11,995 12,207 12,349
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
<CAPTION>
Quarter Ended
----------------------------------------------------------------------------------------------------
Sept. 27, Dec. 27, Mar. 28, June 27, Sept. 26, Dec. 26, Mar. 27, June 26, Sept. 25, Dec. 25,
1997 1997 1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- -------- -------- --------- -------- -------- -------- --------- --------
(Percentage of Total Revenue)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue........... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Total cost of sales and
revenue................ 62.8 63.3 65.0 72.5 90.3 73.3 66.2 65.0 63.5 58.2
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 37.2 36.7 35.0 27.5 9.7 26.7 33.8 35.0 36.5 41.8
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Selling expenses....... 4.8 5.3 4.9 6.3 9.9 7.0 6.4 5.2 6.6 6.9
General and
administrative
expenses.............. 8.1 8.4 7.6 7.8 15.4 10.7 8.7 9.0 8.4 9.8
Research and
development expenses,
net................... 14.7 12.7 12.9 14.0 19.2 13.3 11.8 9.5 8.8 10.9
Acquisition-related
expenses.............. -- 0.9 -- -- -- -- -- -- -- --
Restructuring charge... -- -- -- -- 12.4 -- -- 2.7 -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 27.6 27.3 25.4 28.1 56.9 31.0 26.9 26.4 23.8 27.6
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) from
operations............. 9.6 9.4 9.6 (0.6) (47.2) (4.3) 6.9 8.6 12.7 14.2
Total other expense
(income)............... (0.9) (0.3) (0.8) (0.7) (0.8) (0.8) (0.4) (1.3) (1.3) (1.1)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) before
income taxes........... 10.5 9.7 10.4 0.1 (46.4) (3.5) 7.3 9.9 14.0 15.3
Income tax expense
(benefit).............. 3.9 4.1 3.7 -- (17.6) (0.9) 3.6 3.2 5.4 5.1
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net earnings (loss)..... 6.6% 5.6% 6.7% 0.1% (28.8)% (2.6)% 3.7% 6.7% 8.6% 10.2%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
22
<PAGE>
Liquidity and Capital Resources
At December 25, 1999, we had cash and investments of $27.7 million
consisting of $17.6 million of cash and equivalents, short-term investments of
$5.0 million and long-term investments of $5.1 million. Working capital was
$47.9 million at December 25, 1999. At June 26, 1999, we had cash and cash
equivalents of $31.8 million and working capital of $52.3 million.
During the six months ended December 25, 1999, our cash and cash equivalent
position decreased by $14.1 million as we invested in short-term investments of
$5.0 million and long-term investments of $5.1 million. Cash provided by
operating activities was $3.2 million, and was comprised of $5.8 million of net
income and non-cash depreciation and amortization of $2.1 million offset by
$4.7 million used for changes in working capital (including changes in deferred
income taxes). Cash provided by financing activities was $1.8 million, due to
the exercise of stock options. Cash used for investing activities consisted
primarily of $6.2 million for the August 1999 acquisition of the Shamrock
product line from Sputtered Films, Inc., $2.7 million for additions to
property, plant and equipment, and the purchase of short and long-term
investments previously discussed.
During the fiscal year ended June 26, 1999, our cash position increased by
$24.1 million. Cash provided from operating activities amounted to $2.9
million, cash used for investing activities was $2.9 million, and cash provided
from financing activities was $24.2 million. Cash of $2.9 million from
operations consisted of a net loss of $1.25 million offset by $3.3 million of
noncash depreciation, amortization and loss on disposal of assets of $832,000.
Cash used for investing activities was primarily for additions to property,
plant and equipment, and patents. Cash provided by financing activities was
primarily from the issuance of common stock offset by repayment of notes
payable for $686,000 and advances to subsidiaries prior to acquisition of $1.1
million. We raised $24.9 million from issuance of common stock, primarily from
a public offering completed in March 1999 that raised approximately $23.8
million.
During the fiscal year ended June 27, 1998, we generated $2.5 million in
cash from operating activities and used $4.9 million for investing activities.
Cash used for investing activities consisted of $3.7 million for the
acquisition of ASTeX Sorbios, $3.0 million for additions to property,
equipment, and patents, offset by sales of $1.3 million in investments
(primarily commercial paper and government treasury bills) and $500,000 from
the sale of our investment in a company. Cash flows from financing activities
consisted primarily of repayment of $9.2 million bank debt offset by $16.1
million in proceeds from the issuance of common stock, which was primarily from
the exercise of warrants and stock options by employees.
We have a credit facility with a bank that consists of an $8 million
unsecured demand line of credit with interest at the bank's prime rate, which
was 8.5% at December 25, 1999. At December 25, 1999 we had no borrowings in
connection with this line of credit. Our ability to borrow under the line of
credit is currently at $8 million. We have just purchased a facility in
Wilmington, Massachusetts for $10.7 million. The purchase was financed
primarily by a $10.0 million term loan from a bank payable in equal monthly
installments over seven years and secured by a first mortgage on the property.
We will continue to use our cash resources for developing new products,
expanding sales and marketing, performing collaborative product development
projects, capital expenditures in connection with the planned facility and for
general working capital. We seek new ventures and/or acquisitions that will
enhance our position in our markets and that have the potential to increase our
revenues and profitability.
We believe that existing cash resources and funds from this offering,
anticipated cash flows from operations and our credit facility will be
sufficient to meet planned operating expenses and working capital requirements
for a period of at least the next 12 months.
Effects of Inflation
We believe that, over the past three years, inflation has not had a
significant impact on our revenues or operating results.
23
<PAGE>
Year 2000 Disclosure
Many currently installed computer systems and software products are
dependent upon internal calendars coded to accept only two digit entries in the
date code field. These date code fields 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 may need to be upgraded to
comply with Year 2000 requirements.
We updated our major financial reporting and ERP systems prior to the Year
2000 with SAP R/3. We are currently using SAP R/3 in our facility in Woburn,
MA, and our facility in Colorado Springs, Colorado. The software package used
by ASTeX Sorbios was upgraded in April 1999. We conducted a review of our
manufacturing equipment and facilities to ensure Year 2000 compliance. We
addressed the Year 2000 preparedness of our critical suppliers and our major
customers and related electronic data interfaces with these third parties. We
completed a systematic review of our products in operation at customer
locations and had identified non-compliant products and offered all necessary
modifications to make them compliant.
As of the date of this prospectus, we have not experienced any Year 2000
problems with our software, facilities, critical suppliers or our products.
24
<PAGE>
BUSINESS
We are a worldwide leader in the design, development, manufacture and
support of high performance reactive gas modules and power supplies used in
semiconductor device manufacturing and medical markets, as well as etch and
deposition systems for advanced semiconductor packaging, telecommunications and
magnetic sensors. Our proprietary modules, delivered to semiconductor equipment
OEMs, create reactive gases used to deposit and etch thin films applied during
various steps in the manufacture of semiconductor devices. Our modules help
manufacturers improve yields, reduce overall production costs and improve time
to market. Our complete systems, delivered to end users who manufacture
semiconductor devices, provide proprietary etch and deposition solutions to
high-growth end markets, including semiconductor packaging, telecommunications
and magnetic sensors.
Our objective is to be the worldwide leader in the supply of reactive gas
modules to semiconductor OEMs and related markets. We also seek to leverage our
technology and worldwide infrastructure to expand our systems business into
additional high-growth markets. To extend our technology leadership position,
we intend to continue to invest in research and development and to acquire
complementary technology for existing and new markets. In addition, we intend
to position our modules as the technology of choice for leading semiconductor
equipment manufacturers as they introduce new product lines or continue to
outsource their systems modules.
Since 1987, we have supplied process modules and systems to the
semiconductor industry and have earned a reputation for advanced process
technology and manufacturing excellence. Our customers include semiconductor
OEMs and end users.
Industry Background
Growth of the Semiconductor Market
The semiconductor industry grew significantly over the past decade. That
growth continues today. Dataquest estimates that despite year to year
fluctuation, worldwide semiconductor sales will increase from $160.1 billion in
1999 to approximately $253.3 billion in 2001. The increase in demand is driven
by growth in traditional markets for semiconductors such as data processing and
personal computers, and growth in telecommunications, wireless communications,
consumer electronics, and internet infrastucture and equipment.
According to Dataquest, the semiconductor wafer fabrication equipment
industry will grow from $17.5 billion in 1999 to $34.0 billion in 2001. This
growth will be driven by equipment purchases to expand manufacturing capacity
and purchases of advanced process technology to facilitate the continued
shrinking of semiconductor devices and device packages. Semiconductor
technology advances, particularly shrinking line widths, are driving the need
for more sophisticated manufacturing processes and advanced packaging
techniques which increasingly involve the use of reactive gases.
Capital equipment companies are constantly improving the efficiency of their
process technology and manufacturing processes. These companies increasingly
outsource the development and manufacture of process technology, while adopting
lean manufacturing techniques and consolidating the supply chain. As a result,
capital equipment companies now work more closely with critical suppliers who
can provide integrated process modules, accelerate technology development and
improve time to market.
The Semiconductor Device Manufacturing Process
Semiconductor devices, which include integrated circuits (ICs), sensors and
laser diodes, consist of components, typically transistors, along with
interconnect circuitry that connects the components. Semiconductor fabrication
involves several complex and repetitive processing steps, including diffusion,
25
<PAGE>
photolithography, deposition, etching, chemical mechanical planarization (CMP)
and ion implantation, during which numerous copies of an integrated circuit are
formed on a single wafer. The fabrication process typically creates eight to 30
very thin patterned layers on each wafer. The wafers are then processed into
packaged chips which are subsequently integrated into electronic products.
Reactive gases are used in a majority of process steps in chip fabrication.
Reactive gases are used to etch, strip and deposit films on wafers, to clean
wafers during processing and to clean process chambers to reduce particle
contamination.
[Diagrams of semiconductor fabrication and advanced packaging processes showing
the process steps in which ASTeX current and developing products are used.]
ASTeX In Semiconductor Processing
Semiconductor Fabrication
Bare Wafer
EPI
Ion Implant
Deposition
CMP
Lithography
Clean
Strip
Etch
Advanced Packaging
Bump Fabrication
Sort & Test
Dice
Direct Attach
Final Test
Current Products
Developments
No ASTeX Products
Deposition. Deposition is the process step in semiconductor manufacturing in
which the conductive and non-conductive layers are deposited on the wafer
surface. During this process step, gases are energized and react with other
materials in the process chamber to create a thin, uniform layer on the wafer.
Etch and Strip. Following deposition, the etch and strip processes
selectively remove unwanted areas of the deposited layer, leaving only the
required circuit pattern. Etching and stripping are performed by reacting gas
with the deposited material to vaporize and remove it.
Cleaning. There are two general segments in cleaning: cleaning of the
deposition chamber and cleaning of the wafer. During the deposition step, the
materials deposited on the wafer also coat the walls of the process chamber,
resulting in wafer contamination and loss of production yield. Reactive gases
are used to provide in-situ cleaning of the process chamber, significantly
reducing downtime and maintaining process repeatability and cleanliness.
The cleaning of the wafer occurs after most process sequences and prepares
the wafer for the next processing step. Wafer cleaning is accomplished either
with a dry process using reactive gases or a wet process using ozone (a
reactive gas) in de-ionized water. Wafer cleaning steps have increased
dramatically due to the shrinkage of semiconductor line widths, the associated
increased sensitivity to contamination and the increasing number of layers in
the circuit.
Advances in fabrication technology will continue to be characterized by ever
shrinking feature size in semiconductor chips, thus enabling more functions per
chip. Shrinking feature sizes and the increasing number of manufacturing
process steps create a greater need for the use of reactive gases in etch,
strip, deposition and clean.
26
<PAGE>
Advantages of Reactive Gas Processing
A reactive gas is created by adding energy to a stable gas to break apart
its molecules. The resulting dissociated gas produces rapid chemical reactions
when it comes into contact with other matter. Reactive gas processes have
important advantages relative to other types of chemical processes. These
advantages include the following:
Precision. The trend toward smaller feature size and denser packaging
requires the precision in etch, strip and deposition process steps, which can
only be obtained through the use of reactive gases.
Low Temperature. Reactive gas processes take place at relatively low
temperatures, thus avoiding heat damage to materials involved in the process.
Efficiency. Reactive gas works rapidly, shortening reaction times and
improving yields in the manufacturing process.
Lower Cost. The use of remotely generated reactive gases causes less wear
and tear on the process chamber and reduces the costs of using and disposing of
hazardous acids. Reactive gases can be used to neutralize "greenhouse" gases,
enabling compliance with environmental regulations.
Technological Challenges
Designing equipment to produce high-purity reactive gases presents
formidable engineering challenges requiring comprehensive mastery of a range of
complex technologies. In making a reactive gas, a large amount of power,
typically thousands of watts, must be delivered to the gas without damaging the
chamber walls. Reactive gases are so highly corrosive that it is extremely
difficult to contain these gases at high purity without contamination from
corrosion of chamber walls. Thermal management of the chamber materials and
temperature variations within the gas chamber is vital. Pressure management is
also critical and must be integrated with power source characteristics and gas
composition. Successful design of reliable reactive gas source equipment
involves a complex set of variables with many critical interactions.
Our Solutions
We deliver reactive gas process modules and systems that address the need
for continued technology advancement in semiconductor manufacturing and
packaging. Our expertise in the design and manufacture of these products allows
us to address the increasing trend of OEMs to outsource technology modules to
supply partners. We have continually provided innovative and cost-effective
solutions that address the need for purity, precision, uniformity, reliability
and efficiency in reactive gas processes. Our engineers are experienced in
addressing the difficult challenges associated with designing reactive gas
equipment and have developed a breadth of solutions that meet our customers'
exacting requirements.
ASTeX Modules Solutions. We provide our customers with enabling technology
to expand their product capabilities and address new markets. We provide
complete technology solutions, including development, design, integration,
manufacturing and field support, that deliver the following benefits to our
customers:
. Access to Expert Development Resources. We provide our customers with
access to specialized reactive gas technologists and design experts who
work collaboratively with our customers to advance their product
development efforts. Our customers can draw upon our core capabilities
in reactive gases to complement their system and wafer processing
expertise, thus reducing their product development costs.
. Experience as a Supplier to the Semiconductor Market. Our experience
allows us to understand and meet the unique needs of our customers in
the semiconductor industry, including continuous improvement, reduced
costs, technology shifts and business cycles.
27
<PAGE>
. Shorter Time to Market. We use our core technologies, design skills and
manufacturing expertise to shorten our customers' development and
manufacturing cycles. Our ability to design and manufacture key reactive
gas modules allows our customers to focus their efforts on providing
systems solutions.
. Product Solutions with Broad Application. We leverage our understanding
of semiconductor process steps to apply common reactive gas technology
across multiple process steps, thereby simplifying design, streamlining
support and accelerating customer acceptance.
. Integrated Products Which Support Lean Manufacturing. We provide
integrated modules which require less assembly, test and manufacturing
integration, increasing our customers' manufacturing efficiency.
ASTeX Systems Solutions. In our systems business, we integrate a broad
spectrum of technologies to provide system level solutions to industry process
needs. By using our core process technologies in reactive gas systems, together
with a range of platform capabilities, our engineers are able to design high-
level system solutions for a number of high-growth markets.
. Semiconductor Advanced Packaging. We have designed a specific deposition
tool, the Nimbus 300, to meet the unique needs of the advanced packaging
industry. Our tool provides higher wafer throughput and is easily
configurable on the foundry floor to handle 2 inch to 12 inch wafers.
Our system thus provides manufacturing flexibility and low overall cost
of ownership, making it ideally suited for the independent packaging
industry.
. Telecommunications. We offer low temperature precision etch and
deposition process tools used in the fabrication of both passive and
active components. We draw particularly on our reactive gas capabilities
to deposit and etch films at low temperature on high-frequency
telecommunications chips and laser diodes. The sensitive materials used
in the manufacture of fiber optic components require low temperature
processing.
. Magnetic Sensors. Our recently acquired Shamrock tool deposits complex
multi-layer sensors composed of both magnetic and non-magnetic films. We
use our high vacuum technology to provide the purity and cleanliness
needed in very thin film deposition. In addition, we use our reactive
source technology and control systems methodology to both monitor and
control film thickness and uniformity at the atomic level. Our tool
deposits a highly uniform thin film which is critical to the manufacture
of magnetic sensors, has an extremely small footprint and low cost of
ownership.
Markets
Existing Markets
Semiconductor. We provide modules and systems that incorporate our reactive
gas processing technology to the semiconductor manufacturing and packaging
markets. The equipment used to manufacture semiconductors has traditionally
been divided into "front end" processing and "back end" processing. The "front
end" processes build up the semiconductor circuit onto a wafer and "back end"
processes cut the wafer into individual die and package the die for use in
electronic products. We provide reactive gas modules used throughout the front
end manufacturing process and systems that address back end advanced packaging
needs.
Medical and Industrial. Precision reactive gases are used in a wide variety
of industrial processes that require high purity or very precise specifications
for the end-product. Reactive gas sources are used in deposition for many
applications such as ultra-thin, precise optical films and diamond-like
coatings for precision wear surfaces. Ozone, or reactive oxygen, is used to
modify surfaces of polymers and to destroy carcinogens found in groundwater.
We market our reactive gas processing technology and power control products
to related markets, including the markets for medical equipment, such as MRI,
and industrial applications, such as surface modification of plastics.
28
<PAGE>
Market Opportunities
Telecommunications. We have recently introduced complete etch and deposition
systems to meet the manufacturing requirements of expanding markets for fiber
optic network components and gallium arsenide semiconductors for mobile
telecommunications. Historically, we have provided reactive gas modules to the
telecommunications industry for the manufacture of laser diodes and gallium
arsenide semiconductors.
Magnetic Sensors and Magnetic Memory. Over the past 18 months, we have
acquired etch and deposition systems for the manufacture of magnetic sensors,
which have applications in three key markets: automotive sensors, Magnetic RAM
(MRAM) and disk drive heads. Our Shamrock product has been sold for the
production of automotive sensors used in applications such as anti-lock brakes
and air bag deployment triggers. MRAM, a non-volatile memory technology, is
currently being used in high-end military and satellite applications. As the
technology is refined and produced on a lower cost basis, it has the potential
for widespread application in semiconductor memory. Our Shamrock tool has also
been used for the manufacture of GMR heads for the disk drive industry.
Strategy
Our objective is to expand our leadership position in the provision of
advanced reactive gas processing solutions to the semiconductor market. We also
intend to establish a leadership position in providing such solutions to the
advanced packaging, telecommunications and other high-growth markets. We plan
to pursue the following strategies:
. Extend the Use of Our Core Technologies in the Semiconductor Processing
Market. We seek to increase our penetration of the semiconductor market
by expanding our customer base and by using our core technologies to
introduce new integrated reactive gas modules and innovative power
sources. Over the past two years, we have introduced five new product
families and multiple enhancements to existing products that provide
significant benefits to our customers.
. Leverage Our Technology Leadership into Systems Sales in New Markets. A
key element of our growth strategy is to use our core technology to
address reactive gas applications in new high-growth market segments. We
have recently introduced and sold systems that address the sophisticated
process needs of customers in semiconductor advanced packaging,
telecommunications and magnetic sensors for automotive, data storage and
memory applications.
. Capitalize on Our Global Sales and Service to Accelerate Worldwide
Growth. We are continuing to strengthen our global sales and service
through increased staffing and expanded infrastructure. The strength of
our global infrastructure provides local support to our international
customers and a platform for expanding international sales.
. Continue to Build Collaborative Development Relationships with Key
Customers. We believe that pursuing joint development arrangements with
leading manufacturers will provide us with critical insight into
industry trends, and lead to the development of additional new modules
or systems with broad market appeal. We work closely with our customers
to anticipate and provide solutions that meet specific performance,
reliability, cost and integration requirements.
. Grow Through Strategic Acquisitions. We intend to continue to pursue
strategic acquisitions of companies and/or product lines, particularly
those with closely-related technologies in high-growth markets. Over the
past four years, we have acquired four companies and one product line,
extending our technology and broadening our markets.
Products
We supply a broad range of modules and complete process systems for
precision reactive gas processing applications. The broadest applications for
our products are currently in the semiconductor industry. In addition, our
products are used in certain medical equipment, such as MRI and laser hair
removal devices, and a variety of industrial applications. Our systems are used
in advanced semiconductor packaging, fiber optics manufacturing for
telecommunications and magnetic sensors manufacturing.
29
<PAGE>
In semiconductor applications, the selling prices of our products have wide
ranges depending on the level of integration, the quantity ordered, the extent
of customized features and the application served. Typical selling prices for
reactive gas processing products range from $10,000 to $175,000. Our complete
etch, strip and deposition systems typically range in price from $250,000 to up
to $3.0 million.
Reactive Gas Modules and Power Modules for Semiconductor Processing
Reactive Gas Modules. We supply a series of reactive gas modules that are
designed to be incorporated as components in the semiconductor manufacturing
equipment of our OEM customers. These individual modules provide flexibility of
configuration and integration for semiconductor equipment customers.
Power Modules. We are a leading supplier of RF and microwave power sources
used for semiconductor deposition, etch and strip applications. We first
introduced our product family into the semiconductor equipment market in 1993.
In 1998, we launched our new line of microwave power sources with higher power
levels and improved regulation, ripple, and accuracy. These new microwave power
sources provide lower cost of ownership and improved process repeatability and
control. Full production shipments of our new power sources were achieved in
1999.
In 1997, we introduced our family of three-channel and four-channel
subsystems that combine RF and microwave power sources, integrated with control
systems, for etch, strip and deposition applications. This product family
reduces costs by integrating all power requirements for advanced process
chambers in a single, rack-mounted subsystem. We began selling these products
in volume in 1997, and they have been accepted under a volume supply agreement.
We also introduced into the medical market high-volume, low-cost, solid-state
RF power supplies for reactive gas generation in the sterilization of surgical
instruments.
Integrated Reactive Gas and Power Modules. We supply a range of reactive gas
subsystems for 200mm and 300mm semiconductor processing applications requiring
atomic oxygen, atomic fluorine, ozone and other types of reactive gas. In these
subsystems, the reactive gas source module is integrated with a power supply,
gas handling equipment and controls. Depending on the product, energy supplied
to produce the reactive gas may be microwave, RF or DC. These subsystems enable
our customers to outsource their reactive gas technological development,
speeding time to market and reducing their costs for total system production.
Microwave. In 1997, we introduced an integrated general reactive gas source
for photoresist strip and other applications that reduces time to market for
our OEM customers by providing a fully integrated solution. This product is
sold under a volume supply agreement for integration into a new generation of
etch and strip equipment.
Ozone. Our ozone product series consists of both modules and integrated
ozone subsystems used in semiconductor deposition and wet wafer cleaning
applications. Our subsystems incorporate our reactive gas sources and power
sources integrated with controls and gas handling. Relative to traditional
cleaning methods, ozone cleaning substantially reduces chemical consumption and
disposal costs. In addition, the by-products of ozone cleaning are more
environmentally friendly. Our patented ozone reactive gas generation technology
is recognized in the industry for high-efficiency ozone production as well as
high purity, cleanliness and reliability.
We introduced our ozone gas generators in 1995 for use in TEOS ozone
deposition of the insulating layers in semiconductors. In 1997, we introduced a
higher concentration, higher purity ozone generator series targeted for 300mm
wafer processing. In 2000, we introduced an even higher concentration ozone
generator with no increase in module size.
In 1997, we acquired Sorbios, a German manufacturer of ozone generation
products specializing in dissolved ozone applications for semiconductor and
other markets. In 1998, we introduced Liquozon, an integrated subsystem that
dissolves ozone into water, creating an efficient water cleaning method and
significantly reducing
30
<PAGE>
the use of acids and associated handling costs. We expect Liquozon to become
widely adopted in the wet wafer cleaning market because it provides an
integrated ozone solution which can be rapidly and easily implemented by our
customers. Many leading wet wafer processing equipment companies are either
already shipping our ozone solutions to customers or are in various stages of
introducing wet ozone into their manufacturing process.
ASTRON. In 1998, we introduced an integrated module for the production of
atomic fluorine and atomic oxygen for use in cleaning and abatement in several
semiconductor processing application chambers. Marketed under the trade name
ASTRON, this subsystem integrates a reactive gas generating module, a power
source and controls into an extremely compact unit. It produces a high flow of
atomic gas, which supports rapid processing, while its compact design permits
easy integration with semiconductor production tools.
During the process of depositing the layers which make up a semiconductor
circuit, the deposited material builds up on the inside of the chamber walls.
Because these deposits can influence the uniformity and purity of the process,
they must be periodically removed. Depending on the speed at which they are
deposited, this removal step can cause significant equipment downtime for
cleaning. One of the primary applications for ASTRON module is to clean these
unwanted deposits from the inside walls of the semiconductor processing
chambers. By generating atomic fluorine that reacts with the waste deposits in
the chamber, new gases are formed that are easily scrubbed to form benign salts
for disposal. By incorporating a short cleaning step into the process sequence,
tool availability is greatly enhanced.
In oxide etch and strip tools, our ASTRON module is used to abate hazardous
exhaust, transforming the gases into substances which are easily scrubbed. In
doing this, our reactive gas generator addresses the need to reduce greenhouse
gases while, simultaneously, significantly lowering the cost of cleaning
semiconductor process modules. Volume production shipments began in 1999.
Complete Process Systems
Our reactive gas solutions are incorporated into complete process systems on
fully integrated platforms that include substrate handling, control systems and
a production process. We have targeted a number of high- growth market segments
for supplying complete systems where we can take advantage of our core
technologies to provide unique process solutions. Primary market targets are
semiconductor advanced packaging, telecommunications and magnetic sensors. Our
three product lines detailed below are presently addressing these markets.
These products are offered at prices ranging from $250,000 to $3.0 million.
The Nimbus 300 product is a 300mm compatible complete physical vapor
deposition (PVD) production tool for advanced wafer scale packaging processes.
Primary application is for under-bump metallurgy for flip chip packaging, where
it offers an extremely cost effective solution. Our tool provides higher wafer
throughput and is easily configurable on the foundry floor to handle two inch
to 12 inch wafers. Our system thus provides manufacturing flexibility and low
overall cost of ownership, making it ideally suited for the independent
packaging industry.
Our PQ Series I systems offer batch processing for plasma cleaning of
electronic packages. The PQ Series II and Series III systems are single chamber
plasma process tools combining etch and strip and chemical vapor deposition. We
supply systems for high-rate etch processes using scaleable, microwave driven
reactive gas sources for telecommunications device manufacture and for magnetic
data storage head applications. They provide rapid etch and low temperature
deposition processes.
Our Shamrock product is a multi-source, application specific PVD system for
depositing the high-quality thin films used in MR and GMR recording heads,
tunneling spin valves, motion and shock sensors in automobile electronics and
advanced magnetic memory products. The Shamrock 150 is a 6 inch capable system
with up to six sources. The Shamrock 200, under development, is an 8 inch-
compatible tool featuring an ultra-high vacuum process chamber containing up to
10 sources, expandable to additional process chambers.
31
<PAGE>
Industrial, Medical and Other Applications
We have expanded the use of our power source and reactive gas source
technologies into new markets, including chemical vapor deposition in
industrial markets and power sources for the medical market. In these
applications, the selling prices of our products have wide ranges depending on
the amount of reactive gas or power delivered, the level of integration
(sources or integrated subsystems), the quantity ordered and the application
served. Our products for the medical and industrial markets typically range in
price from $1,500 to $175,000.
Industrial Power Sources and Reactive Gas Sources. We supply power sources
for industrial lasers and electro-optic applications. For the emerging water
remediation market, we supply ozone source components and subsystems integrated
with gas handling and controls. These subsystems can be configured to provide
sufficient high-pressured ozone to process up to 2,000 gallons of water per
minute.
Medical Equipment Power Sources. We supply RF power sources used in MRI
systems and in medical equipment sterilization systems. In addition, in 1997,
we introduced DC switching power sources that offer excellent price/performance
for medical applications. These products were widely offered internationally to
customers beginning in 1999.
32
<PAGE>
Products for Semiconductor Applications
<TABLE>
<CAPTION>
Trade Year
Product Category Products Name Introduced Applications
<S> <C> <C> <C> <C>
Power Modules Microwave 1988 Semiconductor etch and strip
Microwave OEM Product 1993 Semiconductor deposition, etch
and strip
Microwave with Self- SmartPower 1998 Semiconductor, deposition,
Diagnostics etch and strip
-----------------------------------------------------------------------------------
Radio Frequency 1996/1/ Primarily used internally in
ASTeX's subsystems
Multi-Channel DC, RF Gladiator 1997 Semiconductor deposition and
and Microwave Power etch and strip
Source
-----------------------------------------------------------------------------------
DC/Low Frequency 1997/2/ Semiconductor, medical and
laser products
- -------------------------------------------------------------------------------------------------
Reactive Gas Component General SmartSet 1988 Semiconductor etch, strip
Modules Reactive Gas Source deposition and chamber clean
Integrated General CPS 1997 Semiconductor strip
Reactive Gas Source
Fluorine Compatible SmartMatch 1998 Semiconductor etch, strip,
Reactive Gas Source deposition and chamber clean
with Matching
-----------------------------------------------------------------------------------
Component Ozone Semozon 1995 Semiconductor deposition and
Source wet wafer cleaning
Integrated Ozone Semozon 1996 Semiconductor deposition and
Sources wet wafer cleaning
Low Dopant Ozone 1998 Semiconductor deposition and
Source wet wafer cleaning
Ozonated Water Liquozon 1998/3/ Semiconductor wet wafer
Delivery Subsystem cleaning
300mm Ozone Source 2000 Semiconductor deposition and
wet wafer cleansing
-----------------------------------------------------------------------------------
Atomic Fluorine ASTRON 1998 Semiconductor chamber clean
Subsystem and exhaust gas abatement
- -------------------------------------------------------------------------------------------------
Complete Batch Reactor Etch PQ Series I 19984 Plasma cleaning of electronic
Process Systems packages
-----------------------------------------------------------------------------------
Single Chamber Etch & PQ Series II 19984 Data storage/thin film heads
CVD & III etch & CVD; telecommunications
-----------------------------------------------------------------------------------
Cassette to Cassette Nimbus 300 1999/5/ Under bump metallurgy;
Physical Vapor Backside metallization for
Deposition (PVD) advanced semiconductor
packaging
-----------------------------------------------------------------------------------
Orbital Planetary PVD Shamrock 150 1999/6/ GMR magnetic sensors
</TABLE>
- --------------------------------------------------------------------------------
/1/Derived from the acquisition of ETO in January 1996.
/2/Derived from the acquisition of Converter Power in May 1997.
/3/Derived from the acquisition of Sorbios in October 1997.
/4/Derived from the acquisition of PlasmaQuest in November 1998.
/5/Derived from the acquisition of Klee in April 1999.
/6/Derived from the acquisition of Shamrock in August 1999.
As shown in the table, we began selling reactive gas sources and microwave
power sources in volume to the semiconductor equipment market in 1993. Over the
past three years, all of our products introduced for the semiconductor
equipment market have been more fully-integrated modules. As semiconductor
equipment
33
<PAGE>
manufacturers implement lean manufacturing practices and move towards the
outsourcing of more fully-integrated modules, we have an opportunity to further
extend our modules product lines sold to these customers.
Medical and Industrial Applications
We use our power source and reactive gas source capabilities to provide a
broad range of specialized products, primarily for MRI, surgical instrument
sterilization equipment and medical and industrial lasers. The following table
describes these products.
Products for Medical and Industrial Applications
<TABLE>
<CAPTION>
Year
Product Category Products Introduced Applications
<S> <C> <C> <C>
Power Modules Microwave 1993 Polymer processing
---------------------------------------------------------------------
Radio Frequency 1996/1/ Magnetic resonance imaging
equipment and medical
sterilization
---------------------------------------------------------------------
DC/Low Frequency 1997/2/ Medical and industrial lasers
- -----------------------------------------------------------------------------------
Reactive Gas General Reactive Gas 1995 Industrial deposition and
Modules Sources optical thin-film coating
---------------------------------------------------------------------
Component Ozone 1996 Water remediation
Source
1998 Polymer and surface treatment
---------------------------------------------------------------------
Integrated Ozone 1998 Water remediation
Sources
</TABLE>
- --------------------------------------------------------------------------------
/1/Derived from the acquisition of ETO in January 1996.
/2/Derived from the acquisition of Converter Power in May 1997.
Research and Development
Our research and development activities emphasize process and application
development in collaboration with key customers, supported by engineering teams
with electrical, mechanical and software expertise. We have two applications
development groups in the United States and one in Germany. Our senior
engineering staff spend a substantial portion of their time visiting customers
and exploring new applications requiring solutions. Our research and
development staff totals approximately 82 people, 25 of whom have advanced
degrees, including 14 Ph.D.s.
Total research and development expenses were approximately $10.2 million in
fiscal 1999, $12.0 million in fiscal 1998 and $8.7 million in fiscal 1997 or
13.0% of revenues in fiscal 1999, 14% of revenues in fiscal 1998 and 18% of
revenues in fiscal 1997. Total research and development expenses for the six
months ended December 25, 1999 were approximately $6.1 million (or 10% of
revenues) and for the six months ended December 26, 1998 were approximately
$4.8 million (or 16.5% of revenues).
We expect to continue to spend heavily in future years on research and
development activities because of the highly technical nature of our business,
our rapidly expanding markets, and the new technologies that we are developing.
Significant Customers and Contracts
During fiscal 1999, 1998, and 1997, Applied Materials accounted for
approximately 45%, 40%, and 38% of our consolidated total revenue, and 50% for
the six months ended December 25, 1999. If we lose Applied Materials or if it
significantly reduces orders, our revenues, operating results and financial
condition will be hurt. No other customer accounted for more than 8% of total
revenue in fiscal 1999. While sales to Applied Materials represent a large
portion of our total revenue, Applied Materials is the world's largest
semiconductor equipment manufacturer and is reported to represent approximately
21% of the total wafer fabrication equipment market and as much as 60% of the
market segments it serves.
34
<PAGE>
In the semiconductor equipment market, our customers include Applied
Materials, FSI International, GaSonics International, PSK Tech Inc., Semitool,
Silicon Valley Group, Ulvac and Varian Semiconductor Equipment. We have signed
multi-year supply contracts with some of these customers, which typically
provide for cancellation or modification with little or no penalty. Generally,
customers may push out deliveries, put firm orders on hold, or cancel existing
firm orders with little or no penalty.
Marketing, Sales and Services
In order to sell and service our products more aggressively in the global
market, we formed a Global Customer Operations organization in the last quarter
of fiscal 1998. This organization presents one face to the customer worldwide
and comprises our entire marketing, sales, service, and product management
group. The organization is structured around regional offices worldwide,
supporting direct marketing, sales, and service activities, and provides more
control over independent sales and distribution representatives. In the past 18
months, the Global Customer Operations organization established regional
offices for the western U.S. (Santa Clara, CA), central U.S. (Austin, TX),
eastern U.S. (Woburn, MA), Germany, France, Taiwan and Japan, and we are
negotiating a strategic alliance in Korea. During that period, our sales,
marketing and service personnel have increased from 34 people to 46 people.
Manufacturing and Suppliers
Our products are manufactured at facilities in Woburn, Wilmington and
Newton, Massachusetts; Colorado Springs, Colorado; and Berlin, Germany. During
the past two years, we have consolidated other facilities in California, Texas
and Massachusetts into these facilities.
We perform final assembly, integration, testing, and quality assurance at
our facilities. We obtain and ship many of our products and components under
"just-in-time" arrangements.
Most of the components for our products are manufactured by a number of
suppliers. However, we have several significant sole source suppliers. We
believe that these components could be obtained elsewhere if needed or that our
products could be redesigned to use alternative suppliers' products. However,
other supply sources might not be available without significant delay or
increased cost.
We share common information systems and applications programs throughout our
operations. Our enterprise resource program is used for manufacturing in all of
our U.S. facilities and is being implemented in our Berlin facility. Our Woburn
and Colorado Springs facilities are both ISO 9001 certified.
Competition
We compete on the basis of our technical expertise, core competencies,
manufacturing capabilities, high quality and reliability, performance,
established reputation and customer relationships. Many of our technical
personnel have recognized experience in the fields of power and reactive gas
source technology, systems integration and advanced process technology. We
compete in a number of markets by providing a broad array of products,
engineering and service support. We believe that this range of products and
capabilities provides us with a significant competitive advantage.
We believe that we are the largest provider of microwave power sources and
microwave-powered reactive gas sources in the world, facing competition
primarily from Muegge Electronic GmbH in Germany and Daihen in Japan. In the
ozone source market, we compete primarily with Ebara and Sumitomo Precision
Products. We believe our major competitors for RF power sources and amplifiers
are Advanced Energy Industries, Analogic, ENI, a subsidiary of Astec (BSR) Plc,
and Comdel. We believe our major competitors for DC power sources are ALE
Systems and Kaiser Systems. In the systems business, our major competitors are
Balzers Process Systems, CVC, Shimatsu, STS, Trikon and Veeco Systems.
35
<PAGE>
We typically have been able to meet the purity, controllability and
reliability requirements of our customers in a cost effective and timely
manner. However, many of our customers have large, in-house equipment
development programs. These in-house programs often attempt to develop
equipment which may compete with or replace the products purchased from us. We
must continue to develop and enhance our technology and products to keep pace
with technological changes in production equipment and advanced materials
processes.
Patents and Proprietary Information
As of February 15, 2000, we own 26 U.S. patents and two foreign patents, and
have 24 pending U.S. patent applications and 12 pending foreign applications in
various stages of prosecution. The earliest of the issued patents expires in
2007. We have retained license rights to certain third party patents and patent
applications. We have retained commercial ownership rights to proprietary
technology developed under various U.S. and government contracts and grants,
including SBIR contracts. We also have joint development agreements with
industrial and commercial partners which may result in sole or joint ownership
rights to proprietary technology developed under those agreements.
There is no single patent or patent application which we believe is critical
to our business. Our success depends principally on the technical expertise and
product development capabilities of our engineering and manufacturing teams and
the sales and marketing skills of our Global Customer Operations group.
In addition to our patent rights, we rely upon trade secrets and
confidentiality agreements, which all employees are required to execute,
assigning all patent rights and technical or other information developed by
employees during their employment to us. Our employees, consultants, customers,
and potential customers have agreed not to disclose any trade secret or
confidential information without prior written consent. Notwithstanding these
confidentiality agreements, other companies could acquire information which we
consider proprietary. Moreover, while we have successfully enforced one of our
patents and intend to continue to vigorously enforce our patents against
infringement by third parties, we might not be able to enforce our patents or
obtain meaningful protection from competitors or third parties, or receive
patents from our pending patent applications. Even if a competitor's products
were to infringe our patents, enforcing our rights would be very expensive and
would divert funds and resources which otherwise could be used in our
operations. We might not be successful in enforcing our rights and a court
could find that our products infringe a third party's rights. If we are not
successful in a suit involving patents or other intellectual property rights of
a third party, a license might not be available on commercially reasonable
terms, or be available at all.
Backlog
The majority of our business is performed under multi-year supply agreements
with major customers. Due to short cycle times, the majority of our revenues in
any fiscal quarter will likely not appear as backlog at the commencement of any
fiscal quarter. In addition, the backlog figures do not include just-in-time
deliveries, which represented approximately 9% of revenues during the most
recent quarter. Our backlog consists of purchase orders for standard products
and contracts for research and development. At December 25, 1999 our backlog
was approximately $18.7 million, virtually all of which was for standard
products. The product backlog at December 26, 1998 was approximately $12.0
million. We expect to complete all standard product backlog during the next six
months. Our multi-year supply agreements, as well as certain government
contracts, typically provide for cancellation or modification with little or no
penalty. In addition, customers may push out deliveries, put firm orders on
hold, or cancel existing firm orders with little or no penalty.
Facilities
We occupy 60,000 square feet of leased space in Woburn, Massachusetts for
our principal executive offices, research and development center and
manufacturing activities. This lease terminates on June 30, 2000. The current
rent for this facility is $46,851 per month. We recently acquired approximately
118,000 square feet
36
<PAGE>
of space in Wilmington, Massachusetts for our principal executive offices,
research and development center and manufacturing activities. We purchased
these premises for approximately $10.7 million. We own 25,000 square feet of
office, lab and manufacturing space occupied by our ETO subsidiary located in
Colorado Springs, Colorado. We sublease 16,600 square feet of office and lab
space in Colorado Springs, Colorado. The current rent for this facility is
$16,600 per month. This lease will terminate on September 1, 2000, unless we
exercise an option for an additional 18 months. We maintain office and
manufacturing facilities in Newton, Massachusetts in 3,500 square feet of
leased space. This lease expires on June 30, 2000. The rent for this facility
is $4,442 per month.
We maintain a sales and service office in approximately 12,439 square feet
of leased space in Santa Clara, California under a three-year lease which
expires on August 8, 2002. The rent for this space is $22,390 per month in year
one, $23,012 per month in year two and $24,256 per month in year three. We
maintain a sales and service office in approximately 1,484 square feet of
leased space in Austin, Texas. The rent for this space is $1,700 per month and
the lease expires on November 30, 2000. We also lease approximately 9,700
square feet of manufacturing and office space in Berlin, Germany. The current
rent for this facility is $7,013 per month. The office space portion of the
lease terminates on March 31, 2001 and will automatically renew for twelve
months unless cancelled six months in advance. The manufacturing space portion
of the lease terminates on June 30, 2001 and will automatically renew for
twelve months unless cancelled six months in advance.
ASTeX CPI occupied 31,000 square feet of leased space in Beverly,
Massachusetts. We have a five-year lease on this facility which expires in
September 2001. The current rent for this facility is $18,324 per month. We are
currently attempting to sublease this space. During Fiscal 1999, our Beverly,
Massachusetts and Modesto, California facilities were consolidated, primarily
into the Woburn, Massachusetts facility and secondarily into the Colorado
facility.
ASTeX PlasmaQuest occupies 11,700 square feet of leased space in Dallas,
Texas. The lease on this facility expires in July 2004. The current rent for
this facility is $13,352 per month. During the first quarter of Fiscal 2000,
our Dallas, Texas facility was consolidated into the Woburn, Massachusetts
facility, and we have sublet this space.
Litigation
We are not involved in any litigation of a material nature.
Employees
As of January 31, 2000, we employed 471 persons on a full-time basis,
including 72 temporary employees. We employ 55 full time and 7 temporary
persons in administration, 45 full time and 2 temporary in sales, service and
marketing, 82 full time and 3 temporary in research and development, and 215
full time and 62 temporary in manufacturing. We believe that our relations with
our employees are satisfactory.
37
<PAGE>
MANAGEMENT
The directors, executive officers, officers and certain other key employees
of ASTeX, and their ages and positions as of January 31, 2000, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Richard S. Post, Ph.D. 56 President, Chief Executive Officer and Chairman of the Board of Directors
.......................
William S. Hurley....... 55 Senior Vice President and Chief Financial Officer
John M. Tarrh........... 52 Vice President, Secretary, Treasurer and Director
Brian R. Chisholm....... 52 Senior Vice President and Chief Operating Officer
John E. Ross............ 55 Senior Vice President
Stanley Burg............ 59 Senior Vice President
Jill E. Maunder......... 44 Vice President, Human Resources
Richard P. English, 56 Vice President, Massachusetts Manufacturing
Ph.D. .................
Robert N. Caruso........ 48 Vice President and General Manager, Colorado Springs Facility
Piero Sferlazzo, 47 Vice President, Technical Marketing/Product Management
Ph.D. .................
Jack Schuss, Ph.D....... 47 Vice President, Engineering
Robert E. Bettilyon..... 51 Corporate Controller
Robert R. Anderson...... 62 Director
Michel de Beaumont...... 57 Director
John R. Bertucci........ 58 Director
Hans-Jochen Kahl........ 60 Director
</TABLE>
Richard S. Post, Ph.D. has served as our President, Chief Executive Officer
and Chairman of the Board since our inception in January 1987. Prior to
founding ASTeX, Dr. Post served at the Massachusetts Institute of Technology
(MIT) from January 1981 to December 1988. At MIT, Dr. Post served as a Senior
Research Scientist, in the position of Head of the Mirror Confinement Division
of the Plasma Fusion Center. Dr. Post holds a Ph.D. in Plasma Physics from
Columbia University and a B.S. from the University of California at Berkeley.
He also completed the Owner/President Management Program at Harvard Business
School.
William S. Hurley has served as our Senior Vice President and Chief
Financial Officer since November 1999. From August, 1996 to October, 1999, Mr.
Hurley served as Vice President and Chief Financial Officer at Cybex
International, Inc., a publicly held manufacturer of fitness equipment. From
March 1992 to September 1995, Mr. Hurley was Vice President-Controller and
Chief Accounting Officer at Bolt, Beranek & Newman, Inc. (the former BBN
Corporation). Since June 1993, Mr. Hurley has been a director of L.S. Starrett
Co., a publicly held company which produces precision measurement equipment.
Mr. Hurley holds an M.B.A. in Finance from Columbia University and a B.S. in
Accounting from Boston College.
Mr. John M. Tarrh has served as our Vice President, Secretary and Treasurer,
and as a member of our board of directors since our inception in January 1987.
Mr. Tarrh served as our Chief Financial Officer and Secretary from January 1987
through November 1999. Mr. Tarrh became the Manager of the Mirror Confinement
Division of MIT's Plasma Fusion Center in 1986 where he was responsible for
financial management, project management and administration. Prior to joining
the research staff of MIT in 1978, he was the Executive Vice President--
Operations of Magnetic Engineering Associates, a privately held, high
technology company in Cambridge, Massachusetts which was owned by Sala
Magnetics. Mr. Tarrh presently
38
<PAGE>
serves as a director for QC Optics, Inc., a publicly held designer of laser-
based defect detection systems. Mr. Tarrh is also a director of Bintel Systems,
Inc. a privately held developer of inventory management automation systems. Mr.
Tarrh holds a M.S. in Electrical Engineering from MIT, and a B.S. in Electrical
Engineering from Virginia Polytechnic Institute and State University.
Mr. Brian R. Chisholm has been our Chief Operating Officer and Senior Vice
President since May 1998. From November 1996 to May 1998, Mr. Chisholm was our
Senior Vice President of Operations. From 1994 to August 1996, Mr. Chisholm was
the Research and Development Manager--Thin Film Systems for Varian Associates,
a developer and producer of automated systems for depositing thin films, where
he was responsible for advanced development, engineering and support of all
thin film products. Previously, Mr. Chisholm was the Vice President,
Engineering and Product Management for IRT Corporation, a publicly held company
that provides machine vision based x-ray inspection systems and radiation
processing services. Mr. Chisholm holds an M.B.A. from Northeastern University,
a M.S. in Physics from Virginia Polytechnic Institute and State University and
a B.A. in Physics from Northeastern University.
Mr. Stanley Burg has been our Senior Vice President since December 1998.
From July 1995 to November 1998, Mr. Burg was Chief Executive Officer of
Sputtered Films, Inc., a privately-owned company involved in the design and
manufacture of high performance sputtering equipment for the semiconductor and
magnetic storage industries. From 1991 to July 1995, Mr. Burg was Group Vice
President of Implex PLC, a U.K. holding company comprised of wholly-owned
subsidiaries in the semiconductor and memory products business.
Mr. John E. Ross has been our Senior Vice President since February 2000, our
Vice President, Business Development since January 2000 and served as a
consultant to us since September 1999. From June 1998 to May 1999, Mr. Ross was
the Senior Vice President of Operations at Topaz Technologies, a company which
designs and manufactures professional, wide format ink jet printing systems.
From June 1993 to June 1998, Mr. Ross was the General Manager and Vice
President of Operations at Applied Magnetics Corporation, a manufacturer of
read/write recording heads for computer disk drives. Mr. Ross is also a
director of Life Quality Products, Inc., a privately-held company. Mr. Ross
holds a B.S. in Chemistry from Hull University in Hull, England.
Ms. Jill E. Maunder has been our Vice President of Human Resources since
February 1998. From February 1996 to February 1998, Ms. Maunder was the
President for Outsourcing Solutions, Inc., a human resources consulting firm.
From September 1993 to January 1996, Ms. Maunder was Vice President, Human
Resources Consulting for Strategic Outsourcing, Inc., a human resources
outsourcing practice. Prior to that Ms. Maunder was Director, Human Resources
for Bull HN Worldwide Information Services. Ms. Maunder holds a B.A. in Social
Service from the University of New Hampshire.
Richard P. English, Ph.D. has been our Vice President of Massachusetts
Manufacturing since September 1999. During 1998, Dr. English served as a
manufacturing process consultant to Quantum Vision, Inc. of Mountain View,
California. From October 1998 to September 1999, Dr. English served as a
consultant to Equilasers, Inc., a private medical and industrial laser
manufacturing firm, where he identified and led efforts to create process
infrastructure. From November 1998 to April 1999, Dr. English also served as a
Vice President of Manufacturing Operations for Gregory Associates, Inc., a
systems-level contract manufacturing firm, where he was responsible for all
operations-related activities. From 1993 to 1998, Dr. English was Vice
President, Operations, for Alcaltel Comptech, Inc. of Fremont, California. Dr.
English holds a Ph.D. in Physical Chemistry from the Massachusetts Institute of
Technology and a B.S. in Chemistry from the University of Rochester.
Mr. Robert N. Caruso has been our Vice President/General Manager of the
Colorado Springs facility since August 1999. From December 1998 to August 1999,
Mr. Caruso was a consultant to Harris Group Inc., an engineering services firm,
where he provided manufacturing, product/market and business planning expertise
to project teams and senior management. From 1995 to 1998, Mr. Caruso was Chief
Executive Officer of Pride
39
<PAGE>
Industries, Inc., a precision machining and specialty equipment company that
was sold in September 1998. From 1993 to 1995, Mr. Caruso served as President
of GAC Technologies Company. Mr. Caruso has also served as an officer and
member of the Board of Directors of Lauener Engineering A.G., a European
design, engineering and manufacturing subsidiary of ACX Technologies Inc. Mr.
Caruso holds an M.B.A. from Wayne State University and a B.S. in engineering
mechanics and a B.A. from Penn State University.
Piero Sferlazzo, Ph.D. has been our Vice President, Technical
Marketing/Product Management, since April 1999. From June 1997 to April 1999,
Dr. Sferlazzo was President and co-founder of Klee Corporation, a company
founded to develop and produce automated thin film deposition systems used in
the packaging of computer chips, which was acquired by ASTeX in April 1999.
From July 1993 to May 1997, Dr. Sferlazzo was at Krytek Corporation, initially
as Vice President for Engineering, and subsequently as Chief Executive Officer.
Krytek provides equipment to the semiconductor industry used during the
maintenance and refurbishing of Ion Implanters. From December 1988 to July 1993
Dr. Sferlazzo was a Principal Scientist for Eaton Corporation, a major producer
of Ion Implanters. Dr. Sferlazzo holds a Ph.D. from Brandeis University and a
B.S. in Physics from the University of Florence in Italy.
Jack Schuss, Ph.D. has been our Vice President, Engineering since February
2000. From 1997 to 2000, Dr. Schuss was the Director of Engineering at Raytheon
RF Components, a designer and manufacturer of monolithic microwave integrated
circuit components and modules for the wireless industry and in support of
Raytheon Company's other businesses. From 1992 to 1997, Dr. Schuss was the
Engineering Manager at Iridium MMA-Raytheon Co. Dr. Schuss holds a Ph.D. from
Princeton University and an S.B. from Massachusetts Institute of Technology.
Mr. Robert E. Bettilyon has been our Corporate Controller since August 1993.
From 1983 to 1993, Mr. Bettilyon was Controller at Coherent General, Inc., a
publicly-held manufacturer of industrial lasers and laser systems for materials
processing and medical applications, and has served at each of its
Massachusetts, Tokyo and Munich facilities. Mr. Bettilyon previously served as
a Senior Financial Planning Analyst at Standard Oil of Ohio from 1980 to 1983,
and as an Audit Senior at Touche Ross (now Deloitte and Touche) from 1977 to
1980. Mr. Bettilyon holds a B.S. in Accounting from the University of Utah and
is a Certified Public Accountant.
Mr. Robert R. Anderson has served as a member of our Board of Directors
since October 1995. Since October 1998, Mr. Anderson has served as the Chief
Executive Officer and Chairman of the Board of Directors of Yield Dynamics,
Inc. (formerly "Integral Domain Technologies, Inc."), a manufacturer of yield
management software. From 1996 to 1998, Mr. Anderson served as the Chief
Executive Officer of Silicon Valley Research, Inc. (Silicon Valley), a
manufacturer of EDA software for integrated circuit design and manufacture.
Mr. Anderson currently serves as Chairman of Silicon Valley. Previously, Mr.
Anderson co- founded in 1975 and served as Chairman of the Board of Directors,
Chief Financial Officer and Chief Operating Officer of KLA Instruments
Corporation (now KLA-Tencor), the leading manufacturer of yield monitoring and
process control systems for the semiconductor manufacturing industry, from
which he retired in 1994. From 1970 to 1975, Mr. Anderson was Chief Financial
Officer of Computervision Corporation, which developed and marketed software
for design automation and product data management. Mr. Anderson is also a
director of Metron Technology, a publicly held company. Mr. Anderson attended
Bentley College.
Mr. Michel de Beaumont has served as a member of our Board of Directors
since January 1993. Since 1981, Mr. de Beaumont has served as a co-founder and
director of American Equities Overseas (U.K.) Ltd. of London, England, a wholly
owned subsidiary of American Equities Overseas Inc. (American Equities), a
private securities brokerage and corporate finance firm. From 1978 to 1981, Mr.
de Beaumont served as a Vice President in the London, England Office of
American Securities Corp., which subsequently was the clearing house for
American Equities until 1993. Mr. de Beaumont has also previously served as a
Vice President at Smith Barney Harris Upham and Oppenheimer & Co. Mr. de
Beaumont is also a Director of Agripope Inc., a
40
<PAGE>
public Argo-biotech company. Mr. de Beaumont is also a director of Euro-Nocopi,
S.A., a privately-held company. Mr. de Beaumont holds degrees in Advanced
Mathematics, Physics and Chemistry from the Universities of Poitiers and Paris,
and a degree in Business Administration from the University of Paris.
Mr. John R. Bertucci has served as a member of our Board of Directors since
September 1994. Mr. Bertucci was the President, and a director of MKS
Instruments, Inc. (MKS), a publicly held manufacturer and seller of pressure
control instruments for vacuum processes, from 1974 to 1999, and Chairman and
Chief Executive Officer since 1995. Since October 1998, Mr. Bertucci has served
as a director of IntelliSense Corporation, a privately-owned designer and
manufacturer of micro-electronic machined structures. Mr. Bertucci holds a M.S.
in Industrial Administration and a B.S. in Metallurgical Engineering from
Carnegie-Mellon University.
Mr. Hans-Jochen Kahl has served as a member of our board of directors since
October 1995. From June 1994 through September 1996, Mr. Kahl served as a
consultant to Ebara, a Japanese manufacturer of industrial water pumps and
vacuum process equipment for the semiconductor industry. Mr. Kahl was employed
by Leybold AG, formerly Leybold-Heraeus GmbH (Leybold), a leading international
manufacturer of vacuum pumps and other vacuum process equipment for the
semiconductor industry, from July 1983 to March 1992, Mr. Kahl served as a
managing director of Leybold, where he was primarily responsible for sales,
marketing and strategic planning. Mr. Kahl was appointed to the Board of
Directors of Leybold in 1987, and since November 1996, he has served as a
director of Solid State Measurement, a privately held manufacturer of high
precision measurement tools.
41
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to ASTeX regarding
the beneficial ownership of common stock as of March 25, 2000, and as adjusted
to reflect the sale of shares offered hereby, by:
. each of our directors;
. the named executive officers;
. all directors and executive officers as a group; and
. each person known to us to be the beneficial owner of more than 5% of
our outstanding shares of common stock.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to the Owned After the
Offering(1) Shares Offering(1)
-------------------- to be --------------------
Number Percent(2) Sold Number Percent(2)
------ ---------- ------ --------- ----------
<S> <C> <C> <C> <C> <C>
Executive Officers and
Directors
Richard S. Post, Ph.D.(3).... 665,401 5.6% 50,000 615,401 4.3%
William S. Hurley(4)......... 9,000 * -- 9,000 *
John M. Tarrh(5)............. 368,486 3.1% 50,000 318,486 2.2%
Brian R. Chisholm(6)......... 66,900 * -- 66,900 *
Stanley Burg(7).............. 17,000 * -- 17,000 *
Robert R. Anderson(8)........ 90,113 * -- 90,113 *
John Bertucci(9)............. 113,250 1.0% -- 113,250 *
Michel de Beaumont(10)....... 85,719 * -- 85,719 *
Hans-Jochen Kahl(11)......... 34,250 * -- 34,250 *
All Officers and Directors as
a Group (15 Persons)(12).... 1,501,719 12.3% -- 1,401,719 9.6%
Five Percent Stockholder
Kopp Investment Advisors, 1,265,800 10.8% -- 1,265,800 8.9%
Inc.(13)....................
7701 France Avenue South,
Suite 500
Edina, Minnesota 55435
</TABLE>
- --------
* Less than one percent (1%)
(1) Shares of common stock that an individual or group has the right to
acquire within 60 days of March 25, 2000, pursuant to the exercise of
options or warrants are deemed to be outstanding for the purposes of
computing the percentage ownership of such individual or group, but are
not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person shown in the table. Except as indicated in
footnotes to this table, we believe that the stockholders named in this
table have sole voting and investment power with respect to all shares of
common stock shown to be beneficially owned by them based on information
provided to us by such stockholders.
(2) Percentage of ownership is based on 11,766,592 shares of common stock
outstanding on March 25, 2000 and 14,266,592 shares of common stock
outstanding after the completion of this Offering.
(3) Includes 15,150 shares of common stock owned by Dr. Post's wife and
121,299 shares of common stock subject to currently exercisable options
held by Dr. Post.
(4) Includes an aggregate of 8,000 shares of common stock subject to currently
exercisable options held by Mr. Hurley.
(5) Includes an aggregate of 1,313 shares of common stock owned by Mr. Tarrh's
wife and minor son and 36,350 shares of common stock subject to currently
exercisable options held by Mr. Tarrh.
(6) Includes 66,900 shares of common stock subject to currently exercisable
options held by Mr. Chisholm.
(7) Includes 8,000 shares of common stock subject to currently exercisable
options held by Mr. Burg.
(8) Includes 15,000 shares of common stock held in trust for the benefit of a
child of Mr. Anderson, of which Mr. Anderson is the trustee, and 32,250
shares of common stock subject to currently exercisable options held by
Mr. Anderson.
42
<PAGE>
(9) Includes 52,500 shares of common stock held by MKS Instruments, Inc., of
which Mr. Bertucci is the majority shareholder and 38,250 shares of
common stock subject to currently exercisable options held by Mr.
Bertucci.
(10) Includes 47,469 shares of common stock held by various trust
arrangements, of which Mr. de Beaumont is a beneficiary and 38,250 shares
of common stock subject to currently exercisable options held by Mr. de
Beaumont.
(11) Includes 23,750 shares of common stock subject to currently exercisable
options held by Mr. Kahl.
(12) Includes (i) 12,600 shares of common stock owned and 10,000 shares of
common stock subject to currently exercisable options held by Jill E.
Maunder, our Vice President of Human Resources, (ii) 10,000 shares of
common stock owned and 10,000 shares of common stock subject to currently
exercisable options held by Piero Sterlazzo, our Vice President of
Technical Marketing/Product Management, (iii) 6,000 shares of common
stock subject to currently exercisable options held by Robert N. Caruso,
our Vice President and General Manager of Colorado Springs and (iv) 3,000
shares of common stock subject to currently exercisable options held by
Richard P. English, Ph.D., our Vice President of Massachusetts
Manufacturing. See also footnotes 3 through 11 above.
(13) Based solely upon a Schedule 13G filed on February 4, 2000 by Kopp
Investment Advisors, Inc. (KIA) on behalf of KIA, Kopp Holding Company
and Leroy C. Kopp. KIA is an investment adviser that is wholly-owned by
Kopp Holding Company, which is wholly-owned by Leroy C. Kopp. KIA has
sole voting power as to 357,500 of such shares and sole dispositive power
as to 235,000 of such shares. Leroy C. Kopp has sole voting and
dispositive power as to 15,000 of such shares. The address for Kopp
Investment Advisors, Inc., Kopp Holding Company and Leroy C. Kopp is 7701
France Avenue South, Suite 500, Edina, MN 55435.
43
<PAGE>
UNDERWRITING
The underwriters named below, represented by Robertson Stephens, CIBC World
Markets Corp., Needham & Company, Inc. and Adams, Harkness & Hill, Inc. (the
Representatives), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, to purchase from us and the selling
stockholders the number of shares of common stock indicated below opposite
their respective names at the public offering price less the underwriting
discount set forth on the cover page of this prospectus. The Underwriting
Agreement provides that the obligations of the underwriters to pay for and
accept delivery of such shares are subject to certain conditions precedent, and
that the underwriters are committed to purchase all of such shares, if any are
purchased.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
FleetBoston Robertson Stephens Inc. ...................... 1,180,000
CIBC World Markets Corp. ................................. 708,000
Needham & Company, Inc.................................... 236,000
Adams, Harkness & Hill, Inc. ............................. 236,000
Advest, Inc............................................... 80,000
Josephthal & Co. Inc...................................... 80,000
Miller, Johnson & Kuehn, Inc.............................. 80,000
---------
Total................................................... 2,600,000
=========
</TABLE>
The Representatives have advised us that the underwriters initially propose
to offer the shares of common stock to the public on the terms set forth on the
cover page of this prospectus. The underwriters may allow to selected dealers a
concession of not more than $1.02 per share, and the underwriters may allow,
and such dealers may reallow, a concession of not more than $0.10 per share to
certain other dealers. After this offering, the offering price and other
selling terms may be changed by the Representatives. We estimate that the total
offering expenses, other than underwriting discounts and commissions, will be
$456,000.
The underwriters have an option to buy up to 390,000 additional shares of
common stock from us at the same price per share that we will receive for the
2,600,000 shares that the underwriters have agreed to purchase from us and the
selling stockholders. These additional shares would cover sales of shares by
the underwriters which exceed the number of shares specified in the table
above. The underwriters have 30 days to exercise this option. If the
underwriters exercise this option, they will each purchase additional shares
approximately in proportion to the amounts specified in the table above.
Our directors and officers, holding in the aggregate 1,099,670 shares of
common stock after this offering, have agreed that, for a period of 90 days
after the date of this prospectus, they will not, without the prior written
consent of Robertson Stephens, directly or indirectly sell, offer to sell or
otherwise dispose of any such shares of common stock or any right to acquire
such shares. In addition, we have agreed that, for a period of 90 days after
the date of this prospectus, we will not, without the prior written consent of
Robertson Stephens, issue, offer, sell, grant options to purchase or otherwise
dispose of any of our equity securities or any other securities convertible
into or exchangeable for the common stock or other equity security, other than
the grant of options to purchase common stock or the issuance of shares of
common stock under our stock option and stock purchase plans and the issuance
of shares of common stock pursuant to the exercise of outstanding options and
warrants.
The Underwriting Agreement provides that we indemnify the several
underwriters against certain liabilities, including civil liabilities under the
Securities Act of 1933, or will contribute to payments the underwriters may be
required to make arising from these types of liabilities.
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares
44
<PAGE>
than they are required to purchase in the offering. Stabilizing transactions
consist of certain bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while the offering
is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
EXPERTS
The consolidated financial statements of Applied Science and Technology,
Inc. and subsidiaries as of June 26, 1999 and June 27, 1998 and for each of the
years in the three-year period ended June 26, 1999, have been included herein
and in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the common stock offered with this prospectus has been
passed upon for us by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
Boston, Massachusetts. Certain legal matters in connection with the common
stock offered with this prospectus will be passed upon for the underwriters by
Hale and Dorr LLP, Boston, Massachusetts.
45
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets at June 27, 1998, June 26, 1999, and December
25, 1999 (unaudited)..................................................... F-3
Consolidated Statements of Operations for the Years Ended June 28, 1997,
June 27, 1998 and June 26, 1999 and for the six months ended December 26,
1998 and December 25, 1999 (unaudited)................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended June
28, 1997, June 27, 1998 and June 26, 1999 and for the six months ended
December 25, 1999 (unaudited)............................................ F-5
Consolidated Statement of Cash Flows for the Years Ended June 28, 1997,
June 27, 1998 and June 26, 1999 and for the six months ended December 26,
1998 and December 25, 1999 (unaudited)................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Applied Science and Technology, Inc.:
We have audited the accompanying consolidated balance sheets of Applied
Science and Technology, Inc. and subsidiaries as of June 26, 1999 and June 27,
1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
June 26, 1999. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Applied
Science and Technology, Inc. and subsidiaries as of June 26, 1999 and June 27,
1998, and the results of their operations and their cash flows for each of the
years in the three-year period ended June 26, 1999, in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
Boston, Massachusetts
July 23, 1999, except for note 20, as to which the date is August 24, 1999
F-2
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June June
27, 26, December 25,
1998 1999 1999
------- ------- ------------
(Unaudited)
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents..................... $ 7,687 $31,775 $17,628
Trade receivables, net (notes 2, 3 and 9)..... 12,734 18,093 22,680
Other receivables............................. -- 906 647
Investments, short term ...................... -- -- 4,988
Inventories (note 4).......................... 13,737 12,419 16,290
Prepaid expenses and other assets............. 549 386 549
Deferred income taxes (note 7)................ 1,356 1,514 1,091
------- ------- -------
Total current assets........................ 36,063 65,093 63,873
------- ------- -------
Property and Equipment:
Land.......................................... 473 473 473
Building...................................... 1,643 1,652 1,652
Equipment..................................... 11,108 11,181 14,117
Furniture and fixtures........................ 1,032 1,043 1,054
Leasehold improvements........................ 2,228 2,193 2,209
------- ------- -------
16,484 16,542 19,505
Less accumulated depreciation and
amortization............................... (7,960) (8,394) (9,408)
------- ------- -------
Net property and equipment.................. 8,524 8,148 10,097
------- ------- -------
Other Assets:
Patents, net.................................. 1,095 992 988
Goodwill, net of accumulated amortization of
$471 and $942 in 1998 and 1999, respectively,
and $1,392 at December 25, 1999 ............. 4,042 3,967 8,135
Long-term investments......................... -- -- 5,116
Deferred income taxes (note 7)................ 1,100 1,936 2,600
Notes receivable, less current maturities
(notes 3 and 12)............................. 469 394 374
Other, net.................................... -- 5 --
------- ------- -------
Total other assets.......................... 6,706 7,294 17,213
------- ------- -------
$51,293 $80,535 $91,183
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.............................. $ 3,012 $ 5,496 $ 5,357
Accrued expenses.............................. 1,935 3,471 4,750
Accrued compensation expense and related
costs........................................ 1,993 2,624 3,111
Accrued income taxes.......................... 293 607 1,596
Commissions payable and customer advances..... 259 616 1,183
------- ------- -------
Total current liabilities................... $ 7,492 $12,814 $15,997
======= ======= =======
Commitments and contingencies (notes 5 and 10)
Stockholders' Equity (notes 6 and 13):
Common stock.................................. 86 114 116
Additional paid-in capital.................... 44,193 70,045 71,648
Retained earnings (Accumulated deficit)....... (247) (2,124) 3,668
Less: Notes receivable for common stock
purchases.................................... (148) (148) --
Accumulated other comprehensive income loss... (83) (166) (246)
------- ------- -------
Total stockholders' equity.................. 43,801 67,721 75,186
------- ------- -------
$51,293 $80,535 $91,183
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Years Ended Six Months Ended
------------------------------- -------------------------
June 28, June 27, June 26, December 26, December 25,
1997 1998 1999 1998 1999
--------- --------- --------- ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Product sales, net...... $ 43,935 $ 77,958 $ 72,097 $ 26,573 $ 57,300
Research contract
revenue................ 982 786 856 236 32
Other revenue........... 3,050 4,692 5,256 2,145 4,336
--------- --------- --------- --------- ----------
Total revenue (note
9)................. 47,967 83,436 78,209 28,954 61,668
--------- --------- --------- --------- ----------
Cost of sales and
revenue:
Product sales and
other revenues....... 30,053 54,564 55,246 23,145 37,504
Research contracts.... 504 423 309 135 3
--------- --------- --------- --------- ----------
Total cost of sales
and revenue........ 30,557 54,987 55,555 23,280 37,507
--------- --------- --------- --------- ----------
Gross profit........ 17,410 28,449 22,654 5,674 24,161
--------- --------- --------- --------- ----------
Operating expenses:
Research and
development expenses
..................... 7,343 11,253 9,745 4,568 6,092
Selling expenses...... 2,950 4,427 5,168 2,375 4,165
General and
administrative
expenses............. 3,958 6,648 8,055 3,673 5,611
Acquisition-related
expenses (note 11)... 1,500 212 -- -- --
Restructuring
charges.............. -- -- 2,260 1,497 --
--------- --------- --------- --------- ----------
Total operating
expenses........... 15,751 22,540 25,228 12,113 15,868
--------- --------- --------- --------- ----------
Earnings (loss) from
operations......... 1,659 5,909 (2,574) (6,439) 8,293
--------- --------- --------- --------- ----------
Other income (expense):
Interest expense...... (585) (196) (32) (20) --
Interest income....... 396 514 649 187 848
Other income
(expense)............ 18 260 56 69 (107)
--------- --------- --------- --------- ----------
Total other income
(expense).......... (171) 578 673 236 741
--------- --------- --------- --------- ----------
Earnings (loss)
before income
taxes.............. 1,488 6,487 (1,901) (6,203) 9,034
Income tax expense
(benefit) (note 7)..... 550 2,466 (650) (2,286) 3,242
--------- --------- --------- --------- ----------
Net earnings
(loss)............. $ 938 $ 4,021 $ (1,251) $ (3,917) $ 5,792
========= ========= ========= ========= ==========
Earnings (loss) per
share:
Basic................. $ 0.14 $ 0.50 $ (0.13) $ (0.46) $ 0.50
========= ========= ========= ========= ==========
Diluted............... $ 0.14 $ 0.47 $ (0.13) $ (0.46) $ 0.48
========= ========= ========= ========= ==========
Weighted average common
shares:
Basic................. 6,686,253 8,052,926 9,398,289 8,593,863 11,500,957
========= ========= ========= ========= ==========
Diluted............... 6,777,440 8,528,947 9,398,289 8,593,863 12,181,771
========= ========= ========= ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
Notes
Receivable
Preferred Retained for Other Total
Stock Common Stock Additional Earnings Common Accumulated Stock-
------------- ------------------ Paid-in (Accumulated Stock Comprehensive holders'
Shares Amount Shares Amount Capital Deficit) Purchases Income (Loss) Equity
------ ------ ---------- ------ ---------- ------------ ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 29,
1996................... -- $-- 6,672,563 $ 66 $26,668 $(5,206) $(233) $ -- $21,295
Repayment of notes
receivable............. -- -- -- -- -- -- 7 -- 7
Canceled stock in
exchange for
cancellation of note
receivable............. -- -- (7,500) -- (78) -- 78 -- --
Exercise of stock
options................ -- -- 52,964 1 289 -- -- -- 290
Tax benefit of stock
options exercised...... -- -- -- -- 63 -- -- -- 63
Stock issued in
connection with
acquisition ........... -- -- 60,482 1 895 -- -- -- 896
Net earnings and total
comprehensive income... -- -- -- -- -- 938 -- -- 938
--- ---- ---------- ---- ------- ------- ----- ----- -------
Balance at June 28,
1997................... -- -- 6,778,509 68 27,837 (4,268) (148) -- 23,489
Exercise of stock
options and warrants... -- -- 1,827,954 18 16,080 -- -- -- 16,098
Tax benefit of stock
options exercised...... -- -- -- -- 276 -- -- -- 276
Comprehensive income
(loss):
Cumulative translation
adjustment............. -- -- -- -- -- -- -- (83) (83)
Net earnings........... -- -- -- -- -- 4,021 -- -- 4,021
-------
Total comprehensive
income (loss).......... -- -- -- -- -- -- -- -- 3,938
--- ---- ---------- ---- ------- ------- ----- ----- -------
Balance at June 27,
1998................... -- -- 8,606,463 86 44,193 (247) (148) (83) 43,801
Common stock issued, net
of issuance costs ..... -- -- 2,300,000 23 23,783 -- -- -- 23,806
Exercise of stock
options and warrants... -- -- 222,035 2 987 -- -- -- 989
Tax benefit of stock
options exercised ..... -- -- -- -- 443 -- -- -- 443
Cancellation of escrowed
shares................. -- -- (21,940) -- (195) -- -- -- (195)
Stock issued in pooling
of interest
acquisition............ -- -- 310,604 3 834 (626) -- -- 211
Comprehensive income
(loss):
Cumulative translation
adjustment............. -- -- -- -- -- -- -- (83) (83)
Net loss............... -- -- -- -- -- (1,251) -- -- (1,251)
-------
Total comprehensive
income (loss).......... -- -- -- -- -- -- -- -- (1,334)
--- ---- ---------- ---- ------- ------- ----- ----- -------
Balance at June 26, 1999
....................... -- -- 11,417,162 114 70,045 (2,124) (148) (166) 67,721
Exercise of stock
options and warrants... -- -- 250,045 2 1,603 -- -- -- 1,605
Notes receivable for
common stock .......... -- -- -- -- -- -- 148 -- 148
Comprehensive income:
Cumulative translation
adjustment ............ -- -- -- -- -- -- -- (80) (80)
Net earnings .......... -- -- -- -- -- 5,792 -- -- 5,792
-------
Total comprehensive
income (loss) ......... -- -- -- -- -- -- -- -- 5,712
--- ---- ---------- ---- ------- ------- ----- ----- -------
Balance at December 25,
1999 (Unaudited)....... -- $-- 11,667,207 $116 $71,648 $ 3,668 $ -- $(246) $75,186
=== ==== ========== ==== ======= ======= ===== ===== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended Six Months Ended
---------------------------- -------------------------
June 28, June 27, June 26, December 26, December 25,
1997 1998 1999 1998 1999
-------- -------- -------- ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net earnings (loss)..... $ 938 $ 4,021 $(1,251) $(3,917) $ 5,792
Adjustments to reconcile
net earnings (loss) to
net cash provided by
(used for) operating
activities:
Depreciation........... 1,825 2,194 2,658 1,412 1,583
Amortization .......... 117 548 623 306 538
Acquisition-related
expenses.............. 1,500 212 -- -- --
Deferred income taxes.. (439) 37 (994) (2,286) (241)
(Gain) loss on disposal
of assets............. -- (192) 832 625 13
Equipment transferred
to inventories........ 114 -- -- -- 280
Changes in assets and
liabilities:
Trade receivables...... (1,739) 44 (4,328) 684 (4,587)
Inventories............ 146 (2,754) 1,636 1,302 (3,224)
Prepaid expenses and
other assets.......... 42 (272) (569) 28 (230)
Notes receivable....... 373 232 (23) 233 19
Accounts payable....... 785 (1,897) 1,948 (1,600) (138)
Accrued expenses....... 188 410 1,570 (44) 2,398
Accrued income taxes... 536 (77) 758 236 988
------- ------- ------- ------- --------
Net cash provided by
(used for) operating
activities........... 4,386 2,506 2,860 (3,021) 3,191
------- ------- ------- ------- --------
Cash flows from
investing activities:
Acquisitions of
subsidiaries, less cash
acquired............... (6,483) (3,683) (23) (23) (6,208)
Acquisition related
receivable............. -- -- -- (806) --
Advances to subsidiary
prior to acquisition... -- -- (1,050) (800) --
Purchases of
investments............ (1,299) -- -- -- (10,104)
Proceeds from sales of
investments............ 1,991 1,800 -- -- --
Additions to property
and equipment.......... (1,030) (2,999) (1,839) (1,010) (2,616)
Patent costs............ (57) (25) (52) (10) (83)
Investment in other
assets................. (140) -- 48 40 --
------- ------- ------- ------- --------
Net cash used for
investing
activities........... (7,018) (4,907) (2,916) (2,609) (19,011)
------- ------- ------- ------- --------
Cash flows from
financing activities:
Net borrowings under
note payable to bank... -- -- -- 172 --
Proceeds from notes
payable................ 4,983 -- -- -- --
Repayments of notes
payable................ (4,584) (9,173) (686) (206) --
Repayment of notes
receivable for common
stock purchases........ 7 -- -- -- 148
Net proceeds from
issuance of common
stock.................. 290 16,098 24,912 7 1,605
------- ------- ------- ------- --------
Net cash provided by
(used for) financing
activities........... 696 6,925 24,226 (27) 1,753
------- ------- ------- ------- --------
Effect of exchange rates
on cash................ -- (83) (82) 141 (80)
------- ------- ------- ------- --------
Net increase (decrease)
in cash and cash
equivalents............ (1,936) 4,441 24,088 (5,516) (14,147)
Cash and cash
equivalents at
beginning of period.... 5,182 3,246 7,687 7,687 31,775
------- ------- ------- ------- --------
Cash and cash
equivalents at end of
period................. $ 3,246 $ 7,687 $31,775 $ 2,171 $ 17,628
======= ======= ======= ======= ========
Supplemental disclosures
of cash flow
information:
Cash paid during the
period for:
Interest............... $ 539 $ 249 $ 32 $ 20 $ --
======= ======= ======= ======= ========
Income taxes........... $ 454 $ 2,521 $ 277 $ 236 $ 1,526
======= ======= ======= ======= ========
Acquisitions:
Assets acquired......... $ 4,074 $ 4,701 $ 2,578 $ 2,579 $ 2,024
Acquisition related
expenses, net of tax
benefit................ 945 212 -- -- --
Goodwill and other
intangible assets...... 3,317 2,177 393 393 4,288
Liabilities assumed..... (957) (3,407) (2,824) (2,025) (104)
Common stock issued..... (896) -- -- -- --
------- ------- ------- ------- --------
Cash paid............ 6,483 3,683 147 947 6,208
Less cash acquired and
pre-acquisition
advances to
subsidiary............. -- -- (124) (924) --
------- ------- ------- ------- --------
Net cash paid for
acquisitions........ $ 6,483 $ 3,683 $ 23 $ 23 $ 6,208
======= ======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(1) Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Applied Science and Technology, Inc. (the "Company") develops and
manufactures modules and systems using reactive gas and power source
technologies for semiconductor, medical and industrial production applications.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries: Applied Science and Technology ("ASTeX")
GmbH, ASTeX/Gerling Laboratories, Inc., ETO, Inc. ("ETO"), ASTeX CPI, Inc.
("CPI"), Newton Engineering Service, Inc. ("NES") and ASTeX Sorbios GmbH. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Interim Financial Statements
The interim financial statements as of December 25, 1999, and for the six
months ended December 26, 1998 and December 25, 1999 are unaudited. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial position and
results of operations have been included in such unaudited financial
statements. The results of operations for the six months ended December 25,
1999 are not necessarily indicative of the results to be expected for the
entire year.
Revenue Recognition
The Company recognizes revenue on product sales and other sales when the
related products are shipped or the related services are rendered. The Company
periodically enters into research contracts which generally provide for
nonrefundable payments. Research contract revenue is recognized based on the
proportion of costs incurred to total estimated costs using the percentage of
completion method. At the time a loss on a contract becomes known, the entire
amount of the estimated loss is recognized.
Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with original maturities of three
months or less to be cash equivalents.
Investments
Short-term and long-term investments consist of U.S. treasury notes and
government backed debt at June 26, 1999 and June 27, 1998. The Company uses an
investment firm to manage its investment portfolio.
The Company classifies its securities as held-to-maturity. Held-to-maturity
securities are those investments in which the Company has the ability and
intent to hold the security until maturity. Held-to-maturity securities are
recorded at amortized cost, which approximates market value.
Dividend and interest income is recognized in the period earned. Realized
gains and losses for held-to-maturity securities are included in earnings and
are derived using the specific identification method for determining the cost
of securities sold.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
F-7
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Property and Equipment
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. The
estimated useful lives of fixed assets are as follows:
<TABLE>
<S> <C>
Building.............................................. 25 to 31 1/2 years
Equipment, furniture and fixtures..................... 3 1/2 to 7 years
Leasehold improvements................................ Remaining lease term
</TABLE>
Patents
Patent costs are amortized over their estimated useful life of five years.
Goodwill
Goodwill is amortized over 10 years. The Company continually evaluates
whether events or circumstances have occurred that indicate that the remaining
useful life of goodwill may warrant revision or that the remaining balance may
not be recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company estimates the undiscounted cash flow of the
business segment, net of tax, over the remaining life of the asset in
determining whether the asset is recoverable. Charges for impairment of
goodwill would be recorded to the extent unamortized book value exceeds the
related future discounted cash flow, net of tax. The discount factor to be used
would be the long-term debt rate currently obtainable by the Company.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of
The Company uses the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to undiscounted future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount of fair
value less costs to sell.
Research and Development Costs
All research and development costs are expensed as incurred. Research and
development expenses attributable to research contracts are included in costs
of sales and revenue.
Income Taxes
The Company's income taxes are accounted for under the asset and liability
method. Under this method, deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
F-8
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Use of Estimates
Management of the Company has made a number of estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The significant estimates included in the consolidated financial statements
relate to the determination of reserves for excess inventories. Management
establishes its reserves for excess inventories based upon expected future
usage and sales of inventories in the normal course of business as adjusted for
anticipated changes in market demand. Certain of the Company's inventories are
product specific and may not be readily salable in the open market. The
possible loss of sales to certain customers could result in the need for
further adjustment to the carrying value of the Company's inventories.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments, defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a
current transaction between willing parties.
The carrying amounts of cash and cash equivalents, trade receivables,
prepaid expenses and other assets, accounts payable, and accrued expenses
approximate fair value because of the short maturity of those instruments.
The carrying amounts of short-term investments and long-term investments
approximate fair value based on quoted market prices.
The carrying amounts of notes receivable approximate fair value as the rates
of interest on these instruments approximate current market rates of interest
for similar instruments with comparable maturities.
Accounting for Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, Accounting for Stock-Based Compensation ("Statement 123") which
established a fair-value based method of accounting for stock-based
compensation plans. Prior to its adoption of Statement 123, the Company
accounted for employee stock options under APB Opinion No. 25, Accounting for
Stock Issued to Employees, which required the use of an intrinsic-value method
of accounting for stock options. Statement 123 allows the continued use of the
intrinsic-value method of accounting prescribed by APB Opinion No. 25 as long
as pro forma disclosures of net earnings (loss) and net earnings (loss) per
share, as if the fair-value method of accounting for stock-based compensation
were applied, are presented.
The Company has adopted Statement 123 and has elected to continue to account
for stock-based compensation using the methodology prescribed by APB Opinion
No. 25. Accordingly, pro forma disclosures of net earnings (loss) and net
earnings (loss) per share as if the fair-value method of accounting for stock-
based compensation were applied are presented in note 6.
Foreign Currency Translation
All assets and liabilities of the Company's foreign operations are
translated into U.S. dollars using year-end exchange rates. All revenue and
expense items are translated using weighted-average exchange rates for the
year. Translation gains and losses are included in other comprehensive income
in the statement of stockholders' equity.
F-9
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Comprehensive Income
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income, during Fiscal Year 1999.
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during a period,
except those resulting from investments by owners and distributions to owners.
This pronouncement requires that the accumulated total of other comprehensive
income be shown as a separate component of stockholders' equity, with
additional disclosure of accumulated balances for each classification within
other comprehensive income in addition to the reporting of total comprehensive
income. Accumulated other comprehensive income, a component of stockholders'
equity previously titled "cumulative translation adjustment", consists solely
of foreign currency translation.
(2) Trade and Notes Receivable
Trade and notes receivable consist of the following:
<TABLE>
<CAPTION>
June June
27, 26,
1998 1999
------- -------
<S> <C> <C>
Trade receivables.......................................... $13,044 $18,466
Notes receivable, current portion (see note 3)............. 67 362
Allowance for doubtful accounts............................ (377) (735)
------- -------
$12,734 $18,093
======= =======
</TABLE>
(3) Notes Receivable
Notes receivable consist of the following:
<TABLE>
<CAPTION>
June 27, June 26,
1998 1999
-------- --------
<S> <C> <C>
Note receivable from stockholder with interest at 8% per
annum, payable in principal installments through June,
1999 with the remaining balance due in August, 1999.
The note is secured by certificates of deposit......... $288 $224
Note receivable with interest at 8% per annum, payable
in monthly installments of $2, including interest, with
any remaining balance due on December 2, 2002. The note
is secured by real estate.............................. 148 190
Note receivable with interest at 8.5% per annum, payable
in quarterly principal installments of $10, plus
accrued interest, with final principal payment of $100
on June 30, 2003. This note is secured by equipment.... -- 250
Unsecured note receivable due on October 1, 1999........ -- 90
Unsecured note receivable with interest at 10%.......... 100 --
Other notes ............................................ -- 2
---- ----
536 756
Less current maturities............................... 67 362
---- ----
Long-term notes receivable............................ $469 $394
==== ====
</TABLE>
Current maturities of notes receivable have been included in trade
receivables.
F-10
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
(4) Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 25,
June 27, June 26, 1999
1998 1999 (Unaudited)
-------- -------- ------------
<S> <C> <C> <C>
Raw materials................................. $ 8,990 $ 7,906 $11,834
Work in process............................... 3,210 3,458 2,401
Finished goods................................ 1,537 1,055 2,055
------- ------- -------
$13,737 $12,419 $16,290
======= ======= =======
</TABLE>
(5) Leases
The Company leases equipment and office, research and manufacturing
facilities under operating leases which expire through April, 2010. Future
minimum lease payments under operating leases are as follows:
<TABLE>
<S> <C>
Year ending June 30:
2000............................................................... $ 1,714
2001............................................................... 1,433
2002............................................................... 1,253
2003............................................................... 1,340
2004............................................................... 1,324
Thereafter......................................................... 7,292
-------
$14,356
=======
</TABLE>
Rent expense totaled $762, $916 and $1,339 for the years ended June 28,
1997, June 27, 1998 and June 26, 1999, respectively.
(6) Stockholders' Equity
Capital stock consists of the following at June 27, 1998 and June 26, 1999:
<TABLE>
<CAPTION>
Number of shares
issued and outstanding
----------------------
June 27, June 26,
Authorized 1998 1999
---------- ----------------------
<S> <C> <C> <C>
Preferred stock:
Preferred stock, $.01 par value.......... 1,000,000 -- --
---------- ---------- -----------
Total preferred stock.................. 1,000,000 -- --
---------- ---------- -----------
Common stock:
Common stock, $.01 par value............. 30,000,000 8,606,463 11,417,162
---------- ---------- -----------
Total common stock..................... 30,000,000 8,606,463 11,417,162
---------- ---------- -----------
Total capital stock.................... 31,000,000 8,606,463 11,417,162
========== ========== ===========
</TABLE>
The holders of common stock are entitled to one vote for each share of
record held on each matter submitted to a vote of stockholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of preferred stock which may from time to time be outstanding, holders
of common stock
F-11
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
are entitled to receive ratably such dividends as may be declared by the board
of directors out of funds legally available therefrom, and, upon the
liquidation, dissolution or winding up of the Company, are entitled to share
ratably in all assets remaining after payment of liabilities and payment of
accrued dividends and liquidation preference on the preferred stock, if any.
Holders of common stock have no preemptive rights and have no rights to convert
their common stock into any other securities. The outstanding common stock is
validly issued and nonassessable.
On March 5, 1999, the Company completed the registration and sale of
2,000,000 shares of common stock at $11 per share. On April 6, 1999, the
underwriters exercised their over-allotment option to purchase an additional
300,000 shares of common stock, bringing total shares issued in this offering
to 2.3 million. The net proceeds from the offering were approximately $23.8
million.
On February 19, 1998, the Company declared a dividend of one preferred share
purchase right (a "right") for each outstanding share of common stock
outstanding on March 2, 1998 (the "record date") to stockholders of record on
that date. Each right entitles the registered holder to purchase one one-
thousandth of a share of Series A Junior Participating Preferred Stock, par
value $0.01 per share ("junior preferred shares"), of the Company at $70 per
one one-thousandth of a junior preferred share, subject to adjustment in the
event of a stock split of the common shares or a stock dividend on the common
shares payable in common shares or subdivisions, consolidations or combinations
of the common shares occurring prior to the distribution date, defined below.
Until the earlier of (i) 10 days following a public announcement that a
person or group of affiliated or associated persons has acquired a beneficial
ownership of 15% or more of the outstanding common shares or (ii) 10 business
days following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of such outstanding
common shares (the earlier of such dates being the "distribution date"), the
rights will be evidenced, with respect to any of the common share certificates
outstanding as of the record date.
Until the distribution date, the rights will be transferred with and only
with the common shares. Until the distribution date (or earlier redemption or
expiration of the rights), new common share certificates issued after the
record date will contain a notation incorporating the rights agreement by
reference.
Preferred shares purchased upon exercise of the rights are not redeemable
and are entitled to quarterly dividend payments of 1000 times dividends
declared on common shares, 1000 votes, voting together with common shares, and
1000 times the aggregate payment made to common shareholders in the event of
liquidation.
The rights are not exercisable until the distribution date and expire on
December 31, 2007, unless extended or redeemed by the Company.
The preferred stock may be issued in one or more series, the terms of which
may be determined at the time of issuance by the board of directors, without
further action by stockholders, and may include voting rights (including the
right to vote as a series on particular matters), preferences as to dividends
and liquidation, conversion, redemption rights and sinking fund provisions.
The future issuance of preferred stock could reduce the rights, including
voting rights, of the holders of common stock, and, therefore, reduce the value
of the common stock. In particular, specific rights granted to future holders
of preferred stock could be used to restrict the Company's ability to merge
with or sell its assets to a third party, thereby preserving control of the
Company by existing management.
F-12
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
On September 3, 1997, the Company announced that it had met the requirements
for the redemption of redeemable warrants issued in connection with the
Company's Initial Public Offering ("IPO") and called the warrants for
redemption. 2,082,451 redeemable warrants and 133,088 underwriter warrants were
converted into 1,691,416 shares of common stock. The net proceeds were $15.2
million.
The Company adopted the 1993 Stock Option Plan in fiscal 1994 and in fiscal
1995, adopted the 1994 Formula Stock Option Plan to award non-employee
directors of the Company with stock options. The Plans are administered by the
Company's board of directors which has the authority to determine the
recipients, number of shares, and the related terms and provisions of the
options which may be granted.
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock-based compensation plans. In accordance with APB
Opinion No. 25, no compensation cost has been recognized in connection with
these plans. Had compensation cost for the Company's stock-based compensation
plans been determined consistent with Statement No. 123, the Company's net
earnings (loss) and net earnings (loss) per share would have been reduced to
the following pro forma amounts.
<TABLE>
<CAPTION>
Years ended
--------------------------
June 28, June 27, June 26,
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net earnings (loss) as reported............... $ 938 $4,021 $(1,251)
===== ====== =======
Pro forma net earnings (loss)................. $ 226 $2,118 $(3,178)
===== ====== =======
Basic net earnings (loss) per share as
reported..................................... $0.14 $ 0.50 $ (0.13)
===== ====== =======
Pro forma basic net earnings (loss) per
share........................................ $0.03 $ 0.26 $ (0.34)
===== ====== =======
Diluted net earnings (loss) per share as
reported..................................... $0.14 $ 0.47 $ (0.13)
===== ====== =======
Pro forma diluted net earnings (loss) per
share........................................ $0.03 $ 0.25 $ (0.34)
===== ====== =======
</TABLE>
The effect of applying Statement No. 123 as shown in the above pro forma
disclosures is not representative of the pro forma effect on net earnings in
future years because it does not take into consideration stock options granted
prior to fiscal 1996.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants issued in fiscal 1999, 1998 and 1997: no dividend
yield for all years; expected volatility of 82%, 76%, and 75% for 1999, 1998,
and 1997, respectively; risk-free interest rates of 4.72% for 1999 grants, 5.8%
for 1998 grants and 6% for 1997 grants; and expected lives of 4 years for 1999
and 1998 grants and 4 to 8 years for 1997 grants.
F-13
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
The following is a summary of stock option activity.
<TABLE>
<CAPTION>
Employee stock options
-------------------------------------
Option Weighted
shares Options average
available outstanding exercise price
--------- ----------- --------------
<S> <C> <C> <C>
Balance at June 29, 1996............. 688,223 716,070 $ 7.39
Options granted.................... (349,088) 349,088 6.46
Options exercised.................. -- (52,964) 5.47
Options expired.................... 48,769 (48,769) 7.10
--------- ---------
Balance at June 28, 1997............. 387,904 963,425 7.17
Options added...................... 1,132,500 -- --
Options granted.................... (465,579) 465,579 11.61
Options exercised.................. -- (136,538) 6.08
Options expired.................... 101,800 (101,800) 9.61
--------- ---------
Balance at June 27, 1998............. 1,156,625 1,190,666 8.84
Options granted.................... (886,695) 886,695 6.59
Options exercised.................. -- (222,035) 6.76
Options expired.................... 460,993 (484,993) 10.20
--------- --------- ------
Balance at June 26, 1999............. 730,923 1,370,333 $ 7.30
========= =========
</TABLE>
The weighted-average fair value of options granted during fiscal 1999, 1998
and 1997 was $3.13, $6.98 and $3.83, respectively. Effective August 26, 1998,
the Company repriced all of its stock options which had been granted since June
29, 1997 to the closing market price as of that date, which was $6.00 per
share. Options which had been granted to directors of the company during the
same period were not repriced.
The following is a summary of information relating to stock options
outstanding at June 26, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------- ---------------------
Number Weighted- Number Weighted-
outstanding Weighted- average exercisable average
Range of at June 26, average remaining exercise at June 26, exercise
exercise prices 1999 contractual life price 1999 price
--------------- ----------- ----------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 3.83- 5.25 323,282 4.2 years $ 4.03 81,922 $ 4.34
6.00- 9.00 760,600 2.9 6.85 364,234 6.99
9.75-14.50 254,751 6.6 11.28 149,824 10.60
15.00-20.00 31,700 5.2 19.20 6,000 19.25
--------- -------
1,370,333 4.0 $ 7.30 601,980 $ 7.65
========= =======
</TABLE>
Notes receivable for common stock purchases are due through October 2000 or
upon termination of employment with the Company, if earlier. Interest accrues
at 6.28% per annum.
F-14
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
(7) Income Taxes
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
Years ended
--------------------------
June 28, June 27, June 26,
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal......................................... $ 775 $2,141 $ 245
State........................................... 214 288 99
----- ------ -----
Total current................................. 989 2,429 344
----- ------ -----
Deferred:
Federal......................................... (294) (267) (779)
State........................................... (145) 304 (215)
----- ------ -----
Total deferred................................ (439) 37 (994)
----- ------ -----
$ 550 $2,466 $(650)
===== ====== =====
</TABLE>
The actual tax expense differs from the "expected" tax expense (benefit)
(computed by applying the U.S. federal corporate income tax rate of 34% to
earnings (loss) before income taxes) as follows:
<TABLE>
<CAPTION>
Years ended
--------------------------
June 28, June 27, June 26,
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)....... $506 $2,205 $(646)
Increase (reduction) in income taxes resulting
from:
State taxes, net of federal benefit........... 45 391 (76)
Research and experimentation tax credit....... (44) (87) 90
Valuation reserve movement.................... -- (171) (99)
Other......................................... 43 128 81
---- ------ -----
$550 $2,466 $(650)
==== ====== =====
</TABLE>
Total income tax expense was allocated as follows:
<TABLE>
<CAPTION>
Years ended
--------------------------
June 28, June 27, June 26,
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Income (loss) from operations................... $550 $2,466 $ (650)
Stockholders' equity, for compensation expense
for tax purposes in excess of amounts
recognized for financial statement purposes.... (62) (276) (443)
---- ------ -------
$488 $2,190 $(1,093)
==== ====== =======
</TABLE>
F-15
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows:
<TABLE>
<CAPTION>
June 27, June 26,
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....................... $2,164 $1,415
Accrued liabilities.................................... 283 939
Inventory ............................................. 613 1,165
Accounts receivable, principally due to allowance for
doubtful accounts..................................... 118 251
------ ------
Total deferred tax assets............................ 3,178 3,770
Less: valuation allowance ............................. (99) --
------ ------
Deferred tax assets.................................. 3,079 3,770
Deferred tax liabilities:
Property and equipment, principally due to differences
in depreciation methods............................... 623 320
------ ------
Net deferred tax assets.............................. $2,456 $3,450
====== ======
</TABLE>
The net change in the total valuation allowance for the years ended June 26,
1999 and June 27, 1998 was $99 and $171, respectively. The valuation allowance
was principally attributable to state operating loss carryforwards.
The Company has foreign operating loss carryforwards of approximately $2.9
million related to its foreign subsidiary which are available indefinitely to
offset future taxable income of the subsidiary.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Based upon the level of historical taxable income
and projections for future taxable income over the periods during which
deferred tax assets are deductible, management believes it is more likely than
not the Company will realize the benefits of these deductible differences.
F-16
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
(8) Earnings (Loss) Per Share
Basic earnings (loss) per share is based upon the weighted average common
shares outstanding during each year. Diluted earnings (loss) per share is based
upon the weighted average of common shares and dilutive common stock equivalent
shares outstanding during each year. The weighted average number of shares used
to compute diluted earnings (loss) per share consisted of the following:
<TABLE>
<CAPTION>
Years ended Six Months ended
----------------------------- -------------------------
June 28, June 27, June 26, December 26, December 25,
1997 1998 1999 1998 1999
--------- --------- --------- ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Weighted average common
shares outstanding
during the year....... 6,686,253 8,052,926 9,398,289 8,593,863 11,500,957
Weighted average common
equivalent shares due
to stock options and
warrants.............. 91,187 476,021 -- -- 680,814
--------- --------- --------- --------- ----------
6,777,440 8,528,947 9,398,289 8,593,863 12,181,771
========= ========= ========= ========= ==========
</TABLE>
For the year ended June 26, 1999 and for the six months ended December 26,
1998, common equivalent shares of 435,345 and 92,591, respectively, resulting
from stock options and warrants were not included in the computation of diluted
earnings per share because to do so would have been antidilutive.
(9) Sales and Revenue
Total revenue consists of product sales, research contract revenue and other
revenue. Other revenue includes revenues from service and repair activities and
consulting.
One commercial customer accounted for 45%, 40% and 38% of total revenue for
the years ended June 26, 1999, June 27, 1998 and June 28, 1997, respectively,
and 50.0% for the six months ended December 25, 1999. At June 26, 1999 and June
27, 1998, accounts receivable from this customer totaled $7.7 million and $3.3
million, respectively. A second customer accounted for approximately 8%, 6% and
10% of total revenue in 1999, 1998 and 1997, respectively.
Sales to customers in foreign countries for the years ended June 26, 1999,
June 27, 1998 and June 28, 1997 were $16.0 million, $18.9 million and $10.1
million, respectively, and $11.9 million for the six months ended December 25,
1999. At June 26, 1999 and June 27, 1998, accounts receivable from foreign
customers totaled $3.5 million and $8.3 million, respectively.
(10) Commitments
The Company may borrow up to $8 million from a bank under an unsecured
demand line of credit with interest at the bank's prime rate (7.75% at June 26,
1999). Borrowings under the line are limited to 100% of the Company's cash
balance plus 80% of domestic accounts receivable under 90 days outstanding. The
Company may fix a portion or all of the outstanding balances under the line for
periods up to the remaining term of the line. The line may be used for standby
letters of credit.
There are fees of 1.5% for any standby letters of credit and 0.25% on the
unused portion of the line. There were no outstanding borrowings at June 26,
1999 and June 27, 1998. The line of credit expires in May 2000. No security
pledges of assets can be granted nor dividends paid without the approval of the
bank that issued the unsecured line of credit.
F-17
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
(11) Acquisitions
On April 5, 1999, the Company completed the acquisition of Klee Corporation
("Klee"), a manufacturer of physical vapor deposition process systems targeted
to a segment of electronics packaging known as under-bump metallurgy or flip-
chip packaging. Klee had limited operations through the date of the
acquisition. The Company acquired all of the stock of Klee in exchange for
310,604 shares of the Company's common stock. The acquisition was accounted for
on a pooling of interests basis. The Company's consolidated financial
statements have not been restated for periods prior to acquisition as the
acquisition was considered to be an immaterial pooling.
On November 4, 1998, the Company completed the acquisition of PlasmaQuest,
Inc., a manufacturer of systems for research and development, magnetic disk
head processing, and electronic packaging applications. The acquired company
was renamed ASTeX PlasmaQuest, Inc. ("PlasmaQuest"). The Company acquired all
of the stock of PlasmaQuest for a preliminary purchase price of $23 net of cash
acquired of $124. The purchase price was paid in cash from the Company's cash
balances. The terms of certain of the Company's acquisition agreements provide
for amounts advanced to PlasmaQuest prior to the acquisition, to be repaid. At
June 26, 1999, the amount to be repaid to the Company was being negotiated. A
reasonable estimate of the amount to be paid could not be determined at June
26, 1999. If the amounts are not repaid in full, the purchase price may be
adjusted.
On October 1, 1997, the Company completed the acquisition of Sorbios GmbH,
renamed ASTeX GmbH, a manufacturer of ozone generators and air ionizers for
semiconductor production. The Company acquired all of the stock of Sorbios GmbH
for a total purchase price of $3.7 million. The purchase price was paid in
cash, from the Company's cash balances. Costs associated with the acquired in-
process research and development projects were charged to expense.
On May 9, 1997, the Company completed its acquisition of the net assets of
Converter Power, Inc. ("CPI"), a manufacturer of high efficiency, small form
factor power sources used in semiconductor, medical, scientific and industrial
applications. The Company acquired the net assets, exclusive of certain
liabilities of CPI for a total purchase price of $7.4 million which included
$6.5 million in cash, and 60,482 shares of the Company's common stock valued at
$900 were issued to the prior owners of CPI. Costs associated with the acquired
in-process research and development projects were charged to expense.
F-18
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Except for Klee, all acquisitions have been accounted for by the purchase
method of accounting and, accordingly, the purchase prices have been allocated
to the assets acquired and the liabilities assumed based on their fair values
at the acquisition dates. The consideration paid and the fair value of the
assets acquired and the liabilities assumed at the acquisition dates are
summarized as follows:
<TABLE>
<CAPTION>
Years ended
---------------------------
June 28, June 27, June 26,
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Consideration paid:
Cash......................................... $6,483 $ 3,683 $ 147
Common stock (60,482 shares in 1997)......... 896 -- --
------ ------- -------
Total consideration paid................... $7,379 $ 3,683 $ 147
====== ======= =======
Allocation of purchase price:
Cash......................................... $ -- $ -- $ 124
Accounts receivable.......................... 1,255 1,180 1,016
Inventories.................................. 2,050 970 298
Property and equipment and other assets...... 769 2,551 1,141
Liabilities assumed.......................... (957) (3,407) (2,825)
Acquisition related expenses, net of tax
benefits where applicable................... 945 212 --
Goodwill and other intangible assets......... 3,317 2,177 393
------ ------- -------
Total purchase price....................... $7,379 $ 3,683 $ 147
====== ======= =======
</TABLE>
The following unaudited pro forma results of operations give effect to the
acquisitions as if the ASTeX GmbH and CPI acquisitions had occurred at the
beginning of fiscal 1997 (the effect of the PlasmaQuest and Klee acquisitions
is insignificant). Such pro forma information reflects certain adjustments
including amortization of goodwill, interest expense, interest income, income
tax effect and an increase in the number of weighted average shares
outstanding. This pro forma information does not necessarily reflect the
results of operations that would have occurred had the acquisitions taken place
as described and is not necessarily indicative of results that may be obtained
in the future.
<TABLE>
<CAPTION>
Years ended
-------------------
June 28, June 27,
1997 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Pro forma total revenue................................. $ 59,458 $ 84,414
========= =========
Pro forma net earnings.................................. $ 1,143 $ 4,877
========= =========
Pro forma basic earnings per share:
Basic................................................. $ 0.17 $ 0.61
========= =========
Diluted............................................... $ 0.17 $ 0.57
========= =========
Pro forma weighted average common shares:
Basic................................................. 6,738,411 8,052,926
========= =========
Diluted............................................... 6,827,199 8,528,947
========= =========
</TABLE>
F-19
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
(12) Transaction with Stockholder
In 1997, the Company sold the net assets of a subsidiary, Ehrhorn
Technological Operations ("ETO"), Alpha product line with a cost of $565, to
Alpha/Power, Inc. ("API") in exchange for cash and a note receivable. A
majority of API is owned by a former owner of ETO who is currently an ASTeX
stockholder. In connection with this sale, API agreed to assume and indemnify
ETO against all obligations to provide warranty for Alpha products sold prior
to the sale. There was no gain or loss associated with the sale.
(13) Noncash Financing and Investing Activities
During the year ended June 26, 1999, 21,940 shares of common stock were
returned to the Company in lieu of cash reimbursement for warranty costs
incurred related to products shipped by CPI prior to their acquisition by the
Company.
In connection with the exercise of stock options, a tax benefit of $443,
$276 and $62 was recorded as additional paid-in capital for the years ended
June 26, 1999, June 27, 1998 and June 28, 1997 respectively.
(14) Retirement Plans
Prior to January 1, 1997, the Company sponsored two defined contribution
401(k) retirement plans covering substantially all employees of the Company.
The Company contributed 20% of employee voluntary contributions up to 5% of
eligible wages for the plan covering employees of ASTeX, ASTeX/Gerling
Laboratories, and Newton Engineering Service, Inc. The Company contributed 50%
of employee voluntary contributions up to 6% of eligible wages for the plan
covering employees of ETO. Beginning January 1, 1997, the Company merged the
plans and under the new plan contributes 50% of employee voluntary
contributions up to 6% of eligible wages on a discretionary basis. Total
expense under the plans amounted to $87, $324 and $110 for the years ended June
26, 1999, June 27, 1998 and June 28, 1997, respectively.
(15) New Accounting Pronouncements
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
will become effective during fiscal year 2001. Statement No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as (a)
hedge of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the exposure to
variable cash flows of a forecasted transaction, or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a foreign-currency-
denominated forecasted transaction.
The accounting for changes in the fair value of a derivative (that is, gains
and losses) depends on the intended use of the derivative and the resulting
designation.
Under this Statement, an entity that elects to apply hedge accounting is
required to establish at the inception of the hedge the method it will use for
assessing the effectiveness of the hedging derivative and the measurement
approach for determining the ineffective aspect of the hedge. These methods
must be consistent with the entity's approach to managing risk.
F-20
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, will become effective in
fiscal year 2000. SOP 98-1 requires that certain internal and external costs be
expensed or capitalized when incurred to develop or obtain software for
internal use. Generally, costs incurred during the preliminary project and
post-implementation/operation stages, as well as conversion and general and
administrative costs are to be expensed as incurred. Certain costs incurred
during the application and development stage are to be capitalized.
The Company is evaluating the impact of Statement No. 133 and SOP 98-1.
(16) Restructuring Charges and Other Related Expenses
During 1999, the Company consolidated its Modesto, California operations
into its Woburn, Massachusetts and Colorado Springs, Colorado sites. The
Company also consolidated its Beverly, Massachusetts operation into Woburn.
These consolidations resulted in a restructuring charge of $1,497. The
restructuring charge consisted of severance relating to the termination of 70
employees, abandonment of leasehold improvements and fixed assets, and facility
costs (primarily future lease payments relating to abandoned facilities).
Accrued expenses at June 26, 1999 included approximately $174, primarily
relating to restructuring accruals for facility costs expected to be paid over
the next 9 months. As of December 25, 1999 all 70 employees have been
terminated.
In connection with the aforementioned consolidations, the Company wrote down
inventory having a cost of $1,090 during 1999. The write-down was due to excess
inventory resulting from the unexpected severity of the downturn in the
semiconductor equipment industry, excess and obsolete customer-specific
inventory, and the abandonment of certain marginal product lines. The Company
also incurred $393 of other transition costs related to the consolidations for
moving assets and training personnel. The write-down of inventory and other
transition costs are reflected in the consolidated statement of operations as a
component of cost of sales and revenues, and general and administrative
expenses, respectively.
Also during 1999, the Company announced the consolidation of PlasmaQuest
operations based in Dallas, Texas into its newly leased space in Wilmington,
Massachusetts. This consolidation has resulted in a restructuring charge of
approximately $763, primarily consisting of severance relating to the
termination of 16 employees, abandonment of leasehold improvements and fixed
assets, and facility costs (primarily future lease payments relating to the
abandoned facility). The consolidation of the facility is expected to begin in
the first quarter of Fiscal 2000 and take 6 months to complete. As of December
25, 1999 all 16 employees have been terminated.
Total 1999 costs related to restructurings, inventory writedowns and
transition costs were $3,743.
The following table summarizes the recorded accruals and uses of the above
restructuring and impairment actions:
<TABLE>
<CAPTION>
Asset Severance Exit
Impairments Benefits Costs Total
----------- --------- ----- ------
<S> <C> <C> <C> <C>
First Quarter Restructuring
Total charge....................... $606 $579 $312 $1,497
Cash payments...................... 8 546 140 694
Non-cash items..................... 598 -- -- 598
Adjustments of accrual............. -- (33) 2 (31)
---- ---- ---- ------
Accrual balance, as of June 26,
1999............................. -- -- 174 174
Fourth Quarter Restructuring
Total charges...................... 183 196 384 763
Non-cash items..................... 183 -- -- 183
---- ---- ---- ------
Accrual balance as of June 26,
1999............................. -- 196 384 580
---- ---- ---- ------
Total accrual balance as of June 26,
1999................................. $-- $198 $556 $ 754
==== ==== ==== ======
</TABLE>
F-21
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
(17) Segment and Related Information
The company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, in 1999, which changes the way the Company
reports information about its operating segments. The information for 1998 and
1997 has been restated from prior years' presentation in order to conform to
the 1999 presentation.
The Company has four reportable segments, Semiconductor, Medical and
Industrial, Systems, and Corporate, that have separate financial results that
are reviewed by the Company's chief operating decision maker. Identifiable
assets and capital expenditures data are presented geographically as they are
managed on that basis.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies.
<TABLE>
<CAPTION>
Medical
and
Semiconductor Industrial Systems Corporate Total
------------- ---------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Six months ended December
25, 1999 (Unaudited):
Net sales............. $45,764 $ 9,643 $ 6,261 $ -- $61,668
Inter-segment net
sales................. 1,366 12 -- -- 1,378
Profit (loss) from
operations............ 11,942 726 (242) (4,133) 8,293
Depreciation.......... 752 166 196 469 1,583
Six months ended December
26, 1998 (Unaudited):
Net sales............. 15,082 12,616 1,256 -- 28,954
Inter-segment net
sales................. 435 1,033 -- -- 1,468
Profit (loss) from
operations............ (3,132) (958) (337) (2,012) (6,439)
Depreciation.......... 890 311 99 112 1,412
Year ended June 26, 1999:
Net sales............. 51,341 22,611 4,257 -- 78,209
Inter-segment net
sales................. 3,225 8 -- -- 3,233
Profit (loss) from
operations............ 3,736 332 (1,306) (5,336) (2,574)
Depreciation.......... 1,195 304 336 823 2,658
Year ended June 27, 1998:
Net sales............. 52,804 27,715 2,917 -- 83,436
Inter-segment net
sales................. 3,749 -- -- -- 3,749
Profit (loss) from
operations............ 5,634 3,508 128 (3,361) 5,909
Depreciation.......... 1,374 478 175 167 2,194
Year ended June 26, 1997:
Net sales............. 29,333 15,669 2,965 -- 47,967
Inter-segment net
sales................. 1,435 -- -- -- 1,435
Profit (loss) from
operations............ 1,847 2,706 243 (3,137) 1,659
Depreciation.......... 1,218 302 181 124 1,825
</TABLE>
F-22
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Financial information relating to the Company's geographic areas was as
follows:
<TABLE>
<CAPTION>
Total Revenue
-------------------------
1997 1998 1999
-------- -------- -------
<S> <C> <C> <C>
United States......................................... $37,884 $64,513 $62,244
Europe................................................ 6,261 12,291 11,175
Other................................................. 3,822 6,632 4,790
------- ------- -------
$47,967 $83,436 $78,209
======= ======= =======
<CAPTION>
Long-lived Assets
-------------------------
June
June 28, June 27, 26,
1997 1998 1999
-------- -------- -------
<S> <C> <C> <C>
United States......................................... $ 7,503 $ 8,245 $ 7,849
Europe................................................ -- 279 299
------- ------- -------
$ 7,503 $ 8,524 $ 8,148
======= ======= =======
<CAPTION>
Identifiable Assets
-------------------------
June
June 28, June 27, 26,
1997 1998 1999
-------- -------- -------
<S> <C> <C> <C>
United States......................................... $39,327 $48,533 $76,534
Europe................................................ -- 2,760 4,001
------- ------- -------
$39,327 $51,293 $80,535
======= ======= =======
<CAPTION>
Capital Expenditures
-------------------------
June
June 28, June 27, 26,
1997 1998 1999
-------- -------- -------
<S> <C> <C> <C>
United States......................................... $ 1,030 $ 2,878 $ 1,733
Europe................................................ -- 121 106
------- ------- -------
$ 1,030 $ 2,999 $ 1,839
======= ======= =======
</TABLE>
F-23
<PAGE>
APPLIED SCIENCE AND TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
(18) Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Diluted
Net
Earnings Net Earnings
Total Gross (Loss) From Earnings (Loss)
Revenue Profit Operations (Loss) Per Share
------- ------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
1999
First Quarter................. $12,100 $ 1,175 $(5,713) $(3,481) $(0.41)
Second Quarter................ 16,854 4,499 (726) (436) (0.05)
Third Quarter................. 20,942 7,075 1,438 784 0.08
Fourth Quarter................ 28,313 9,905 2,427 1,882 0.16
------- ------- ------- ------- ------
Year ended June 26............ $78,209 $22,654 $(2,574) $(1,251) $(0.22)
======= ======= ======= ======= ======
1998
First Quarter................. $17,421 $ 6,474 $ 1,677 $ 1,155 $ 0.14
Second Quarter................ 22,440 8,230 2,099 1,275 0.15
Third Quarter................. 23,462 8,207 2,252 1,578 0.18
Fourth Quarter................ 20,113 5,538 (119) 13 --
------- ------- ------- ------- ------
Year ended June 27............ $83,436 $28,449 $ 5,909 $ 4,021 $ 0.47
======= ======= ======= ======= ======
</TABLE>
(19) Comprehensive Income (Unaudited)
The components of total comprehensive loss for the six months ended December
25, 1999 and December 26, 1998 are as follows:
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
December 26, December 25,
1998 1999
<S> <C> <C>
Net earnings (loss)................................ $(3,917) $5,792
Other comprehensive income (loss).................. 141 (80)
------- ------
Comprehensive income (loss)........................ $(3,776) $5,712
======= ======
</TABLE>
(20) Subsequent Event
On August 24, 1999, the Company acquired substantially all of the assets of
Shamrock from Sputtered Films, Inc. for cash consideration of $6 million. The
acquisition of this product line will be accounted for by the purchase method
of accounting.
F-24
<PAGE>
Photographs of ASTeX equipment:
Nimbus 300 Process systems for advanced packaging
Shamrock 150(TM) Process systems for magnetic sensors, MRAM, and disk drive
heads
Liquozon(TM) Ozonated water delivery system
SmartPower(TM) Microwave power generation module
ASTRON(R) Reactive gas generator for atomic fluorine and other gases
<PAGE>
[ASTEX LOGO APPEARS HERE]
