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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For fiscal year ended September 30, 1997 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
For the transition period from __________ to ____________.
Commission File Number: 0-25434
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Brooks Automation, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 04-3040660
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
15 Elizabeth Drive, Chelmsford, Massachusetts 01824
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(Address of Principal Executive Offices) (Zip Code)
978-262-2566
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Rights to Purchase Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock, $.01 par value,
held by non-affiliates of the registrant as of December 12, 1997 was
$129,494,399 based on the closing price of $12.88 on that date on the Nasdaq
Stock Market. As of December 12, 1997, 10,053,913 shares of the registrant's
Common Stock, $.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the fiscal year
ended September 30, 1997 are incorporated by reference in Part II and Part IV of
this Report.
Portions of the registrant's Proxy Statement involving the election of
directors, which is expected to be filed within 120 days after the end of the
registrant's fiscal year, are incorporated by reference in Part III of this
Report.
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PART I
ITEM 1. BUSINESS
Brooks Automation, Inc. (the "Company") is a leading worldwide independent
developer, manufacturer and supplier of substrate handling robots, modules,
software, controls and fully integrated cluster tool handling systems for the
semiconductor and flat panel display process equipment industries. The Company's
products have evolved from individual robots used to transfer wafers in advanced
production equipment to fully integrated handling system solutions that increase
the throughput and utilization of semiconductor and flat panel display process
equipment. In 1996, the Company acquired Techware Systems Corporation (now
Brooks Canada), a designer and supplier of integrated equipment control software
for the semiconductor and related industries, expanding its software and control
capability. In 1997, the Company introduced a line of products for the
atmospheric handling market, including in-line and controlled environment
systems, robots, aligners and traversers.
Products
The Company offers a full complement of semiconductor wafer and flat panel
display substrate handling systems. The Company has developed comprehensive
product lines that encompass automation modules, complete handling systems and
integrated software and controls for its targeted markets. The Company's
systems, robots and modules are designed, developed and produced with similar
technologies and can use the Company's ClusterLink software. The Company uses
the synergies of its complementary products to respond to changing industry
demands such as processing 300mm semiconductor wafers and the larger, fourth
generation flat panel display substrates. The Company believes that its products
offer significant advantages in a number of areas, including those set forth
below:
Throughput. The Company's patented LeapFrog robots have been able to achieve
significant improvements in throughput compared to other robots. The Company
also has been able to increase throughput by developing patented algorithms to
calculate efficient trajectories and acceleration and deceleration profiles
(time optimal trajectories) for its robot arms while reducing vibrations and
maintaining position control of the substrate being transported. The Company has
developed system software to improve cluster tool throughput. By combining
digital signal processing ("DSP") technology with time optimal trajectory
software, the Company believes that it has achieved additional reductions in
transfer time.
Reliability. The Company has developed and implemented a rigorous design and
test program to enhance and evaluate product reliability. The Company's
reliability initiative is guided by the computer-based reliability models
developed by SEMATECH and Sandia National Laboratories. The magnetic drive in
the Company's latest generation robots transmits force magnetically, without
piercing the vacuum barrier, and eliminates the need for moveable vacuum seals.
By designing robots with fewer moving parts and eliminating moveable seals, the
Company believes that it will be able to increase the reliability of its
transfer robots significantly. The Company's goal is to continue to increase
mean time between failures.
Accuracy. As wafer and substrate sizes increase and placement accuracy becomes
more demanding, it is becoming increasingly important to minimize tracking
errors, substrate sliding and arm deflection (the bending or wobbling of the
robot arm). The Company's transfer robots contain a closed loop servo control
which monitors and maintains placement accuracy in the rotational axis by
obtaining constant positioning feedback. Many other transfer robots use an open
loop stepper control system which commands a robot to move a specified number of
steps with limited or no feedback as to the final position of the robot. These
stepper systems can lead to misplacement of the robot arm if the number of steps
is miscounted. To further enhance tracking, the Company has incorporated a
closed loop feedback system with a proprietary DSP-based controller in its
latest generation robots.
Contamination Control. The Company has designed its wafer and flat panel display
substrate handling systems and modules to reduce contamination by using several
design criteria: limited moving parts within the tool environment and above the
wafer or substrate plane; picking and placing with a vertical motion to prevent
wafer or substrate sliding on process module surfaces and cassette slots; gentle
handling motions which reduce relative wafer or substrate vibration and movement
on the transfer robot end effectors; controlled load lock pumping and venting;
incorporation of materials that reduce contamination; and assembly, test and
packaging in the Company's clean rooms.
The Company currently manufactures products for the semiconductor and flat panel
display markets. The following table lists the Company's product offerings
within each of the markets it serves:
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<TABLE>
<CAPTION>
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Market Product Lines
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<S> <C>
Semiconductor Vacuum Products Central Wafer Handling Systems
Transfer Robots
Thermal Conditioning Modules (Cool and Degas)
Cassette Elevator Load Locks
Aligners
Factory Automation Interface Modules
System Software and Controls
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Semiconductor Atmospheric and Central Wafer Handling Systems
Inert Environment Products In-line Wafer Handling Systems
Transfer Robots
Robot Traversers
Thermal Conditioning Modules (Cool)
Cassette Elevator Load Locks
Aligners
Factory Automation Interface Modules
System Software and Controls
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Flat Panel Display Products Central Substrate Handling Systems
Transfer Robots
Cassette Elevator Load Locks
Thermal Conditioning Modules (Degas)
System Software and Controls
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Semiconductor Vacuum Products
Vacuum Central Wafer Handling Systems
The Company's family of Marathon vacuum central wafer handling systems handle
wafer sizes of 100mm to 300mm in diameter, are offered with four to eight sides
(referred to as ports) and have vacuum ranges of 10/-3/ to 10/-8/ torr (a
measure of vacuum pressure). Each port can accommodate process modules meeting
SEMI/MESC standards. Using a two load lock configuration, the Company's Marathon
800 eight-sided central wafer handling system can accommodate up to six process
modules.
The Company's Marathon systems currently incorporate either the Company's single
VacuTran or dual MultiTran frog-arm vacuum transfer robot, one or more of the
Company's vacuum cassette elevator (VCE) load locks, the Company's InLigner
wafer aligner, and, if required, the Company's InCooler wafer cooling module.
The Company has been able to increase the availability of ports for use with
process modules by developing a wafer aligner and a cooling module which mount
between a vacuum cassette elevator load lock or process module and the central
wafer handling chamber. The Company is developing degas modules for its Marathon
systems.
The Company has also developed tool control ClusterLink 3 system software to
control its vacuum wafer handling systems, graphical user interface and process
modules. The software interfaces with process tool controllers and provides
environment control, profiled load lock pumping and venting, error recovery
diagnostics, safety control and scheduling of wafer transfers. When providing a
turn-key solution that includes the Company's system control and scheduling
software, the Company is able to provide guarantees relating to throughput and
particle contamination.
In 1997, the Company developed a next-generation 200mm wafer handling system,
the Marathon Express 800, which features the dual same-side LeapFrog robot and
offers improvement to throughput, vacuum performance and serviceability. In
anticipation of the emergence of next-generation 300mm wafers, the Company has
developed central wafer handling systems (the Marathon 4000 and 6000) and is
developing a Marathon Express 8000 eight-sided configuration. These systems have
incorporated handling technology developed by the Company for flat panel display
substrates, which are generally significantly more demanding to handle than
wafers.
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Vacuum Transfer Robots
The Company's next-generation vacuum transfer robot, the MagnaTran 7, is a
second generation magnetic drive robot which incorporates the Company's patented
time optimal trajectory software algorithims to control and monitor its
operation. The MagnaTran 7 is smaller and lighter than its predecessor. Building
on its experience in developing robot wafer transfer technology, the Company has
developed the dual, same-side LeapFrog high-productivity arm configuration. The
LeapFrog arm is only available on the MagnaTran 7 robot and is a feature of the
Company's Marathon Express central handling systems. These robots are
constructed to SEMI/MESC standards and are sold separately for use with other
vacuum wafer handling applications. The Company believes that the technical
advances implemented to meet the requirements of the flat panel display industry
enabled the Company to adopt its MagnaTran robots, with minimal technical
modifications, to handle 300mm wafers.
Other Vacuum Wafer Handling and Conditioning Modules
Vacuum Cassette Elevator Load Locks. The Company has developed a family of
vacuum cassette elevator load locks to hold and index (raise and lower)
cassettes of wafers for cluster tools and other vacuum automated equipment. The
Company's VCE 4 200mm cassette load lock features flexible and changeable
interfaces, is field upgradable and is available with either a manual or
automatic door configuration. The automatic door uses an innovative low
particle, low profile drive mechanism, which opens vertically below the cluster
platform for SMIF, automated guided vehicle ("AGV") and rail guided vehicle
("RGV") compatibility. The Company has developed the VCE 5 for 300mm wafers with
a batch wafer transfer arm and a front opening unified pod ("FOUP") interface.
The Company is developing the VCE 7 for 300mm wafers to interface with the
Company's Caliber atmospheric, in-line handling system.
Vacuum Aligners. Wafer processing requires precise alignment and, often,
orientation of a wafer for processing. The Company's InLigner intermodule wafer
aligner provides fast one-step wafer alignment by optically sensing the location
of the wafer on the aligner and communicating that position to the vacuum
transfer robot. Using this information, the transfer robot adjusts the placement
of its arm to pick up the wafer in the proper position. The InLigner is designed
for intermodule mounting between a module, such as the cassette load lock and
the central wafer handling chamber, in order to conserve a port of the cluster
tool. The Company's InLigner 3 is designed for 300mm wafer alignment. The
Company is developing a new family of aligners for 200mm and 300mm wafers, the
TopLigners, that mount from the top in the central transport chamber and offer
improved serviceability.
Vacuum Cool Modules. The Company's InCooler intermodule cool station cools
wafers after hot processing to a temperature that allows placement into a
plastic wafer cassette. This module is also designed for intermodule mounting.
The Company's InCooler 3 is designed for 300mm wafer applications. The Company
is developing a family of new cooling modules for 200mm and 300mm wafers, the
TopCoolers, that mount from the top in the central transport chamber and offer
improved serviceability.
Vacuum Degas Modules. The Company is developing degas modules to remove water
from the surface of the wafer. The Company is developing a stand alone 200mm and
a top mount 300mm module that offer improved serviceability.
Semiconductor Atmospheric and Inert Environment Products
Building upon its vacuum wafer handling systems, the Company is pursuing the
development of a broad line of products for atmospheric applications.
Atmospheric wafer handling systems may be segregated into two subcategories: the
traditional ambient atmospheric wafer handling systems and "inert" (principally
nitrogen) environment wafer handling systems. The traditional atmospheric wafer
handling systems include fully integrated automated wafer handling platforms for
open, ambient air in-line wafer handling platforms. The inert environment wafer
handling systems include fully integrated, automated wafer handling platforms
for at or above atmospheric pressure cluster tools.
Atmospheric Wafer Handling Systems
The Company's Caliber atmospheric, in-line wafer handling systems handle wafer
sizes from 150mm to 300mm in diameter and are offered with two to four cassette
staging locations and may be operated in Class 1 clean room environments. These
configurations have been developed to meet broad market requirements. The
Caliber 200 and 400 are used for 200mm wafer open cassettes and the Caliber 400
S is being developed for use with 200mm SMIF
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applications. The Company is developing the Caliber 2000 in-line wafer handling
system to handle 300mm wafers in open cassette or FOUP applications.
The Company's Caliber systems incorporate the Company's single scara-arm AcuTran
atmospheric transfer robot, the Company's AcuTrav robot traverser, two or more
of the Company's cassette staging locations, and, if required, the Company's
AcuLigner wafer aligner. The Company's Caliber systems also incorporate a system
controller to control all wafer handling functions and to interface to the
process tool's primary controller.
Atmospheric Transfer Robots
Building on its experience in developing transfer robots and employing its
magnetic direct drive technology, the Company has developed the AcuTran 3, its
next-generation atmospheric transfer robot, to handle up to 300mm wafers. These
robots are a standard feature of the Company's Caliber in-line wafer handling
systems, are constructed to SEMI standards and are sold separately for use with
other atmospheric wafer handling applications. The Company's robots incorporate
DSP technology and patented time optimal trajectory software to control and
monitor their operation.
Other Atmospheric Wafer Handling Modules
Atmospheric Robot Traverser. The Company's AcuTrav provides high speed
horizontal motion permitting the AcuTran 3 robot to access multiple process tool
load ports and cassette staging locations. The AcuTrav uses direct drive
mechanism which allows high speed motions comparable to the Company's robot
family.
Atmospheric Aligners. The Company's AcuLigner 3 wafer aligner is being designed
for fast one-step 150mm to 300mm wafer alignment by optically sensing the
location of the wafer on the aligner and communicating that position to the
vacuum transfer robot. Using this information, the transfer robot adjusts the
placement of its arm to pick up the wafer in the proper position.
Inert Environment Wafer Handling Systems
In 1997, the Company introduced a new central wafer handling system to address
market needs for reduced water vapor environment central handling systems for
high temperature wafer processing (e.g. rapid thermal processing and epitaxial
deposition).
Building upon its expertise in vacuum central wafer handling systems and
modules, the Company developed the Atmospheric Express 600 "inert" environment
wafer handling system for 150mm to 200mm wafers. This inert environment central
wafer handling system transfers wafers at or above atmospheric pressure in a
principally nitrogen environment. The Atmospheric Express incorporate robots and
modules from the Company's vacuum wafer handling product line. The Company is
developing the Atmospheric Express 6000 to handle up to 300mm wafers.
Flat Panel Display Products
In 1994, the Company introduced a family of vacuum central substrate handling
systems and modules for the flat panel display deposition and etch process
equipment markets, shipping its first Hercules central substrate handling system
for a flat panel display vacuum cluster tool in July 1994. The Hercules systems
can handle flat panel display substrates from 350mm x 460mm to 600mm x 720mm in
size. The Company is developing a next generation flat panel display platform,
for substrates up to approximately 1 meter x 1 meter.
The Hercules system includes the Company's MagnaTran 60 magnetically driven
frog-arm vacuum transfer robot with two or three axes of motion and single or
dual arm options, a single substrate load lock, or a 20 to 30 substrate cassette
elevator load lock (VCE 40), and a seven substrate batch degas module.
The Company is developing a next generation magnetic drive robot, the MagnaTran
70, for the flat panel display market. The MagnaTran 70 robot series is expected
to be smaller and lighter and to feature an optional extended vertical axis for
deployment in the Company's next generation platforms.
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Customers
The Company's customers are primarily semiconductor wafer and flat panel display
substrate OEMs and semiconductor manufacturers who are retrofitting the vacuum
automation of their process equipment or developing advanced process equipment
for internal use. The Company's current customers are primarily located in the
United States, Japan, South Korea and Europe. The Company intends to market its
developing family of atmospheric central wafer handling equipment to its
existing customers in the vacuum and flat panel display markets and other
potential customers.
In fiscal 1997, 1996 and 1995, Lam Research Corporation ("Lam") accounted for
21% of the Company's revenues, and sales to the Company's top ten customers
accounted for approximately 71%, 69% and 75% of revenues, respectively. A
reduction or delay in orders from Lam or other significant customers could have
a material adverse effect on the Company's results of operations. See "Factors
That May Affect Future Results--Customer Concentration" in Management's
Discussion and Analysis on Financial Conditions and Results of Operations for
further discussion.
Marketing, Sales and Customer Support
The Company markets and sells its wafer and substrate handling systems and
modules in the United States, Japan, South Korea, Taiwan and Europe through its
direct sales and marketing organization. As of September 30, 1997, 45 persons
were engaged in sales and marketing activities worldwide. The selling process
for the Company's products is often multilevel, involving a team comprised of
individuals from sales, marketing, engineering, operations and senior
management. Each significant customer is assigned a team that engages the
customer at different organization levels to provide planning and product
customization and to assure open communication and support.
The Company's marketing activities also include participation in trade shows,
publication of articles in trade journals, participation in industry forums and
distribution of sales literature. To enhance this communication and support,
particularly with its international customers, the Company maintains technology
centers in California, British Columbia, South Korea and Japan. These
facilities, together with the Company's headquarters, maintain demonstration
equipment for customers to evaluate. Customers are also encouraged to discuss
the features and applications of the Company's demonstration equipment with the
Company's engineers located at these facilities. The Company also maintains
regional sales and service personnel in Taiwan, the United Kingdom, Phoenix,
Arizona and Austin, Texas. The Company has recently experienced significant
growth in foreign revenues. In fiscal 1997, 1996 and 1995, foreign revenues
accounted for 38%, 20% and 12%, respectively, of the Company's revenues. The
Company expects foreign revenues to continue to represent a significant
percentage of total revenues in the foreseeable future. However, there can be no
assurance that geographical growth rates, if any, in the foreseeable future,
particularly in Japan and South Korea which are suffering regional economic
downturns, will be comparable to those achieved in fiscal 1997. See "Factors
That May Affect Future Results--Risks of International Sales and Operations" in
Management's Discussion and Analysis on Financial Conditions and Results of
Operations and Note 10 to the Company's Consolidated Financial Statements for
further discussion.
In 1997, the Company developed a new sales and marketing tool, a process tool
throughput simulator, to enable the evaluation of various wafer handling system
configurations to identify the preferred tool configuration for a specific
application. This tool simulates the movement of wafers with execution times,
scheduling algorithms, and flow sequences similar to those of actual process
tools and outputs this information visually. This tool is capable of comparing
multiple tool configurations simultaneously for preferred fit comparison.
The Company provides support to its customers with (i) telephone technical
support access 24-hours a day, 365 days a year, (ii) direct training programs
and (iii) operating manuals and other technical support information for the
Company's products. The Company maintains spare parts inventories all locations
to enable its personnel to serve the Company's customers and repair their
products more efficiently.
Competition
The semiconductor and flat panel display process equipment manufacturing
industries are highly competitive and characterized by continual change and
improvement in technology. Although other independent companies sell vacuum and
atmospheric wafer and flat panel display substrate handling automation systems
and vacuum transfer robots to OEMs, the Company believes that its primary
competition is from the larger, integrated semiconductor and flat panel display
OEMs that satisfy their substrate handling needs in-house rather than by
purchasing handling systems or modules from an independent source such as the
Company. Such OEMs comprise the majority of the Company's
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current and potential customers. Applied Materials Inc. ("Applied Materials"),
the leading process equipment OEM, develops and manufactures its own central
wafer handling systems and modules. The Company believes that most vacuum
central wafer handling systems and modules are manufactured in-house by OEMs.
Many of the companies in these industries have significantly greater research
and development, clean room manufacturing, marketing and financial resources
than the Company.
Many OEMs have substantial resources and expertise in substrate handling and
automation in vacuum and atmospheric environments and will only purchase the
Company's products if the Company can demonstrate improved product performance
as measured by throughput, reliability, contamination control and accuracy, at
an acceptable price. The Company believes that it competes favorably with OEMs
and other independent suppliers with respect to all of these factors. However,
there can be no assurance that the Company will be successful in selling its
products to OEMs that currently satisfy their wafer and flat panel handling
needs in-house or from other independent suppliers, regardless of the
performance or the price of the Company's products.
The Company's sale of its products for the flat panel display process equipment
market is heavily dependent upon its penetration of the Japanese market. The
Company is also seeking to expand its presence in the Japanese semiconductor
process equipment market. In addressing the Japanese markets, the Company may be
at a competitive disadvantage to Japanese suppliers. See "Factors That May
Affect Future Results--Risks of International Sales and Operations" in
Management's Discussion and Analysis on Financial Conditions and Results of
Operations for further discussion.
Research and Development
The Company's research and development efforts are focused on developing new
products for the semiconductor and flat panel display process equipment
industries and further enhancing the functionality, reliability and performance
of existing products. The Company's engineering, marketing, operations and
management personnel have developed close collaborative relationships with many
of their customer counterparts and have used these relationships to identify
market demands and target its research and development to meet those demands.
The Company's current research and development efforts include the continued
development and enhancement of the Company's semiconductor and flat panel
display products, including 300mm Marathon Express vacuum central wafer handling
systems and modules, fourth generation flat panel display substrate handling
systems and modules, control and scheduling software, and atmospheric handling
systems and modules. There can be no assurance that the Company will be able to
develop new products effectively, to enhance its existing products, or to
respond effectively to technological changes or new industry standards or
developments on a timely basis, if at all. In fiscal 1997, 1996 and 1995, the
Company's research and product development expenses were $14.2 million, $12.4
million and $6.8 million, respectively, representing 16.5%, 13.7% and 13.4% of
the Company's revenues, respectively. See "Factors That May Affect Future
Results--New Products and Rapid Technological Change" in Management's Discussion
and Analysis on Financial Conditions and Results of Operations for further
discussion.
Manufacturing
The Company's manufacturing operations consist primarily of product assembly,
integration, and testing. The Company has adopted stringent quality assurance
procedures that include standard design practices, component selection
procedures, vendor control procedures and comprehensive reliability testing and
analysis to assure the performance of its products. The Company received ISO
9001 certification in February 1996.
The Company employs a just-in-time manufacturing strategy. The Company believes
that this strategy, coupled with the outsourcing of noncritical subassemblies,
reduces fixed operating costs, improves working capital efficiency, reduces
manufacturing cycle times and improves flexibility to rapidly adjust its
production capacities. While the Company often uses single source suppliers for
certain key components and common assemblies to achieve quality control and the
benefits of economies of scale, the Company believes that these parts and
materials are readily available from other supply sources.
Patents and Proprietary Rights
The Company relies upon trade secrets and patents to protect its technology. Due
to the rapid technological change that characterizes the semiconductor and flat
panel display process equipment industries, the Company believes that the
improvement of existing technology, reliance upon trade secrets and unpatented
proprietary know-how and the
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development of new products may be more important than patent protection in
establishing and maintaining a competitive advantage. It is the Company's policy
to require all technical and management personnel to enter into nondisclosure
agreements. Nevertheless, the Company has obtained patents and will continue to
make efforts to obtain patents, when available, in connection with its product
development program. There can be no assurance that any patent obtained will
provide protection or be of commercial benefit to the Company, or that its
validity will not be challenged.
The Company had obtained 20 United States patents and had 30 United States
patent applications pending on its behalf. In addition, the Company had obtained
10 foreign patents and had 43 foreign patent applications pending on its behalf.
The Company's United States patents expire at various times from 1999 to 2017.
There can be no assurance that the Company's pending patent applications or any
future applications will be approved, that any patents will provide it with
competitive advantages or will not be challenged by third parties, or that the
patents of others will not have an adverse effect on the Company's ability to do
business. Because foreign patents may afford less protection under foreign law
than is available under United States patent law, there can be no assurance that
any such patents issued to the Company will adequately protect the Company's
proprietary information. There can be no assurance that others will not
independently develop similar products, duplicate the Company's products or, if
patents are issued to the Company, design around the patents issued to the
Company.
Others may have filed and in the future may file patent applications that are
similar or identical to those of the Company. To determine the priority of
inventions, the Company may have to participate in interference proceedings
declared by the United States Patent and Trademark Office that could result in
substantial cost to the Company. No assurance can be given that any such patent
application will not have priority over patent applications filed by the
Company.
The Company also relies upon trade secret protection, employee and third-party
nondisclosure agreements and other intellectual property protection methods to
protect its confidential and proprietary information. Despite these efforts,
there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology or that
the Company can meaningfully protect its trade secrets.
There has been substantial litigation regarding patent and other intellectual
property rights in the semiconductor related industries. The Company had
received notice from General Signal Corporation ("General Signal") alleging
infringements of General Signal's patent rights, relating to cluster tool
architecture, by certain of the Company's products. The notification advised the
Company that General Signal was attempting to enforce its rights to those
patents in litigation against Applied Materials, Inc. ("Applied Materials"), and
that, at the conclusion of that litigation, General Signal intended to enforce
its rights against the Company and others. According to a recent press release
issued by Applied Materials, Applied Materials settled its litigation with
General Signal by acquiring ownership of five General Signal patents. Although
not verified, these five patents would appear to be the patents referred to by
General Signal in its prior notice to the Company. Applied Materials has not
contacted the Company regarding these newly-acquired patents.
In 1992, at the time that General Signal first raised patent claims in the
cluster tool area, the Company joined with six major semiconductor process tool
equipment manufacturers in forming an "Ad Hoc Committee for the Defense against
General Signal Cluster Tool Patents." At that time, the members of the Ad Hoc
Committee notified General Signal that the member companies were of the opinion
that the General Signal patents were invalid based on (i) prior art, (ii)
inequitable conduct before the Patent & Trademark Office and (iii) estoppel as a
result of General Signal's activities in establishing standards for cluster
tools and interfaces within the semiconductor industry. The Company believes
that the position taken by the Ad Hoc Committee remains valid. However, if the
holder of these patents were to seek to enforce these patents against the
Company, there can be no assurance that the Company would prevail in such
litigation.
The Company has in the past been, and may in the future be, notified that it may
be infringing intellectual property rights possessed by other third parties. Any
patent litigation would be costly and could divert the efforts and attention of
the Company's management and technical personnel, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that infringement claims by third parties
or other claims for indemnification by customers or end users of the Company's
products resulting from infringement claims will not be asserted in the future
or that such assertions, if proven to be true, will not materially and adversely
affect the Company's business, financial condition and results of operations. If
any such claims are asserted against the Company's intellectual property rights
it may seek to enter into a royalty or licensing arrangement. There can be no
assurance, however, that a license will be available on reasonable terms or at
all. The Company could
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decide, in the alternative to resort to litigation to challenge such claims or
to design around the patented technology. Such actions could be costly and would
divert the efforts and attention of the Company's management and technical
personnel, which would materially and adversely affect the Company's business,
financial condition and results of operations. See "Factors That May Affect
Future Results--Intellectual Property Risks" in Management's Discussion and
Analysis on Financial Conditions and Results of Operations for further
discussion.
Backlog
Backlog for the Company's products as of September 30, 1997 and 1996 totaled
$43.8 million and $35.6 million, respectively. Backlog consists of purchase
orders for which a customer has scheduled delivery within the next 12 months.
Orders included in the backlog may be canceled or rescheduled by customers
without significant penalty. Backlog as of any particular date should not be
relied upon as indicative of the Company's revenues for any future period.
Employees
As of September 30, 1997, the Company had approximately 518 employees. Of these,
161 were involved in engineering, 45 in sales and marketing, 265 in global
customer support and manufacturing operations and 47 in general and
administrative. The Company believes its future success will depend in large
part on its ability to attract and retain highly skilled employees. None of the
employees of the Company are covered by a collective bargaining agreement. The
Company considers its relationships with its employees to be good.
ITEM 2. PROPERTIES
The Company has a seven year lease, beginning May 1995, for its headquarters and
manufacturing facility. The facility has two stories with approximately 130,000
square feet of space located in Chelmsford, Massachusetts. The lease provides
for the Company to move into all the space over a three year period ending May
1998 with the Company occupying a minimum of approximately 83,000 square feet in
the first year, 93,000 square feet in the second year, 108,000 square feet in
the third year and the entire space thereafter.
The Company also maintains sales and service offices in Santa Clara, California,
Tokyo, Japan, Seoul, South Korea and Kingston, England. In August 1996, the
Company entered into a six year lease for a new facility for Brooks Canada. The
new facility is a shared, three story building with approximately 41,000 square
feet of space and is located in Richmond, British Columbia.
The Company believes that these facilities are adequate for its current needs
and that it can obtain additional space at commercially reasonable rates when
and as required.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings. See
"Patents and Proprietary Rights in Business" for a description of certain
potential patent disputes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended September 30, 1997, no matters were submitted to a vote
of security holders through the solicitation of proxies or otherwise.
9
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The market for the Company's common stock and related stockholder matters, which
appear in the Brooks Automation, Inc. Annual Report to Stockholders, are hereby
incorporated by reference in this Form 10-K Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the five years ended September 30, 1997, which
appear in the Brooks Automation, Inc. Annual Report to Stockholders, are hereby
incorporated by reference in this Form 10-K Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Conditions and Results of
Operations, which appears in the Brooks Automation, Inc. Annual Report to
Stockholders is hereby incorporated by reference in this Form 10-K Annual
Report.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, together with the report thereon of Price Waterhouse
LLP dated November 12, 1997, appearing in the Brooks Automation, Inc. Annual
Report to Stockholders are hereby incorporated by reference in this Form 10-K
Annual Report.
10
<PAGE>
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 is hereby incorporated by reference to
the Company's definitive proxy statement to be filed by the Company within 120
days after the close of its fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is hereby incorporated by reference to
the Company's definitive proxy statement to be filed by the Company within 120
days after the close of its fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is hereby incorporated by reference to
the Company's definitive proxy statement to be filed by the Company within 120
days after the close of its fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is hereby incorporated by reference to
the Company's definitive proxy statement to be filed by the Company within 120
days after the close of its fiscal year.
11
<PAGE>
PART IV
ITEM 14. EXHIBITS
<TABLE>
<CAPTION>
Page in
Annual Report*
--------------
<S> <C>
(a) The following documents are filed as part of this report:
(1) Financial Statements:
Consolidated Balance Sheet at September 30, 1997 and 1996........................................26*
Consolidated Statement of Income for the
three years ended September 30, 1997............................................................27*
Consolidated Statement of Changes in Stockholders'
Equity for the three years ended September 30, 1997.............................................28*
Consolidated Statement of Cash Flows for the
three years ended September 30, 1997............................................................29*
Notes to Consolidated Financial Statements.....................................................30-41*
Report of Independent Accountants.................................................................42*
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial
Statement Schedule..............................................................................13
For the three years ended September 30, 1997 --
II. Valuation and Qualifying Accounts...........................................................14
</TABLE>
Other schedules for the year ended September 30, 1997 are omitted because of the
absence of conditions under which they are required or because the required
information is given in the financial statements or notes thereto.
* Incorporated by reference from the indicated pages of the 1997 Annual Report
to Stockholders.
12
<PAGE>
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Brooks Automation, Inc.
Our audits of the consolidated financial statements referred to in our report
dated November 12, 1997 appearing on page 42 of the 1997 Annual Report to
Stockholders of Brooks Automation, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Boston, Massachusetts
November 12, 1997
13
<PAGE>
BROOKS AUTOMATION, INC.
Schedule II - Valuation and Qualifying Accounts and Reserves
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Charged to Deductions Balance
beginning costs and other and at end
Description Year ended of period expenses accounts write-offs of period
- ------------------------------- ------------------ --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts September 30, 1997 $ 100 $ 162 $ - $ (102) $ 160
September 30, 1996 80 20 - - 100
September 30, 1995 80 - - - 80
</TABLE>
14
<PAGE>
(a)3. EXHIBITS
- ---------------
<TABLE>
<CAPTION>
Exhibit No. Reference
----------- ---------
<S> <C> <C>
2.01 Merger Agreement relating to the reincorporation of the A**
Registrant in Delaware
3.01 Certificate of Incorporation of the Registrant A**
3.02 Bylaws of the Registrant A**
3.03 Certificate of Designation of Series A Junior Participating H**
Preferred Stock
4.01 Specimen Certificate for shares of the Registrant's Common A**
Stock
4.02 Description of Capital Stock (contained in the Certificate A**
of Incorporation of the Registrant, filed as Exhibit 3.01)
4.03 Rights Agreement dated July 23, 1997 I**
10.01 Agreement between the Registrant and Robert J. Therrien A**
10.02 Employment Agreement between the Registrant and Robert J. A**
Therrien dated as of October 1, 1994*
10.03 Employment Agreement between the Registrant and Stanley D. A**
Piekos*
10.04 intentionally omitted
10.05 intentionally omitted
10.06 Form of Indemnification Agreement for directors and officers A**
of the Registrant
10.07 Form of Selling Stockholder's Agreement B**
10.08 Lam Promissory Note A**
10.09 Lam Security Agreement A**
10.10 Lam Production and Terms of Purchase Agreement A**
10.11 Lam Term Sheet A**
10.12 Revolving Credit and Security Agreement with US Trust A**
10.13 Loan and Security Agreement with the Massachusetts Business A**
Development Corporation
10.14 Guarantee of Robert J. Therrien of Revolving Credit A**
Agreement with US Trust and Release
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C>
10.15 Guarantee of Jeffrey Hohl of Revolving Credit Agreement with A**
US Trust and Release
10.16 Guarantee of Robert J. Therrien of Loan Agreement with A**
Massachusetts Business Development Corporation
10.17 Guarantee of Norman B. Brooks of Revolving Credit Agreement A**
with US Trust and Release
10.18 Lease Extension Agreement C**
10.19 Headquarters Lease B**
10.20 Loan Agreement between Brooks Automation, Inc. and U.S. D**
Trust dated June 25, 1996
10.21 intentionally omitted
10.22 Loan Agreement First Amendment Dated April 30, 1997 F**
10.23 Revolving Loan Note First Amendment dated April 30, 1997 F**
10.24 Participation Agreement dated April 30, 1997 F**
10.25 Loan Agreement Second Amendment dated June 30, 1997 G**
10.26 Loan Agreement First Amendment dated June 3, 1997 G**
10.27 Amendment to Master Short Term Foreign Currency Borrowing Filed herewith
Agreement with Core States Bank dated June 3, 1997
11.01 Statement re: Computation of Per Share Earnings Filed herewith
13.01 Portions of Brooks Automation, Inc. Annual Report to Filed herewith
Stockholders
21.01 Subsidiaries of the Registrant Filed herewith
23.01 Consent of Price Waterhouse LLP Filed herewith
27.01 Financial Data Schedule Filed herewith
99.01 1993 Nonemployee Director Stock Option Plan J** *
99.02 1992 Combination Stock Option Plan K** *
99.30 1995 Employee Stock Purchase Plan E**
</TABLE>
--------------------
A Incorporated by reference to the Company's registration statement on
Form S-1 (Registration No. 33-87296). The number set forth herein is
the number of the Exhibit in said registration statement.
B Incorporated by reference to the Company's registration statement on
Form S-1 (Registration No. 33-93102). The number assigned to each
Exhibit above is the same as the number assigned to the Exhibit in said
registration statement.
16
<PAGE>
C Incorporated by referenced to the Company's quarterly report on Form
10-Q for the quarterly period ended March 31, 1995. The number assigned
to the Exhibit above is the same as the number assigned to the Exhibit
in said quarterly report.
D Incorporated by reference to the Company's quarterly report on Form
10-Q for the quarterly period ended June 30, 1996. The number assigned
to the Exhibit above is the same as the number assigned to the Exhibit
in said quarterly report.
E Incorporated by reference to the Company's registration statement on
Form S-8 (No. 333-07315). The number set forth herein is the number of
the Exhibit in said registration statement.
F Incorporated by reference to the Company's quarterly report on Form
10-Q for the quarterly period ended December 31, 1996. The number
assigned to the Exhibit above is the same as the number assigned to the
Exhibit in said quarterly report.
G Incorporated by reference to the Company's quarterly report on Form
10-Q for the quarterly period ended June 30, 1997. The number assigned
to the Exhibit above is the same as the number assigned to the Exhibit
in said quarterly report.
H Incorporated by reference to the Company's registration statement on
Form S-3 (No. 333-34487). The number assigned to each Exhibit above is
the same as the number assigned to the Exhibit in said registration
statement.
I Incorporated by reference to the Company's current report on Form 8-K
filed on August 7, 1997
J Incorporated by reference to the Company's registration statement on
Form S-8 (No. 333-22717). The number assigned to each Exhibit above is
the same as the number assigned to the Exhibit in said registration
statement.
K Incorporated by reference to the Company's registration statement on
Form S-8 (No. 333-07313). The number assigned to each Exhibit above is
the same as the number assigned to the Exhibit in said registration
statement.
* Management contract or compensatory plan or arrangement.
** In accordance with Rule 12b-32 under the Securities Exchange Act of
1934, as amended, reference is made to the documents previously filed
with the Securities and Exchange Commission, which documents are hereby
incorporated by reference.
(b) REPORTS ON FORM 8-K
- ---------------------------
The Company filed a Current Report on Form 8-K on August 7, 1997 relating to a
Shareholders' Rights Agreement.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BROOKS AUTOMATION, INC.
Date: December 18, 1997 By: /s/ Robert J. Therrien
---------------------------------
Robert J. Therrien, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- -----
<S> <C> <C>
/s/ Robert J. Therrien Director and President (Principal December 18, 1997
- -------------------------------------- Executive Officer)
Robert J. Therrien
/s/ Stanley D. Piekos Chief Financial Officer (Principal December 18, 1997
- -------------------------------------- Financial and Accounting Officer)
Stanley D. Piekos
/s/ Deborah D. Fox Controller (Principal Accounting December 18, 1997
- -------------------------------------- Officer)
Deborah D. Fox
/s/ Norman B. Brooks Director December 18, 1997
- --------------------------------------
Norman B. Brooks
/s/ Roger D. Emerick Director December 18, 1997
- --------------------------------------
Robert D. Emerick
/s/ Amin J. Khoury Director December 18, 1997
- --------------------------------------
Amin J. Khoury
</TABLE>
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BROOKS AUTOMATION, INC.
Date: December 18, 1997 By:
---------------------------------
Robert J. Therrien, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
- --------------------------------------- Director and President (Principal December 18, 1997
Robert J. Therrien Executive Officer)
- --------------------------------------- Chief Financial Officer (Principal December 18, 1997
Stanley D. Piekos Financial and Accounting Officer)
- --------------------------------------- Controller (Principal Accounting December 18, 1997
Deborah D. Fox Officer)
- --------------------------------------- Director December 18, 1997
Roger D. Emerick
- --------------------------------------- Director December 18, 1997
Amin Khoury
- --------------------------------------- Director December 18, 1997
Norman B. Brooks
</TABLE>
19
<PAGE>
William G. Sudhaus
Senior Vice President Exhibit 10.27
[LETTERHEAD OF CORESTATES BANK APPEARS HERE]
June 3, 1997
Mr. Stanley D. Piekos
Chief Financial Officer
Brooks Automation, Inc.
15 Elizabeth Drive
Chelmsford, Ma. 08124
Dear Stan:
This letter serves to amend and replace the letter agreement dated June 18, 1996
which established a $3,000,000 discretionary line of credit for foreign currency
borrowing. The amount is now being increased to $6,000,000. In addition this
letter will serve to amend the date in paragraph 1 (b) Requests for Loans, in
------------------
the Master Short Term Foreign Currency Borrowing Agreement from December 31,
1997 to December 31, 1998, (a copy of which is attached). All other terms and
conditions remain the same.
BORROWER(S): Brooks Automation Inc.
Brooks Automation Canada Corp.
Brooks Automation K.K.
Brooks automation Ltd.
Brooks Automation Massachusetts Securities Corp.
LENDER: CoreStates Bank N.A.
LOAN TYPE AND AMOUNT: $6,000,000 Unsecured Discretionary Line of Credit
AVAILABILITY: The maximum outstanding under this facility at any
one time shall be the equivalent of $6,000,000 USD
in any other currency mutually agreed between the
Borrowers and the Bank.
PURPOSE: Working capital and other short term corporate
purposes.
COLLATERAL: None
INTEREST RATE: LIBOR plus 200 b.p. for maturities of 30,60,90 or
180 days.
INTEREST PAYMENTS: In case of 30, 60 or 90-day loans, at maturity. In
the case of 180-day loans, at the end of 90 days
and at maturity.
<PAGE>
Mr. Stanley D. Piekos, Chief Financial Officer
June 3, 1997
Page Two
MINIMUM LOANS: $250,000 US dollar equivalent.
PREPAYMENTS
PROHIBITIONS: LIBOR loans may not be prepaid prior to maturity without
a potential breakage fee depending upon the interest
rate market at the time of prepayment.
REPORTING
REQUIREMENTS: 1. Quarterly, within 45 days after the end of each of
the first three fiscal quarters.
a. Consolidated financial statements prepared
by the Company.
b. Certificate of covenant compliance with all
Bank debt.
2. Within 90 days after the end of each fiscal year.
a. Consolidated financial statements prepared
and certified by an independent certified
public accountant.
b. Certificate of covenant compliance.
c. Principal financial officer and accountant's
statement of no default.
3. Promptly after the filing of the same, copies of
all reports, proxy statements and financial
statements that the Borrower files with the U.S.
Securities and Exchange Commission or any
comparable department in a foreign country.
OTHER CONDITIONS TO
THE LINE OF CREDIT: 1. Master Short Term Borrowing Agreement, Corporate
Borrowing Resolution and Negative Pledge Agreement
(previously dated 6/18/96 and executed 6/25/96).
<PAGE>
Mr. Stanley D. Piekos, Chief Financial Officer
June 3, 1997
Page Three
If the foregoing is satisfactory, please sign this letter and return to my
attention.
Very truly yours,
/s/ R. Thomas Esser
R. Thomas Esser
Vice President
RTE/vb
AGREED AND ACCEPTED:
/s/ Stanley D. Piekos August 12, 1997
- --------------------------------- -----------------------------
Name and Title Date
Stanley D. Piekos
Vice President & CFO
<PAGE>
MASTER SHORT TERM FOREIGN CURRENCY BORROWING AGREEMENT
------------------------------------------------------
June 18, 1996 [LOGO OF CORESTATES BANK APPEARS HERE]
Brooks Automation, Inc.
Brooks Automation Canada Corp.
Brooks Automation K.K.
Brooks Automation Ltd.
Brooks Automation Massachusetts Securities Corp.
15 Elizabeth Drive
Chelmsford, MA 01824
Dear Sirs:
The purpose of this Agreement is to supplement the letter agreement
dated June 18, 1996 ("Letter Agreement") between us, CoreStates Bank N.A.
("Bank") and you, each of the addressees of this Agreement ("Borrower(s)") to
further describe how the foreign currency loans will be made pursuant to the
foreign currency line of credit described in the Letter Agreement ("Loan(s)").
The Letter Agreement is attached hereto and incorporated by reference herein.
This Agreement does not constitute a commitment to lend or to make advances. It
is understood and agreed that any and all Loans will be governed by the
following:
1. Requests for Loans. From time to time, before the earlier to occur
------------------
of (a) a Default under Section 10 hereof, or (b) December 31, 1997, your duly
authorized officer or other duly authorized person may request Loans by
telephone or by letter. If we agree to make a Loan, then we will credit the
proceeds to your designated account with us. Upon your request we will forward
to you at your address set forth in Paragraph 15 written advices or statements
of Loans, which will specify rate or rates of interest payable on the Loans, and
such other terms as may have been agreed to.
2. Resolutions Authorizing Loans. Any and all documents required to be
-----------------------------
executed in connection with Loans may be signed by any of the officers or other
persons duly authorized by your borrowing resolutions as in effect from time to
time, provided that a copy of such resolutions is certified by the Secretary or
an Assistant Secretary of your corporation and delivered to us. We shall incur
no liability to you or any other person in acting on any request for a Loan
which we believe in good faith to have been made by a person duly authorized to
borrow on your behalf as set forth in your borrowing resolutions.
<PAGE>
3. Bank Records Conclusive. The terms of each Loan including the rate
-----------------------
of interest thereon and your payments of principal and interest, as well as any
special terms and details of each such Loan, shall be established and evidenced
by this Agreement, the Letter Agreement and by our records, which shall be
conclusively deemed to be correct in the absence of manifest error.
4. Payment of Loans. All Loans shall be payable on demand, time or
----------------
other basis mutually agreed upon at the time the Loan is made. Loans which are
payable on a basis other than demand are subject to the prepayment penalties
described in the Letter Agreement and may not be prepaid prior to their maturity
date or dates without payment of such penalties, if any. Upon the payment in
whole or in part of any Loan as provided above, accrued and unpaid interest on
the amount repaid shall be simultaneously paid.
5. Interest. (a) Interest on each Loan shall be computed at the
--------
applicable LIBOR rate plus 200 basis points and, with resect to 30, 60, or 90
day, Loans shall be payable upon maturity and, with respect to 180 day Loans,
shall be payable at 90 days and at maturity. The term LIBOR rate shall mean and
refer to LIBOR rate applicable at that time in the country of the foreign
currency which is borrowed.
(b) Each overdue payment of principal on any Loan and, to the extent
permitted by law, each overdue payment of interest shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to 2% in excess of
the current interest rate applicable to that Loan.
(c) Unless otherwise agreed, interest on all Loans shall be computed on
the basis of a year of 360 days for each day of the year actually elapsed.
6. Payments. You irrevocably authorize us to effect payments of
--------
principal of and interest on all Loans whenever such payment is due and to debit
your designated account for the amount of such payment. We shall furnish to you
a written confirmation of the amount of each principal and interest payment
charged against your designated account. You will pay us promptly such amounts
as may be due if your designated account balance is insufficient. All payments
of principal and interest on Loans shall be made in the currency of the borrowed
funds in immediately available funds free and clear of and without deduction for
any taxes, fees or other charges of any nature imposed by any governmental
authority, or, if such withholding is required, you shall pay to us the same net
amount as if no withholding was made.
7. Payment of Costs. In addition to the principal and interest
----------------
specified in paragraphs 4 and 5, you agree to pay upon demand all costs and
expenses (including reasonable attorneys' fees and legal expenses) we incur in
enforcing the Loans and this Agreement.
8. Further Evidence of Loans. Upon our request, you hereby agree to
-------------------------
execute and deliver to us a promissory note or notes payable to our order to
evidence all or any part of any Loans. If any Loan is or shall be evidenced by
one or more promissory notes, such note or notes shall be
-2-
<PAGE>
deemed to incorporate by reference, and to be supplemented and modified by, the
terms of this Agreement.
9. Security. As security for the payment of all sums owed by you to us,
--------
we shall have a lien upon, and security interest in, any balance belonging to
you in any of your deposit or other accounts with us and any other amounts or
property which from time to time may be owing by us to you or held by us for
you.
10. Defaults. The occurrence of any of the following events shall cause
--------
you to be in default on any and all outstanding Loans:
(a) the non-payment when due of any amount payable on any of the
Liabilities and such non-payment continues for five (5) days after such due date
(the term "Liabilities" shall mean all loans and advances made under this
Agreement and any renewals, extensions and modifications thereof and all of your
other existing and future liabilities, whether absolute or contingent, to the
Bank regardless of their source or nature and out of whatever transactions
arising);
(b) the failure of any Obligor to observe or perform any other term of
this Agreement or any other agreement or note with Bank or other lender,
including without limitation the Loan Agreement and related documents dated June
25, 1996, between Borrower and U.S. Trust (the term "Obligor" includes you and
all persons otherwise liable for the payment of all such loans or notes or both
and all renewals, extensions or modifications thereof, such as endorsers or
guarantors);
(c) the entry of any judgment or the issuing of any attachment or
garnishment against any Obligor in an amount in excess of $150,000.
(d) the dissolution, merger, consolidation or reorganization of any
Obligor;
(e) if any information furnished by any Obligor proves to have been
materially false or misleading when made;
(f) the failure of any Obligor to furnish such financial or other
information as we may reasonably request; and
(g) the insolvency of any Obligor, any assignment for the benefit of
creditors of any Obligor or the filing by or against any Obligor of a petition
under any provision of any law or statute alleging insolvency or inability to
pay debts as they mature.
11. Acceleration. If you are in default as described in Paragraph 10(a)
------------
through (f), at our election evidenced by notice in writing to you, all Loans,
whether or not evidenced by a note, shall thereupon become due and payable
without presentment, demand or protest, all of which are hereby waived. If you
are in default as described in Paragraph 10(g), then forthwith and without any
-3-
<PAGE>
election or notice, all Loans, whether or not evidenced by a note, shall
thereupon become due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived. You waive all right to stay
of execution and exemption of property in any action to enforce your obligations
to us hereunder.
12. Joint and Several Liability. All of the liabilities shall be joint and
---------------------------
several obligations of each of the Borrowers.
13. Continuing Effect. This Agreement shall remain in full force and
-----------------
effect until all Loans outstanding, together with interest thereon, and all
other sums required to be paid under the terms of this Agreement have been paid
in full.
14. Governing Law. This Agreement and any note or notes evidencing Loans
-------------
made shall be construed in accordance with and governed by the laws of
Massachusetts.
15. Bank's Assignees. The Bank may at any time or from time to time grant
----------------
to others assignments of or participations in the Loans.
16. Notices. Any notice given under this Agreement shall be effective on
-------
the date when it is delivered to a party at its address set forth as follows (or
at such other address as the party to which may be given may specify to the
other in writing); if to you, at:
Brooks Automation, Inc.
15 Elizabeth Drive
Chelmsford, MA 01824
Attn: Stanley D. Piekos, CFO
and if to us, at:
Broad and Chestnut Streets,
Philadelphia, PA 19101
Attn: R. Thomas Esser
F.C. 1-8-4-2
17. Miscellaneous. Any failure by us to exercise any right under this
-------------
Agreement shall not be construed as a waiver of the right to exercise the same
or any other right at any other time. If more than one person, including any
form of legal entity, shall sign this Agreement, as borrower, such persons shall
be jointly and severally liable hereunder and the terms "you" and "your" shall
be deemed to mean any and all of such persons. The parties hereto intend this
Agreement to be a sealed instrument and to be legally bound hereby.
-4-
<PAGE>
Acceptance Of And Agreement To
Master Short Term Foreign Currency Borrowing Agreement
------------------------------------------------------
We, the addressee of the above Master Short Term Borrowing Agreement,
intending to be legally bound, accept and agree to the terms and conditions of
said Agreement and promise to pay the principal of and interest on all Loans
made to us by CoreStates Bank, N.A. and all other sums required to be paid by us
to said Bank, under and in accordance with the terms of said Master Short Term
Borrowing Agreement. Signed this 25th day of June 1996.
Brooks Automation, Inc. Brooks Automation Canada Corp.
/s/ Stanley D. Piekos /s/ Robert J. Therrien
- --------------------------------- --------------------------------------
(Borrower) (Borrower)
By: Stanley D. Piekos By: Robert J. Therrien
----------------------------- -----------------------------------
VP & Chief Financial Officer President & Chief Executive Officer
----------------------------- -----------------------------------
(Name and Title) (Name and Title)
Brooks Automation K.K. Brooks Automation Ltd.
/s/ Stanley D. Piekos /s/ Stanley D. Piekos
- --------------------------------- ---------------------------------
(Borrower) (Borrower)
By: Stanley D. Piekos By: Robert J. Therrien
----------------------------- -----------------------------------
VP & Chief Financial Officer President & Chief Executive Officer
----------------------------- -----------------------------------
(Name and Title) (Name and Title)
-6-
<PAGE>
Brooks Automation Massachusetts Securities Corp.
/s/ Stanley D. Piekos
- ---------------------------------------
(Borrower)
By Stanley D. Piekos
------------------------------------
VP & Chief Financial Officer
------------------------------------
(Name and Title)
[SEAL]
-7-
<PAGE>
Exhibit 11.01
BROOKS AUTOMATION, INC.
Computation of Net Income Per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996 1995
<S> <C> <C> <C>
Net income applicable to common shares............................................... $ 806 $8,497 $4,945
====== ====== ======
Weighted average shares outstanding:
Common stock.................................................................. 7,681 7,503 5,758
Assumed conversion of stock
options and warrants........................................................ 754 696 806
Shares issuable pursuant to SAB 83
using the treasury stock method............................................. - - 239
------ ------ ------
Total shares........................................................... 8,435 8,199 6,803
====== ====== ======
Net income per share.......................................................... $ 0.10 $ 1.04 $ .73
====== ====== ======
</TABLE>
<PAGE>
Exhibit 13.01
Financial Table of Contents
<TABLE>
<S> <C>
Management's Discussion and Analysis
of Financial Condition and Results of Operations 16
Consolidated Balance Sheet 26
Consolidated Statement of Income 27
Consolidated Statement of Changes in
Stockholders' Equity 28
Consolidated Statement of Cash Flows 29
Notes to Consolidated Financial Statements 30
Report of Independent Accountants 42
Quarterly Financial Information 43
</TABLE>
Certain statements in this annual report, including the letter to the
stockholders, customers and employees, narrative text, captions and graphics,
constitute "forward-looking statements" which involve known risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of Brooks Automation, Inc. (the "Company") to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include the factors
that may affect future results set forth in Management's Discussion and Analysis
of Financial Condition and Results of Operations which is included in this
report. Precautionary Statements made herein should be read as being applicable
to all related forward-looking statements wherever they appear in this report.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
The Company's Massachusetts predecessor was organized in February 1989 and
acquired the semiconductor wafer handling business of the Brooks Automation
Division of Aeronca Electronics, Inc., a subsidiary of Fleet Aerospace
Corporation, in March 1989. The Company and its predecessors have been in the
semiconductor wafer handling business since 1978.
Since the acquisition in 1989, the Company has invested over $40.0 million in
research and development focused on developing vacuum transfer robots and other
vacuum automation modules and systems. In 1992, the Company introduced the
family of vacuum central wafer handling systems and modules that forms the
foundation of the Company's current business. In 1994, the Company introduced a
similar family of systems and modules for flat panel display substrates,
including a next-generation magnetically driven vacuum transfer robot. In 1996,
the Company acquired Techware Systems Corporation (now Brooks Canada), a
designer and supplier of integrated equipment control software for the
semiconductor and related industries, expanding its software and control
capability. In 1997, the Company introduced a line of products for the
atmospheric handling market, including in-line and controlled environment
systems, robots, aligners and traversers.
Many of the Company's customers purchase the Company's vacuum transfer robots
and other modules before purchasing the Company's vacuum central wafer handling
systems. In fiscal 1997, 1996 and 1995, approximately 49%, 49% and 44%,
respectively, of the Company's revenues were attributable to systems sales. The
Company's goal is to continue to increase systems sales as a percentage of
revenues. The Company believes that once a customer has selected the Company's
products for a process tool, the customer is likely to rely on those products
for the life of that process tool model, which can be in excess of five years.
The Company records revenue from product sales upon shipment to the customer
provided that no significant Company obligations remain outstanding and
collection of the related receivable is deemed probable by management. When
insignificant Company obligations remain after shipment of the product, the
Company accrues for the estimated costs of such obligations upon shipment.
Additionally, the Company accrues for warranty costs upon shipment.
Most of the Company's revenues have been generated by sales to customers in
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
the United States, although the Company believes that a significant portion of
these customers incorporate the Company's products into equipment sold to their
foreign customers. The Company's foreign sales have occurred principally in
Japan, South Korea and Europe. The Company has recently expanded its
international marketing and sales efforts and its customer support capabilities
in Asia and intends to increase these efforts in the future.
The Company's foreign revenues are generally denominated in United States
dollars. Accordingly, foreign currency fluctuations have not had a significant
impact on the comparison of the results of operations for the periods presented.
The costs and expenses of the Company's international subsidiaries are generally
denominated in currencies other than the United States dollar. However, since
the functional currency of the Company's international subsidiaries is the local
currency, foreign currency translation adjustments are reflected as a component
of stockholders' equity. To the extent that the Company expands its
international operations or changes its pricing practices to denominate prices
in foreign currencies, the Company will be exposed to increased risks of
currency fluctuation.
The Company's business is highly dependent upon the capital expenditures of
semiconductor and flat panel display manufacturers which historically have been
cyclical, and the Company's ability to develop, manufacture and sell new
products and product enhancements. The Company's results will also be affected,
especially when measured on a quarterly basis, by the volume, composition and
timing of orders, conditions in the industries served by the Company,
competition and general economic conditions.
Results of Operations
The following table sets forth certain financial data for the periods indicated
as a percentage of revenues:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Cost of revenues 67.6 58.2 58.4
- ----------------------------------------------------------------------------
Gross profit 32.4 41.8 41.6
Operating expenses:
Research and development 16.5 13.7 13.4
Selling, general and administrative 14.9 13.7 14.1
- ----------------------------------------------------------------------------
Income from operations 1.0 14.4 14.1
Interest expense 0.6 0.4 1.0
Interest income 0.1 0.4 1.0
- ----------------------------------------------------------------------------
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes 0.5 14.4 14.1
Income tax provision (benefit) (0.4) 5.0 4.4
- ----------------------------------------------------------------------------
Net income 0.9% 9.4% 9.7%
============================================================================
</TABLE>
Fiscal Year Ended September 30, 1997 as Compared to Fiscal Year Ended September
30, 1996
REVENUES
Revenues decreased 4.4% to $86.4 million in fiscal 1997 compared with revenues
of $90.4 million in fiscal 1996. Revenues from 200mm central wafer handling
systems and components decreased 19.2%, or $12.6 million, in fiscal 1997. The
decrease in 200mm product revenues was partially offset by increased shipments
of 300mm and flat panel display products. The Company attributes lower fiscal
1997 revenues to a broad decline in capital spending by the semiconductor
manufacturing equipment industry which adversely affected the Company's revenues
particularly in the first half of fiscal 1997.
Foreign revenues increased 77.5% to $32.5 million (37.6% of revenues), including
$26.7 million of sales to Asian customers, compared with foreign revenues of
$18.3 million (20.2% of revenues), including $13.3 million of sales to Asian
customers in the prior fiscal year. The increase in foreign revenues is
attributable to shipments of 200mm and 300mm central wafer handling systems and
flat panel display systems to customers primarily in Japan and South Korea. The
Company expects that foreign revenues will continue to grow in fiscal 1998 and
account for a significant portion of total revenues. However, there can be no
assurance that geographical growth rates, if any, in the foreseeable future,
particularly in Japan and South Korea which are suffering regional economic
downturns, will be comparable to those achieved in fiscal 1997.
GROSS PROFIT
Gross profit as a percentage of revenues decreased to 32.4% in fiscal 1997
compared with 41.8% for the prior fiscal year. The decrease in the gross profit
percentage is attributable to underutilization of manufacturing capacity, higher
concentration of shipments of lower gross margin platforms, increased global
support costs and to a lesser extent, pricing pressure and higher new product
introduction costs. Global support costs, consisting primarily of personnel
costs and travel expenses, increased 100.5% to $6.5 million (7.5% of revenues)
in fiscal 1997 from $3.2 million (3.6% of revenues) in the prior fiscal year.
The increase in global support costs are indicative of the expansion of the
Company's global support organization in support of the international growth of
its customer base. In future periods, gross profit may be adversely affected by
changes in the mix of products sold, continued pricing pressure or increases in
the cost of goods.
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
R E S E A R C H A N D D E V E L O P M E N T
Research and development expenses increased 15.1% to $14.2 million (16.5% of
revenues) in fiscal 1997 from $12.4 million (13.7% of revenues) in the prior
fiscal year. During fiscal 1997, the Company continued to make investments in
research and development to enhance existing and develop new semiconductor and
flat panel display products. As a percentage of revenues, the increase in
research and development expenses reflects the effect on the Company's cost
structure of the lower revenue level in fiscal 1997. The Company believes that
research and development expenditures are essential to maintaining its
competitive position in the semiconductor and flat panel display fabrication
equipment market and expects these expenditure levels to continue at or above
current levels in the foreseeable future.
S E L L I N G , G E N E R A L A N D A D M I N I S T R A T I V E
Selling, general and administrative expenses increased 3.3% to $12.8 million
(14.9% of revenues) in fiscal 1997 from $12.4 million (13.7% of revenues) in the
prior fiscal year. Selling, general and administrative expenses for fiscal 1996
included merger-related expenses of $230,000 in connection with the acquisition
of Brooks Canada during the second quarter. There were no such merger-related
expenses incurred by the Company during fiscal 1997. As a percentage of
revenues, the increase in selling, general and administrative expenses reflects
the effect on the Company's cost structure of the lower revenue level in fiscal
1997. The Company expects expenditure levels to support the growth of its world
wide sales and administrative organizations will continue at or above current
levels in the foreseeable future, reflecting the Company's commitment to further
penetrate key international markets.
I N T E R E S T I N C O M E A N D E X P E N S E
Interest income decreased 79.0% to $70,000 (0.1% or revenues) in fiscal 1997
from $334,000 (0.4% of revenues) in the prior fiscal year. The decrease in
interest income is due to lower cash and investment balances during fiscal 1997
compared with fiscal 1996. Interest expense increased 57.2% to $610,000 (0.6%
or revenues) in fiscal 1997 from $388,000 (0.4% of revenues) in the prior fiscal
year. The increase in interest expense is primarily due to higher borrowings
during the second and third quarters of fiscal 1997 compared with the same
periods of fiscal 1996.
I N C O M E T A X P R O V I S I O N ( B E N E F I T )
During fiscal 1997, the Company recorded a net tax benefit of $1,289 in the
United States primarily due to the tax benefit of domestic operation loss and
tax credit carrybacks. This benefit was partially offset by a net foreign tax
provision of $889 resulting largely from the net taxable income of the Company's
foreign subsidiaries. During fiscal 1996, the Company recorded a net
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
tax provision due to its taxable income position for both domestic and foreign
operations.
Fiscal Year Ended September 30, 1996 as Compared to
Fiscal Year Ended September 30, 1995
R E V E N U E S
Revenues increased 77.5% to $90.4 million in fiscal 1996 from $51.0 million in
fiscal 1995. Sales of vacuum central wafer handling systems, modules and
control software comprised approximately 74% of the increase in revenues, which
was primarily attributable to increased unit sales. The remainder of the
increase was primarily attributable to increased unit sales of flat panel
display substrate handling systems and modules, and service revenues,
comprising approximately 14% and 12%, respectively, of the increase in 1996
revenues. Fiscal 1996 shipments included initial deliveries of 300mm vacuum
central wafer handling systems incorporating the MagnaTran 6 high speed vacuum
transport robot, the Company's sixth generation product developed to enable the
production of advanced semiconductors (0.35 micron feature sizes and below).
Foreign revenues increased 192.4% to $18.3 million (20.2% of revenues),
including $13.3 million of sales to Asian customers in fiscal 1996, compared to
foreign revenues of $6.3 million (12.3% of revenues), including $3.9 million of
sales to Asian customers in fiscal 1995.
G R O S S P R O F I T
Gross profit as a percentage of revenues improved slightly to 41.8% in fiscal
1996 compared to 41.6% in fiscal 1995. Cost reductions attributable to
manufacturing efficiencies from increased unit sales and increased sales of
products incorporating higher value-added control software were partially offset
by higher material costs related to changes in product mix and new product
introductions, including the introduction of the Company's Marathon 300mm
vacuum central wafer handling systems and modules, increased global support
costs and generally competitive price pressure. Global support costs,
consisting primarily of personnel costs and travel expenses, increased 117.0% to
$3.2 million (3.6% or revenues) in fiscal 1996 from $1.5 million (2.9% of
revenues) in the prior fiscal year.
R E S E A R C H A N D D E V E L O P M E N T
Research and development expenses increased 81.3% to $12.4 million (13.7% of
revenues) in fiscal 1996 from $6.8 million (13.4% or revenues) in fiscal 1995.
The increase in research and development expenses primarily resulted from
continued enhancement of the Company's semiconductor and flat panel display
products, including 300mm Marathon vacuum central wafer handling systems and
modules, control and scheduling software, and factory automation
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
wafer cassette delivery systems.
S E L L I N G , G E N E R A L A N D A D M I N I S T R A T I V E
Selling, general and administrative expenses increased 73.0% to $12.4 million
(13.7% of revenues) in fiscal 1996 from $7.2 million (14.1% of revenues) in
fiscal 1995. The increase in selling, general and administrative expenses
resulted from the hiring of additional sales, marketing and administrative staff
to manage and support the Company's international expansion in Japan, South
Korea, Taiwan and Europe.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
INTEREST INCOME AND EXPENSE
Interest income decreased 34.1% to $334,000 (0.4% of revenues) in fiscal 1996
from $507,000 (1.0% of revenues) in fiscal 1995. The decrease reflects lower
cash balances in fiscal 1996 as a result of the Company's investments in
infrastructure. Interest expense decreased 19.5% to $388,000 (0.4% of revenues)
in fiscal 1996 from $482,000 (1.0% of revenues) in fiscal 1995. The decrease in
interest expense was due to the Company's improved working capital position and
reduced borrowings following the Company's fiscal 1995 public offerings of
common stock.
INCOME TAX PROVISION (BENEFIT)
The Company's effective tax rate was 34.5% in fiscal 1996 compared to 31.3% in
fiscal 1995. The increase in the effective rate is primarily due to the
statutory lapse of federal research and development tax credits during the first
nine months of 1996.
Liquidity and Capital Resources
As of September 30, 1997, the Company had working capital of $112.7 million,
including $71.8 million of cash and cash equivalents, compared with working
capital of $32.6 million, including $2.1 million of cash and cash equivalents,
as of September 30, 1996. During fiscal 1997, the Company used cash of $2.0
million in operating activities primarily to finance increased accounts
receivable and inventory levels. Accounts receivable and inventories increased,
particularly in the third and fourth quarters, due to increased demand for
products. Investing activities in fiscal 1997 consisted primarily of capital
spending for CAD/CAM/CAE (computer-aided design, manufacturing and engineering)
hardware and software, test and demonstration equipment and improvements in and
expansion of the Company's facilities worldwide. While the Company has no
significant capital commitments as of September 30, 1997, the Company
anticipates that it will continue to make capital expenditures to support its
business as the Company expands its product offerings and prepares for expected
growth. The Company is also planning to expand the manufacturing capacity in its
existing facility and anticipates capital spending in fiscal 1998 of at least
$1.5 million in connection with this expansion.
In September 1997, the Company received net proceeds of $80.8 million from a
public stock offering of 2,298,150 shares of common stock. Other financing
activities in fiscal 1997 consisted primarily of the issuance of common stock
under the employee stock purchase plan, stock option exercises and repayment of
short-term borrowings under credit lines.
The Company has a $22.0 million unsecured revolving line of credit and a $6.0
million unsecured foreign currency line of credit, both of which expire December
31, 1998. Under the revolving credit facility, advances bear
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
interest, at the option of the Company, at the prime rate or the LIBOR rate plus
2%. Foreign currency advances bear interest at the LIBOR rate plus 2%. There
were no borrowings outstanding under these credit facilities at September 30,
1997. At September 30, 1997, the Company was in compliance with the terms of the
credit agreements or had obtained the appropriate waivers.
The Company has received notice from a third-party alleging infringements of
such party's patent rights by certain of the Company's products. The Company
believes the patents claimed may be invalid. In the event of litigation with
respect to this claim, the Company is prepared to vigorously defend its
position. Currently, the Company does not believe that it is probable that
future events related to this threatened matter will have a material adverse
effect on the Company's business; however, there can be no assurance that this
will be the case. The Company is currently unable to reasonably estimate any
possible loss related to this matter.
The Company believes that anticipated cash from operations, available funds and
borrowings available under the Company's bank lines of credit will be adequate
to fund the Company's currently planned working capital and capital expenditure
requirements through fiscal 1998.
Recently Enacted Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS
128), which establishes standards for computing and presenting earnings per
share. The new standard replaces the presentation of primary earnings per share
prescribed by Accounting Principles Board Opinion No. 15, "Earnings per Share"
(APB 15), with a presentation of basic earnings per share and also requires dual
presentation of basic and diluted earnings per share on the face of the
statement of operations for all entities with complex capital structures. Basic
earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share is computed similarly to
fully diluted earnings per share pursuant to APB 15. The Company will be
required to implement SFAS 128 in the first quarter of fiscal 1998 and to
restate all prior periods.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130) and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). The Company will implement SFAS 130 and SFAS
131, as required in fiscal 1999, which require the Company to report and display
certain information related to comprehensive income and operating segments,
respectively. Adoption of SFAS 130 and SFAS 131
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
will not impact the Company's financial position or results of operations.
Factors That May Affect Future Results
From time to time, information provided by the Company or statements made by its
employees may contain forward-looking information which involve substantial
risks and uncertainties that could cause actual results to differ materially
from targets or projected results.
In particular, statements contained in this report and in Management's
Discussion and Analysis of Financial Condition and Results of Operations which
are not historical facts (including, but not limited to, statements concerning
anticipated capital spending and operating expense levels and the availability
of funds to meet cash requirements) may be forward-looking statements. The
Company's actual future results may differ significantly from those stated in
any forward-looking statements. Factors that could cause actual results to
differ materially include, but are not limited to, the factors discussed below
and the accuracy of the Company's internal estimates of revenue and operating
expense levels.
Fluctuations in Operating Results
The Company's operating results have in the past fluctuated and may in the
future continue to fluctuate significantly depending upon a variety of factors.
Such factors may include: the demand for semiconductors in general; cyclicality
in the market for semiconductor manufacturing equipment; the timing and size of
orders from the Company's customer base; the ability of the Company to
manufacture, test and deliver products in a timely and cost effective manner;
the ability of the Company's competitors to obtain orders from the Company's
customers; the timing of new product announcements and releases by the Company
and its competitors; the mix of products sold by the Company; and competitive
pricing pressures.
The Company has historically derived a substantial portion of its quarterly and
annual revenues from the sale of a relatively small number of semiconductor and
flat panel display substrate handling systems, which have relatively high
selling prices compared to its other products. As a result, the precise timing
of the recognition of revenue from an order for one or a small number of systems
can have a significant impact on the Company's total revenues and operating
results for a particular period. The Company's operating results for a
particular period could be adversely affected if orders for a small number of
systems are canceled or rescheduled by customers or cannot be filled in time to
recognize revenue during that period due to, for example, unanticipated
manufacturing, testing, shipping or product acceptance delays. The Company's
expense levels are based, in large part, on the Company's expectations as to
future revenues and are, therefore, relatively
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
fixed in the short term. If revenue levels fall below expectations, net income
will be disproportionately and adversely affected. The impact of these and other
factors on the Company's revenues and operating results in any future period
cannot be forecast with any degree of certainty. These factors could have a
material adverse effect on the Company's business, financial condition, revenues
and results of operations.
Dependence on Semiconductor Industry
The Company's business is significantly dependent on capital expenditures by
manufacturers of semiconductors. The semiconductor industry is highly cyclical
and has experienced periods of oversupply, resulting in significantly reduced
demand for capital equipment, including the products manufactured and marketed
by the Company. The Company's future financial condition, revenues and results
of operations may be materially and adversely affected by semiconductor industry
downturns or slowdowns. The Company believes that downturns in the semiconductor
manufacturing industry will occur in the future, and will result in decreased
demand for semiconductor manufacturing equipment. In addition, the Company
believes that its ability to reduce expenses in a future downturn will be
constrained by the need for continual investment in research and development,
and the need to maintain extensive ongoing customer service and support
capability. Accordingly, any downturn in the semiconductor industry could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Customer Concentration
Relatively few customers account for a substantial portion of the Company's
revenues. Sales to the Company's ten largest customers in fiscal 1997, 1996 and
1995 accounted for 71%, 69% and 75% of revenues, respectively. In fiscal 1997,
1996 and 1995, sales to Lam Research Corporation ("Lam"), the Company's largest
customer in these periods, accounted for 21% of the Company's revenues in each
fiscal year. The Company expects that sales to Lam will continue to represent a
significant portion of the Company's revenues for the foreseeable future. The
Company's customers, including Lam, generally do not enter into long-term
agreements obligating them to purchase the Company's products. A reduction or
delay in orders from Lam or other significant customers, including reductions or
delays due to market, economic or competitive conditions in the semiconductor or
flat panel display industries, could have a material adverse effect on the
Company's business, financial condition and results of operations.
Reliance on OEM Customers; Lengthy Sales Cycle
The Company's products are principally sold to OEMs which incorporate the
Company's products into their equipment. Due to the significant capital
commitments usually incurred by semiconductor and flat panel display
manufacturers in their purchases of these OEMs' equipment, these manufacturers
demand highly reliable products which may require several years for OEMs to
develop. The Company's revenues are therefore primarily dependent upon the
timing and effectiveness of the efforts of its OEM customers in developing and
marketing equipment incorporating the Company's products.
The Company's new products are generally incorporated into an OEM customer's
process tools at the design stage. However, customer decisions to use the
Company's products, which can often require significant expenditures by the
Company without any assurance of success, often precede the generation of volume
sales, if any, by a year or more. There can be no assurance that the Company
will continue to achieve design-in wins, that the process tools manufactured by
the Company's customers will be introduced in a timely manner or that such
systems will achieve market acceptance. The Company's or its customers' failure
to develop and introduce new products successfully and in a timely manner could
materially and adversely affect the Company's business, financial condition and
results of operations.
New Products and Rapid Technological Change
The semiconductor and flat panel display manufacturing industries have been
characterized by rapid technological change and evolving industry requirements
and standards. The Company believes that these trends will continue. The
Company's success will depend upon its ability to enhance its existing products
and to develop and market new products to meet customer requirements. Successful
product development and introduction depends on a number of factors, including
accurate new product definition, timely completion and introduction of new
product designs and market acceptance of the Company's products and its
customers' products. Currently, the Company's major development programs include
expanding its product offerings of semiconductor and flat panel display
substrate handling systems to address emerging industry requirements for 300mm
wafer and fourth generation flat panel substrates, as well as wafer handling
systems and modules for atmospheric process tools. In addition, the Company
continues to develop and enhance its process control software product offerings.
There can be no assurance that the Company will adjust to changing market
conditions or be successful in introducing products or product enhancements on a
timely basis, if at all, or that the Company will be able to market successfully
these products and product enhancements once developed. Further, there can be no
assurance that the Company's products will not be rendered obsolete by new
industry standards or changing technology.
Risks of International Sales and Operations
In fiscal 1997, 1996 and 1995, the Company derived approximately 38%, 20% and
Management's Discussion and Analysis of Financial Condition and Results of
Operations
12% of its revenues from customers located outside the United States. The
Company anticipates that international revenues will continue to account for a
significant portion of its revenues. However, there can be no assurance that
geographical growth rates, if any, in the foreseeable future, particularly in
Japan and South Korea which are suffering regional economic downturns, will be
comparable to those achieved in fiscal 1997. To support its international
customers, the Company maintains subsidiaries in Japan, Europe, South Korea and
Taiwan and is expanding its field service and support operations in Europe and
Southeast Asia. There can be no assurance that the Company will be able to
manage these operations effectively or that the Company's investment in these
activities will enable it to compete successfully in international markets or to
meet the service and support needs of its customers.
Additionally, a significant portion of the Company's revenues and operations
could be subject to certain risks, including tariffs, foreign government
standards and regulations and other barriers, difficulties in staffing and
managing foreign subsidiary and branch operations, currency exchange risks and
exchange controls, adverse tax consequences and difficulty in accounts
receivable collection. International trade regulations, such as United States
export controls, could change in the future and make it more difficult for the
Company to export its products to various countries. There can be no assurance
that any of these factors will not have a material adverse effect on the
Company's business, financial condition and results of operations.
Intellectual Property Rights
There has been substantial litigation regarding patent and other intellectual
property rights in the semiconductor and related industries. The Company has
received notice from a third-party alleging infringements of such party's patent
rights by certain of the Company's products. The Company's patent counsel
continues to investigate the claims made against the Company. With regard to the
notice, the Company believes that the patents claimed may be invalid. In the
event of litigation with respect to this notice, the Company is prepared to
defend vigorously its position. However, because patent litigation can be
extremely expensive and time consuming, the Company may seek to obtain a license
to one or more of the disputed patents. There can be no assurance that the
Company would prevail in any litigation seeking damages or expenses from the
Company or to enjoin the Company from selling its products on the basis of the
alleged patent infringement, or that a license for any of the alleged infringed
patents will be available to the Company on reasonable terms, if at all.
Management of Growth
The Company's strategy is to grow by providing hardware and software solutions
to enhance semiconductor and flat panel display substrate handling systems of
advanced production tools used to produce semiconductors and flat panel
displays. Due to the level of technical and marketing expertise necessary to
support its existing and new customers, the Company must attract highly
qualified and well-trained domestic and international personnel. There is a
limited number of persons with the requisite skills to serve in these positions
and it may become inceasingly difficult for the Company to hire such personnel.
The Company will also be required to manage its expanding international
operations, to effect timely deliveries of its products and to maintain the
product quality and reliability required by its customers. The Company's
expansion may also significantly strain the Company's management, manufacturing,
financial and other resources. There can be no assurance that the Company's
systems, procedures, controls and existing space will be adequate to support the
Company's operations. Failure to properly manage the Company's growth, if any,
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Highly Competitive Industry
The markets for the Company's products are highly competitive and subject to
rapid technological change. The Company believes that its primary competition is
from integrated OEMs that satisfy their semiconductor and flat panel display
handling needs in-house rather than by purchasing systems or modules from an
independent supplier such as the Company. Many of these other potential
competitors have substantially greater resources than the Company. There can be
no assurance that the Company will be successful in selling its products to OEMs
that currently satisfy their substrate handling needs in-house, regardless of
the performance or the price of the Company's products. Moreover, there can be
no assurance that integrated OEMs will not begin to commercialize their handling
capabilities. Competitors may develop superior products or products of similar
quality at the same or lower prices. Other technical innovations may impair the
Company's ability to market its products. There can be no assurance that the
Company will be able to compete successfully.
Risks Associated with Possible Acquisitions
The Company may pursue potential acquisitions of businesses, products and
technologies that could complement or expand the Company's business. The Company
currently has no plans, commitments or agreements with respect to any material
acquisitions and there can be no assurance that the Company will be able to
identify any appropriate acquisition candidates. If the Company identifies an
acquisition candidate, there can be no assurance that the Company will be able
to successfully negotiate the terms of any such acquisition, finance such
acquisition or integrate such acquired businesses, products or technologies into
the Company's existing business and products. The negotiation of potential
acquisitions as well as the integration of an acquired business could cause
diversion of management's time and resources. Future acquisitions by the Company
Management's Discussion and Analysis of Financial Condition and Results of
Operations
could result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities and amortization expenses. If any
such acquisition were to occur, there can be no assurance that, whether or not
consummated, any such acquisition would not have a material adverse effect on
the Company's business, financial condition and results of operations.
Volatility of Stock Price
The Company believes that a variety of factors could cause the price of the
Company's common stock to fluctuate, perhaps substantially, including:
announcements of developments related to the Company's business; quarterly
fluctuations in the Company's actual or anticipated operating results and order
levels; general conditions in the semiconductor and flat panel display
industries or the worldwide economy; announcements of technological innovations;
new products or product enhancements by the Company or its competitors;
developments in patents or other intellectual property rights and litigation;
and developments in the Company's relationships with its customers and
suppliers. In addition, in recent years the stock market in general and the
market for shares of small capitalization and semiconductor industry-related
companies in particular, have experienced extreme price fluctuations which have
often been unrelated to the operating performance of affected companies. Any
such fluctuations in the future could adversely affect the market price of the
Company's common stock. There can be no assurance that the market price of the
common stock of the Company will not decline.
<PAGE>
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
SEPTEMBER 30, 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 71,753 $ 2,102
Accounts receivable, net of allowance for doubtful accounts
of $160 and $100, respectively, and including related party
receivables of $5,204 and $5,533, respectively 28,408 24,381
Inventories 23,253 17,803
Prepaid expenses and other current assets 1,980 1,026
Deferred income taxes 1,710 653
- ---------------------------------------------------------------------------------------------
Total current assets 127,104 45,965
Fixed assets, net 19,054 16,698
Other assets 3,572 2,098
- ---------------------------------------------------------------------------------------------
Total assets $ 149,730 $ 64,761
=============================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt and capital lease obligations $ 399 $ 1,431
Accounts payable 9,125 8,103
Accrued compensation and benefits 2,719 2,719
Accrued expenses and other current liabilities 2,193 1,130
- ---------------------------------------------------------------------------------------------
Total current liabilities 14,436 13,383
Long-term debt and capital lease obligations 190 589
Deferred income taxes 905 98
- ---------------------------------------------------------------------------------------------
Total liabilities 15,531 14,070
- ---------------------------------------------------------------------------------------------
Commitments and contingency (Note 12) -- --
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized; none
issued and outstanding -- --
Common stock, $.01 par value; 21,500,000 shares authorized;
10,052,663 and 7,569,109 shares issued and outstanding,
respectively 101 76
Additional paid-in capital 117,139 34,335
Cumulative translation adjustment 5 (174)
Deferred compensation (416) (110)
Retained earnings 17,370 16,564
- ---------------------------------------------------------------------------------------------
Total stockholders' equity 134,199 50,691
- ---------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 149,730 $ 64,761
=============================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
Consolidated Statement of Income
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED SEPTEMBER 30, 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
FISCAL 1997 FISCAL 1996 FISCAL 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues, including related party revenues of $18,176,
$19,109 and $10,530, respectively $ 86,409 $ 90,432 $ 50,958
Cost of revenues 58,395 52,610 29,783
- ---------------------------------------------------------------------------------------------------
Gross profit 28,014 37,822 21,175
- ---------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 14,222 12,359 6,818
Selling, general and administrative 12,846 12,436 7,188
- ---------------------------------------------------------------------------------------------------
Total operating expenses 27,068 24,795 14,006
- ---------------------------------------------------------------------------------------------------
Income from operations 946 13,027 7,169
Interest expense 610 388 482
Interest income 70 334 507
- ---------------------------------------------------------------------------------------------------
Income before income taxes 406 12,973 7,194
Income tax provision (benefit) (400) 4,476 2,249
- ---------------------------------------------------------------------------------------------------
Net income $ 806 $ 8,497 $ 4,945
===================================================================================================
Net income per share $ 0.10 $ 1.04 $ 0.73
===================================================================================================
Weighted average number of common and
common equivalent shares 8,435 8,199 6,803
===================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Consolidated Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
COMMON ADDITIONAL CUMULATIVE TOTAL
STOCK AT PAID-IN TRANSLATION DEFERRED RETAINED STOCKHOLDERS'
(IN THOUSANDS) PAR VALUE CAPITAL ADJUSTMENT COMPENSATION EARNINGS EQUITY
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 $ 40 $ 2,360 $ (171) $ - $ 3,360 $ 5,589
Issuance of common stock-
public offerings 30 30,216 30,246
Exercise of common stock warrants 5 1,240 1,245
Exercise of common stock options 57 57
Purchase and retire treasury stock (119) 80 (39)
Currency translation adjustments 35 35
Deferred compensation 264 (264) -
Amortization of deferred
compensation 45 45
Payment of stockholders' notes
receivable 60 60
Dividends (91) (91)
Income tax benefit related
to stock options 130 130
Net income 4,945 4,945
- ---------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 75 34,208 (136) (139) 8,214 42,222
Issuance of common stock under
employee stock purchase plan 210 210
Exercise of common stock options 1 101 102
Purchase and retire treasury stock (184) (184)
Currency translation adjustments (38) (38)
Amortization of deferred
compensation 29 29
Elimination of Techware net income
for the three-months ended
December 31, 1995 (147) (147)
Net income 8,497 8,497
- ---------------------------------------------------------------------------------------------------------
Balance at September 30, 1996 76 34,335 (174) (110) 16,564 50,691
Issuance of common stock-
public offering 23 80,739 80,762
Issuance of common stock under
employee stock purchase plan 1 531 532
Exercise of common stock options 1 240 241
Currency translation adjustments 179 179
Deferred compensation 368 (368) -
Amortization of deferred
compensation 62 62
Income tax benefit related
to stock options 926 926
Net income 806 806
- ---------------------------------------------------------------------------------------------------------
Balance at September 30, 1997 $101 $117,139 $ 5 $(416) $17,370 $134,199
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FISCAL 1997 FISCAL 1996 FISCAL 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 806 $ 8,497 $ 4,945
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 4,808 3,028 1,270
Loss on disposal of fixed assets 7 122 50
Compensation expense related to common stock options 62 29 45
Deferred income taxes (249) (443) 115
Changes in operating assets and liabilities:
Accounts receivable (3,948) (11,742) (8,340)
Inventories (5,555) (5,005) (8,413)
Prepaid expenses and other current assets 165 511 (715)
Accounts payable 1,046 2,127 4,195
Accrued compensation and benefits (15) 1,019 717
Accrued expenses and other current liabilities 882 (291) (855)
- -------------------------------------------------------------------------------------------------------
Net cash used in operating activities (1,991) (2,148) (6,986)
- -------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Purchases of fixed assets (6,363) (9,689) (7,673)
Increase in other assets (2,069) (1,267) (511)
Proceeds from sales of short-term investments, net -- -- 492
- -------------------------------------------------------------------------------------------------------
Net cash used in investing activities (8,432) (10,956) (7,692)
- -------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net (repayments of) borrowings under line of credit (1,019) 123 236
Principal payments on long-term debt and capital lease obligations (412) (462) (2,293)
Proceeds from issuance of common stock, net of issuance costs 81,535 312 31,608
Dividends paid -- (91) --
Purchase and retire treasury stock -- (253) (39)
- -------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 80,104 (371) 29,512
- -------------------------------------------------------------------------------------------------------
Effects of exchange rate changes on cash and cash equivalents (30) (17) 35
Net increase (decrease) in cash and cash equivalents 69,651 (13,492) 14,869
Cash and cash equivalents, beginning of year 2,102 15,594 725
Cash and cash equivalents, end of year $ 71,753 $ 2,102 $ 15,594
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 615 $ 419 $ 371
Cash paid during the year for income taxes $ 1,486 $ 4,076 $ 2,786
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Notes to Consolidated Financial Statements
1. Nature of Business and Summary of Significant Accounting Policies
N A T U R E O F B U S I N E S S
Brooks Automation, Inc. (the "Company") is an independent supplier of substrate
handling robots, modules, software controls and fully-integrated cluster tool
platforms to semiconductor, flat panel display and data storage manufacturers
worldwide.
A summary of the Company's significant accounting policies follows:
P R I N C I P L E S O F C O N S O L I D A T I O N A N D B A S I S O F
P R E S E N T A T I O N
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All intercompany balances and transactions have
been eliminated. The consolidated financial information contained herein
includes the accounts of Techware Systems Corporation ("Techware") for all
periods presented (Note 2).
U S E O F E S T I M A T E S
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from these estimates.
R E V E N U E R E C O G N I T I O N
Revenue from product sales is recorded upon shipment to the customer provided
that no significant obligations remain and collection of the related receivable
is probable. When insignificant obligations remain after shipment of the
product, the Company accrues the estimated costs of such obligations upon
shipment. A provision for product warranty costs is recorded at the time of
sale.
C A S H A N D C A S H E Q U I V A L E N T S
The Company invests its excess cash in repurchase agreements with major banks
and U.S. government securities that are subject to minimal credit and market
risk. The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At September
30, 1997, cash and cash equivalents include $40,031,000 and $31,171,000 of
securities which are classified as available-for-sale and held to maturity,
respectively, and for which cost approximates fair value. At September 30, 1996,
cash and cash equivalents include $1,758,000 of securities which are classified
as held to maturity and for which cost approximates fair value.
<PAGE>
Notes to Consolidated Financial Statements
I N V E N T O R I E S
Inventories are stated at the lower of cost or market, cost being determined
using the first-in, first-out method. The Company provides inventory reserves
for excess, obsolete or damaged inventory based on changes in customer demand,
technology and other economic factors. While the Company often uses sole source
suppliers for certain key components and common assemblies to achieve quality
control and the benefits of economies of scale, the Company believes that these
parts and materials are readily available from several supply sources.
F I X E D A S S E T S
Fixed assets are recorded at cost and depreciated over their estimated useful
lives using the straight-line method. Equipment held under capital leases is
recorded at the lower of the fair market value of the equipment or the present
value of the minimum lease payments at the inception of the leases. Leasehold
improvements and equipment held under capital leases are amortized over the
shorter of their estimated useful lives or the term of the respective leases.
Repair and maintenance costs are expensed as incurred.
P A T E N T S
The Company capitalizes the direct costs associated with obtaining patents.
Capitalized patent costs are amortized using the straight-line method over the
shorter of seven years or the estimated economic life of the patents.
R E S E A R C H A N D D E V E L O P M E N T A N D S O F T W A R E
D E V E L O P M E N T C O S T S
Costs incurred in the research and development of the Company's products are
expensed as incurred, except for certain software development costs. Software
development costs are expensed prior to establishing technological feasibility
and capitalized thereafter until the related product is available for general
release to customers. Capitalized software development costs are amortized to
cost of sales on a product-by-product basis over the estimated lives of the
related products.
S T O C K - B A S E D C O M P E N S A T I O N
The Company's stock compensation plans are accounted for in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Under this method, compensation expense on stock option grants to
employees is recognized only to the extent that the exercise price on the date
of grant is less than the current fair value of the Company's common stock. In
October 1996, the Company adopted the disclosure provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS123), for stock-based awards to employees (Note 8).
<PAGE>
Notes to Consolidated Financial Statements
All stock based awards to non-employees are accounted for in accordance with
SFAS123.
I N C O M E T A X E S
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under this method,
deferred income tax assets and liabilities are recognized for the expected
future tax consequences, utilizing current tax rates, of temporary differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. Deferred income tax expense represents the change in the net
deferred tax asset and liability balances.
F O R E I G N C U R R E N C Y
The functional currency of the Company's international subsidiaries is the local
currency. Accordingly, foreign currency financial statements of the Company's
international subsidiaries are translated into U.S. dollars using exchange rates
in effect at period end for assets and liabilities and at average rates during
the period for results of operations. The resulting foreign currency translation
adjustments are reflected as a separate component of consolidated stockholders'
equity.
N E T I N C O M E P E R S H A R E
Net income per share is determined based on the weighted average number of
common shares and common equivalent shares, if dilutive, assumed outstanding
during the applicable period. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, certain common and common equivalent shares
issued by the Company during the twelve month period prior to the initial filing
of the registration statement relating to the Company's initial public offering
have been included in the calculation of weighted average shares, using the
treasury stock method and an estimated initial public offering price of $9.00
per share, as if these shares were outstanding for all periods prior to the
initial public offering.
R E C E N T L Y E N A C T E D A C C O U N T I N G P R O N O U N C E M E N T S
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings per Share" (SFAS128), which establishes standards for
computing and presenting earnings per share. The new standard replaces the
presentation of primary earnings per share prescribed in Accounting Principles
Board Opinion No. 15, "Earnings per Share" (APB15) with a presentation of basic
earnings per share and also requires dual presentation of basic and diluted
earnings per share on the face of the statement of operations for all entities
with complex capital structures. Basic earnings per share excludes dilution and
is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share is computed similarly to fully diluted earnings per share
pursuant to APB15. The Company will be required to implement SFAS128 in the
first quarter of fiscal 1998 and to restate all prior periods. If the Company
had been required to implement the guidance in SFAS128 during the year ended
September 30, 1997, the following earnings per share amounts
<PAGE>
Notes to Consolidated Financial Statements
would have been reported.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income per common share:
Basic $ 0.10 $ 1.13 $ 0.82
===========================================================================================
Diluted $ 0.09 $ 1.04 $ 0.73
===========================================================================================
Weighted average number of common shares 7,681 7,503 5,997
===========================================================================================
Weighted average number of common and dilutive
potential common shares 8,634 8,199 6,803
===========================================================================================
</TABLE>
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS130) and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS131). The Company will implement SFAS130 and SFAS131,
as required in fiscal 1999, which require the Company to report and display
certain information related to comprehensive income and operating segments,
respectively. Adoption of SFAS130 and SFAS131 is not expected to impact the
Company's financial position or results of operations.
<PAGE>
Notes to Consolidated Financial Statements
2. Acquisition
In fiscal 1996, the Company issued 462,189 shares of common stock in exchange
for all the outstanding shares of Techware pursuant to a Combination Agreement
dated as of February 28, 1996. The Techware acquisition was accounted for as a
pooling of interests. In connection with the Techware acquisition, the Company
incurred expenses of $230,000, consisting primarily of transaction costs to
effect the acquisition, in the quarter ended March 31, 1996.
Due to the previously differing year-ends of the Company and Techware,
Techware's results of operations for the year ended December 31, 1995 have been
combined with the Company's results of operations for the year ended September
30, 1995. The results of operations for fiscal 1996 are for the twelve-months
ended September 30, 1996 for both the Company and Techware. Techware's unaudited
results of operations for the three months ended December 31, 1995 (including
revenues and net income of $1,810,000 and $147,000, respectively) are included
in the consolidated statements of income for both the year ended September 30,
1996 and 1995. Therefore, an amount equal to Techware's net income for the three
months ended December 31, 1995 was eliminated from consolidated retained
earnings for the year ended September 30, 1996.
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
SEPTEMBER 30, 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Raw materials and purchased parts $14,750 $12,547
Work-in-process 7,745 2,899
Finished goods 758 2,357
- -----------------------------------------------------------------------------
$23,253 $17,803
=============================================================================
</TABLE>
4. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) ESTIMATED USEFUL
SEPTEMBER 30, LIFE IN YEARS 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment and software 3-5 $ 8,224 $ 5,595
Computer equipment and software life of
under capital leases lease 626 626
Machinery and equipment 5-7 10,764 7,861
Machinery and equipment life of
under capital leases lease 753 753
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
<TABLE>
<S> <C> <C> <C>
Furniture and fixtures 3-10 3,496 3,077
Leasehold improvements 7 4,769 4,133
- -------------------------------------------------------------------------------
28,632 22,045
Less-Accumulated depreciation and amortization 9,578 5,347
- -------------------------------------------------------------------------------
$19,054 $16,698
===============================================================================
</TABLE>
Accumulated amortization on fixed assets under capital leases was $902,000 and
$626,000 at September 30, 1997 and 1996, respectively. Amortization expense for
fixed assets under capital leases was $276,000, $243,000 and $124,000 for the
years ended September 30, 1997, 1996 and 1995, respectively.
5. Long-term Debt and Capital Lease Obligations
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
SEPTEMBER 30, 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding borrowings under bank line of credit agreements $ - $1,019
Subordinated note payable, principal payments in monthly
installments of $5, interest payable monthly at prime plus 2.75%
per annum (11.25% and 11.0% at September 30, 1997 and 1996) 182 246
Capital lease obligations at rates of 5% to 21% per annum, secured
by certain fixed assets; expiring at various dates through January 1999 407 755
- -------------------------------------------------------------------------------------------------
589 2,020
Less-Current portion 399 1,431
- -------------------------------------------------------------------------------------------------
$ 190 $ 589
=================================================================================================
</TABLE>
The aggregate maturities of long-term debt and capital lease obligations are as
follows as of September 30, 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
FISCAL
- -------------------------------------------------------------------------------------------------
<S> <C>
1998 $399
1999 122
2000 68
- -------------------------------------------------------------------------------------------------
$589
=================================================================================================
</TABLE>
The Company has a $22.0 million unsecured revolving line of credit and a $6.0
<PAGE>
Notes to Consolidated Financial Statements
million unsecured foreign currency line of credit, both of which expire December
31, 1998. Under the revolving credit facility, advances bear interest, at the
option of the Company, at the prime rate or the LIBOR rate plus 2%. Foreign
currency advances bear interest at the LIBOR rate plus 2%. There were no
borrowings outstanding under these credit facilities at September 30, 1997. At
September 30, 1996, the Company had $1,019,000 outstanding ($725,000 denominated
in Japanese yen and $294,000 denominated in Canadian dollars) under the foreign
currency line of credit. The terms of the Loan Agreement require the Company to
comply with various covenants, including the maintenance of specified financial
ratios and a minimum tangible capital base, as defined, and limits annual levels
of capital expenditures.
Additionally, the Company has a $450,000 term note agreement with a third party
due in June 2000. The note is secured by substantially all of the Company's
assets and is personally guaranteed by the president of the Company. The note
agreement contains various restrictive covenants.
At September 30, 1997, the Company was in compliance with the terms of these
credit agreements or had obtained the appropriate waivers.
6. Income Taxes
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal ($987) $ 3,695 $ 1,719
State 8 625 241
Foreign 829 600 174
- --------------------------------------------------------------------------------
(150) 4,920 2,134
================================================================================
Deferred:
Federal ($204) (42) 67
State (106) (402) 48
Foreign 60 -- --
- --------------------------------------------------------------------------------
(250) (444) 115
- --------------------------------------------------------------------------------
($400) $ 4,476 $ 2,249
================================================================================
</TABLE>
The components of income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic ($1,136) $11,580 $6,651
Foreign 1,542 1,393 543
- --------------------------------------------------------------------------------
$ 406 $12,973 $7,194
================================================================================
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
The significant components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
SEPTEMBER 30, 1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Reserves not currently deductible $ 1,531 $ 819 $ 382
Foreign and state tax credit carryforwards 516 411 --
Other -- 61 12
- ----------------------------------------------------------------------------------
Gross deferred tax assets 2,047 1,291 394
- ----------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization (1,059) (676) (266)
Other (183) (60) (16)
- ----------------------------------------------------------------------------------
Gross deferred tax liabilities (1,242) (736) (282)
- ----------------------------------------------------------------------------------
$ 805 $ 555 $ 112
==================================================================================
</TABLE>
The differences between the income tax provision (benefit) and income taxes
computed using the applicable U.S. statutory federal tax rate are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes computed at federal statutory rate $ 142 $ 4,540 $ 2,518
State income taxes, net of federal benefit (98) 420 207
Research and development tax credits (591) (587) (255)
Foreign sales corporation tax benefit (381) (325) (85)
Foreign income taxed at different rates 407 161 (20)
Non-deductible transaction expenses -- 110 --
Other 121 157 (116)
- --------------------------------------------------------------------------------
($400) $ 4,476 $ 2,249
================================================================================
</TABLE>
The Company does not provide for U.S. income taxes applicable to undistributed
earnings of its foreign subsidiaries since these earnings are indefinitely
reinvested.
7. Stockholders' Equity
In February 1995, the Company issued 2,000,000 shares of common stock
<PAGE>
Notes to Consolidated Financial Statements
in an initial public offering and received proceeds, net of offering costs, of
$13.6 million. In July 1995 and September 1997, the Company completed public
stock offerings of 1,000,000 shares and 2,298,150 shares of common stock,
respectively, and received proceeds, net of offering costs, of $16.6 million and
$80.8 million, respectively.
8. Stock Plans
1995 EMPLOYEE STOCK PURCHASE PLAN
On February 22, 1996, the stockholders approved the 1995 Employee Stock Purchase
Plan (the "1995 Plan") which enables eligible employees to purchase shares of
the Company's common stock. Under the 1995 Plan, eligible employees may purchase
up to an aggregate of 150,000 shares during six-month offering periods
commencing on January 1 and July 1 of each year at a price per share of 85% of
the lower of the market price per share on the first or last day of each
six-month offering period. Participating employees may elect to have up to 10%
of base pay withheld and applied toward the purchase of such shares. The rights
of participating employees under the 1995 Plan terminate upon voluntary
withdrawal from the plan at any time or upon termination of employment. As of
September 30, 1997, the Company has reserved 82,744 shares of common stock for
issuance under the 1995 Plan.
1992 COMBINATION STOCK OPTION PLAN
The 1992 Combination Stock Option Plan (the "1992 Plan") allows for the grant of
non-qualified and incentive stock options for the purchase of up to 1,550,000
shares of the Company's common stock by employees, directors or consultants who
provide services to the Company. The Board of Directors of the Company is
responsible for administration of the 1992 Plan. Stock options granted under the
plan have generally been granted at exercise prices of not less than the fair
value per common share on the date of the grant. Non-qualified and incentive
stock options are exercisable at various dates as determined by the Board of
Directors. Incentive stock options are generally exercisable either within 10
years of the date of grant or within 5 years of the date of grant for employees
holding greater than 10% of the Company's voting stock.
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The 1993 Non-Employee Director Stock Option Plan (the "Director Plan") allows
for the issuance of stock options to directors who provide services to the
Company. In fiscal 1997, the Company's stockholders approved an increase in the
number of shares issuable under the Director Plan from 90,000 to 190,000 shares.
The price of the stock options is determined by the Board of Directors and are
priced at not less than the fair market value on the date of
<PAGE>
Notes to Consolidated Financial Statements
grant. Options vest over a five year period.
On July 25, 1996, the Board of Directors determined that certain stock options
issued to employees of the Company had an exercise price significantly higher
than the fair market value of the Company's common stock. In light of the
Board's conclusions that such options were not providing the desired incentive,
the Board provided employees with the opportunity to exchange options previously
granted to them under the 1992 Plan for new options (the "replacement options")
to purchase the same number of shares of common stock at an exercise price of
$11.00 per share, the then fair market value of the Company's common stock.
Employees were given the choice of retaining their existing options, with the
original vesting schedule, or accepting the replacement options, with a vesting
schedule commencing on July 25, 1996. The Company canceled and replaced options
to purchase 344,600 shares of common stock with an average exercise price of
$14.36 per share.
Stock option activity under all plans is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
- -----------------------------------------------------------------------------
<S> <C> <C>
Outstanding, September 30, 1994 942,300 $ 1.83
Granted 128,500 12.52
Canceled (9,000) 1.54
Exercised (49,700) 1.12
- -----------------------------------------------------------------------------
Outstanding, September 30, 1995 1,012,100 3.18
Granted 717,500 12.14
Canceled (405,375) 13.41
Exercised (101,575) 0.99
- -----------------------------------------------------------------------------
Outstanding, September 30, 1996 1,222,650 5.47
Granted 133,300 16.08
Canceled (34,075) 7.55
Exercised (141,791) 1.70
- -----------------------------------------------------------------------------
Outstanding, September 30, 1997 1,180,084 $ 7.02
=============================================================================
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
The weighted average fair value per share of options granted with exercise
prices at fair market value during the years ended September 30, 1997 and 1996
was $12.51 and $8.69, respectively. The weighted average exercise price per
share of options granted with exercise prices at fair market value during the
year ended September 30, 1997 was $17.37. The weighted average fair value and
weighted average exercise price per share of options granted at below fair
market value during the year ended September 30, 1997 was $17.68 and $12.75,
respectively.
The following table summarizes information about stock options outstanding at
September 30, 1997:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
REMAINING WEIGHTED- WEIGHTED-
CONTRACTUAL AVERAGE AVERAGE
EXERCISE NUMBER LIFE EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.83-$1.67 113,559 5.9 $ 1.35 47,434 $ 1.25
$2.21-$2.43 505,875 4.7 $ 2.31 248,625 $ 2.33
$8.00-$10.25 18,650 8.1 $ 8.77 1,500 $ 8.00
$11.00 387,600 8.8 $ 11.00 - -
$11.50-$14.75 99,400 9.4 $ 12.89 2,600 $ 12.08
$15.62-$21.50 44,000 9.1 $ 19.99 3,000 $ 19.00
$29.50-$38.38 11,000 9.9 $ 34.08 - -
--------- -------
1,180,084 6.8 $ 7.02 303,159 $ 2.44
========= =======
</TABLE>
At September 30, 1996 and 1995, there were 217,150 and 144,225 options
exercisable, respectively, with weighted average exercise prices of $1.97 and
$1.35, respectively.
<PAGE>
Notes to Consolidated Financial Statements
The fair value of each option grant is estimated on the date of grant with the
following assumptions used for grants made during fiscal years 1997 and 1996: no
dividend yield, risk-free interest rates of 6.2% to 6.3%, expected option term
of 4 years, expected forfeiture rate of 2.5% and a volatility factor of 100%.
Had compensation expense for the Company's option grants to employees been
determined based on the fair value at the date of grant and for shares of common
stock purchased pursuant to the Employee Stock Purchase Plan, consistent with
the methods prescribed by SFAS123, the pro forma effect on the Company's net
income for the years ended September 30, 1997 and 1996 would have been as
follows:
<TABLE>
<CAPTION>
Y E A R E N D E D S E P T E M B E R 30, 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net income As reported $806,000 $8,497,000
Pro forma $ 60,000 $8,021,000
Net income per share As reported $0.10 $1.04
Pro forma $0.01 $1.02
</TABLE>
Because most options vest over several years and additional option grants are
expected to be made subsequent to September 30, 1997, the results of applying
the fair value method may have a materially different effect on pro forma net
income in future years.
R E S T R I C T E D S T O C K P U R C H A S E P L A N
Prior to its initial public offering, the Company had an informal stock purchase
plan whereby selected key employees and consultants were granted the opportunity
to purchase common stock. The shares of common stock sold pursuant to this plan
are generally subject to purchase by the Company at the original purchase price
plus a specified interest rate, if the individual ceases to be employed or
associated with the Company after various specified periods of time. In
connection with this plan, the Company issued a total of 423,195 shares of
common stock to employees and consultants at per share prices ranging from $.83
to $2.21. During fiscal 1996 and 1995, the Company purchased and retired 25,500
and 18,000 shares, respectively, under this plan. At September 30, 1997, the
number of shares of common stock outstanding includes 62,295 shares subject to
purchase by the Company.
R I G H T S D I S T R I B U T I O N
In July 1997, the Board of Directors declared a dividend of one preferred share
purchase right (a "right") for each share of common stock outstanding on August
12, 1997. Each right entitles the registered holder to purchase from the
Company, upon certain triggering events, one-thousandth of a share of Series
A Junior Participating Preferred Stock, par value $0.01 per share (the "Series A
Preferred Shares"), of the Company, at a purchase price of $135 per
one-thousandth of a Series A Preferred Share, subject to adjustment. Redemption
of the rights could generally discourage a merger or tender offer involving the
securities of the Company that is not approved by the Company's Board of
Directors by increasing the cost of effecting any such transaction and,
accordingly, could have an adverse impact on stockholders who might want to vote
in favor of such merger or participate in such tender offer. The rights will
expire on the earlier of (i) July 31, 2007, or (ii) the date on which the rights
are redeemed. The terms of the rights may generally be amended by the Board of
Directors without the consent of the holders of the rights.
<PAGE>
9. Benefit Plan
The Company sponsors a defined contribution plan which meets the requirements of
Section 401(k) of the Internal Revenue Code. All domestic employees of the
Company who meet minimum age and service requirements are eligible to
participate in the plan. The plan allows employees to contribute 1% to 15% of
their annual salary subject to statutory limitations. The Company contributes
50% of amounts contributed by employees up to 3% of their annual salary. The
Company's contribution expense was $165,000, $133,000 and $82,000 in fiscal
1997, 1996 and 1995, respectively.
10. Geographic, Significant Customers and Related Party Information
Revenues from customers outside the United States were 38% (31% to Asia and 7%
to Europe), 20% (15% to Asia and 5% to Europe) and 12% (8% to Asia and 4% to
Europe) of total revenues for fiscal 1997, 1996 and 1995, respectively.
During fiscal 1997, 1996 and 1995, the Company had revenues from a related party
representing 21% of revenues in each fiscal year. An executive of this customer
is a member of the Company's Board of Directors.
During fiscal 1997, the Company had revenues from one customer (not a related
party) representing 11% of revenues. During fiscal 1995, the Company had
revenues from another customer (not a related party) representing 13% of
revenues.
A financial instrument which potentially exposes the Company to concentration of
credit risk is accounts receivable, as the Company's customers are concentrated
in the semiconductor industry and relatively few customers account for a
significant portion of the Company's revenues. At September 30, 1997 and 1996,
accounts receivable from three customers and two customers, respectively,
accounted for approximately 46% and 36%, respectively, of accounts receivable.
The Company regularly monitors the creditworthiness of its customers and
believes that it has adequately provided for any exposure to potential credit
losses.
11. Supplemental Cash Flow Information
During fiscal 1996 and 1995, the Company acquired $630,000 and $348,000,
respectively, of fixed assets under capital leases.
During fiscal 1997, the Company recorded deferred compensation of $368,000
relating to certain common stock options granted during the year. During fiscal
1996, the Company recorded compensation expenses of $69,000 in connection with
the purchase and retirement of 25,500 shares of restricted common stock (Note
8). During fiscal 1995, the Company recorded deferred compensation of $264,000
relating to certain common stock issued and common stock options granted during
the twelve month period prior to the initial filing of the registration
statement relating to the Company's initial public offering.
12. Commitments and Contingency
L E A S E C O M M I T M E N T S
The Company leases manufacturing and office facilities and certain equipment
under operating and capital leases (Notes 4 and 5) that expire through 2003.
Rent expenses under operating leases for fiscal 1997, 1996 and 1995 was
$1,741,000, $976,000 and $725,000, respectively. Future minimum
<PAGE>
lease payments under operating and capital leases with initial or remaining
noncancelable terms of one or more years are as follows as of September 30,
1997:.
<TABLE>
<CAPTION>
(IN THOUSANDS)
OPERATING CAPITAL
FISCAL LEASES LEASES
- --------------------------------------------------------------------------------
<S> <C> <C>
1998 $1,282 $362
1999 1,191 66
2000 1,150 22
2001 1,098 -
2002 1,058 -
Thereafter 623 -
- --------------------------------------------------------------------------------
Total minimum lease payments $6,402 450
=================================================================
Less-Amount representing interest 43
- --------------------------------------------------------------------------------
Net present value of minimum lease payments $407
================================================================================
</TABLE>
C O N T I N G E N C Y
There has been substantial litigation regarding patent and other intellectual
property rights in the semiconductor and related industries. The Company has
received notice from a third-party alleging infringements of such party's
patent rights by certain of the Company's products. The Company's patent
counsel is investigating the claim and the Company believes the patents claimed
may be invalid. In the event of litigation with respect to this claim, the
Company is prepared to vigorously defend its position. However, because patent
litigation can be extremely expensive and time consuming, the Company may seek
to obtain a license to one or more of the disputed patents. Based upon currently
available information, the Company would only do so if such license fees would
not be material to the Company's consolidated financial statements. Currently,
the Company does not believe that it is probable that future events related to
this threatened matter will have an adverse effect on the Company's business.
The Company is currently unable to reasonably estimate any possible loss related
to this matter.
<PAGE>
Report of Independent Accountants
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
OF BROOKS AUTOMATION, INC.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Brooks Automation, Inc. and its subsidiaries at September 30, 1997 and 1996, and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
November 12, 1997
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended September 30, 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Revenues $ 86,409 $90,432 $50,958 $26,651 $16,425
Gross Profit 28,014 37,822 21,175 10,646 6,761
Income from operations 946 13,027 7,169 2,778 1,415
Income before income taxes 406 12,973 7,194 2,340 1,189
Income tax provision (benefit) (400) 4,476 2,249 724 51
Net income 806 8,497 4,945 1,616 1,138
Net income per share $ 0.10 $ 1.04 $ 0.73 $ 0.32 $ 0.24
Weighted average number of common
and common equivalent shares 8,435 8,199 6,803 5,045 4,737
Total assets $149,730 $64,761 $53,580 $14,488 $12,487
Working capital 112,668 32,582 32,563 6,032 4,261
Long-term obligations 190 589 531 3,227 3,264
Stockholders' equity 134,199 50,691 42,222 5,589 3,388
</TABLE>
<PAGE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
(IN THOUSANDS, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1997
Revenues $16,111 $16,433 $23,059 $30,806
Gross profit 5,480 4,398 7,631 10,505
Net income (loss) 40 (1,544) 267 2,043
Net income (loss) per share $ - $ (0.20) $ 0.03 $ 0.23
- ----------------------------------------------------------------------------------------------
Common stock prices High $ 19.50 $ 19.75 $ 19.50 $ 38.69
Low $ 9.50 $ 14.75 $ 12.38 $ 19.50
- ----------------------------------------------------------------------------------------------
Fiscal 1996
Revenues $18,564 $22,602 $25,280 $23,986
Gross profit 7,887 9,614 10,467 9,854
Net income 1,844 2,113 2,375 2,165
Net income per share $ 0.22 $ 0.26 $ 0.29 $ 0.27
- ----------------------------------------------------------------------------------------------
Common stock prices High $ 22.25 $ 16.00 $ 15.88 $ 14.75
Low $ 13.00 $ 10.00 $ 9.75 $ 9.00
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CORPORATE INFORMATION
D I R E C T O R S G E N E R A L C O U N S E L
Robert J. Therrien Brown, Rudnick, Freed & Gesmer, P.C.
Chief Executive Officer One Financial Center
President and Treasurer Boston, MA 02111
Brooks Automation, inc.
I N D E P E N D E N T
Norman B. Brooks A C C O U N T A N T S
Retired Price Waterhouse LLP
Founder of Brooks Automation, Inc. 160 Federal street
Boston, MA 02110
Roger D. Emerick
Chairman of the Board T R A N S F E R A G E N T
Lam Research Corporation Boston EquiServe
Blue Hill Office Park
Amin J. Khoury 150 Royall Street
Chairman of the Board Canton, MA 02021
B/E Aerospace, Inc.
S T O C K L I S T I N G
O F F I C E R S The Company's common stock is
Robert J. Therrien* traded in the Over-the-Counter
Chief Executive Officer Market under the symbol "BRKS"
President and Treasurer and quoted on the Nasdaq
National Market. As of November
David R. Beaulieu* 28, 1997 there were
Vice President approximately 97 holders of
Engineering record of the Company's common
stock.
Robert Carey
Vice President
Asian Operations R E P O R T O N F O R M 10-K
A copy of the Company's Annual
Robert A. McEachern Report on Form 10-K as filed
Vice President with the Securities and
Flat Panel Display Engineering Exchange Commission may be
obtained from the Company
Richard W. McMahon without charge by writing to
Vice President Investor Relations. Brooks
President-Brooks Automation Canada Automation, Inc., 15 Elizabeth
Drive, Chelmsford, MA 01824
Stanley D. Piekos*
Vice President A N N U A L M E E T I N G
Finance and Chief Financial Officer O F S T O C K H O L D E R S
The 1998 Annual Meeting of
Michael W. Pippins* Stockholders will be held on
Vice President Thursday, February 26, 1998, at
Sales and Marketing 10:00 a.m., at 15 Elizabeth
Drive, Chelmsford, MA 01824
Michael F. Werner*
Vice President D I V I D E N D S
Manufacturing and Operations The Company has not paid cash
dividends on its common stock
Tsunchisa Yamashita and currently intends to retain
Vice President earnings to finance future
President-Brooks Automation KK growth and, therefore, does not
anticipate paying cash dividends in
the foreseeable future.
* Officer designated as an executive officer for
Securities and Exchange Commission reporting purposes.
<PAGE>
Exhibit 21.01
BROOKS AUTOMATION, INC.
Subsidiaries of the Registrant
------------------------------
<TABLE>
<CAPTION>
Name Jurisdiction
- ------------------------------------------------------ ----------------
<S> <C>
Brooks Automation International Barbados
Brooks Automation K.K. Japan
Brooks Automation Massachusetts Securities Corporation Massachusetts
Brooks Automation, Ltd. United Kingdom
Brooks Automation (Canada) Corp. Canada
Brooks Automation Korea, Ltd. Korea
Brooks Automation Taiwan Taiwan
</TABLE>
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-95268, 333-07313, 333-07315 and 333-22717) of
Brooks Automation, Inc. of our report dated November 12, 1997 appearing on page
42 of the 1997 Annual Report to Stockholders of Brooks Automation, Inc. which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page 13 of this Form 10-K.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Boston, Massachusetts
December 18, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFOMATION EXTRACTED FROM THE BROOKS
AUTOMATION INC. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AS OF AND
FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 71,753
<SECURITIES> 0
<RECEIVABLES> 28,568
<ALLOWANCES> 160
<INVENTORY> 23,253
<CURRENT-ASSETS> 127,104
<PP&E> 28,632
<DEPRECIATION> 9,578
<TOTAL-ASSETS> 149,730
<CURRENT-LIABILITIES> 14,436
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 134,098
<TOTAL-LIABILITY-AND-EQUITY> 149,730
<SALES> 86,409
<TOTAL-REVENUES> 86,409
<CGS> 58,395
<TOTAL-COSTS> 27,068
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 610
<INCOME-PRETAX> 406
<INCOME-TAX> 806
<INCOME-CONTINUING> 806
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 806
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
