e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For fiscal year ended
September 30, 2006
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number: 0-25434
Brooks Automation,
Inc.
(Exact name of Registrant as
Specified in Its Charter)
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Delaware
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04-3040660
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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15 Elizabeth Drive
Chelmsford, Massachusetts
(Address of Principal
Executive Offices)
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01824
(Zip Code)
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978-262-2400
(Registrants 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, $0.01 par value
Rights to Purchase Common Stock
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934. Yes o No þ
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 þ No o
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 registrants 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. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Indicate by check mark whether the registrant is a shell company
(as defined in Exchange Act
Rule 12b-2). Yes o No þ
The aggregate market value of the registrants Common
Stock, $0.01 par value, held by nonaffiliates of the
registrant as of March 31, 2006, was approximately
$1,061,248,600 based on the closing price per share of $14.24 on
that date on the Nasdaq Stock Market. As of March 31, 2006,
75,365,813 shares of the registrants Common Stock,
$0.01 par value, were outstanding. As of November 30,
2006, 75,563,054 shares of the registrants Common
Stock, $0.01, par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants Proxy Statement involving the
election of directors, which is expected to be filed within
120 days after the end of the registrants fiscal
year, are incorporated by reference in Part III of this
Report.
PART I
Brooks Automation, Inc. (Brooks, we,
us or our) is a leading supplier of
technology products and solutions primarily serving the
worldwide semiconductor market. We supply hardware, software and
services to both chip manufacturers and original equipment
manufacturers, or OEMs, who make semiconductor device
manufacturing equipment. We are a technology and market leader
with offerings ranging from individual hardware and software
modules to fully integrated systems as well as services to
install and support our products world-wide. Although our core
business addresses the increasingly complex automation and
integrated subsystems requirements of the global semiconductor
industry, we also provide solutions for a number of related
industries, including the flat panel display manufacturing, data
storage and certain other industries which have complex
manufacturing environments.
We were founded in 1978 to develop and market automated
substrate handling equipment for semiconductor manufacturing and
became a publicly traded company in February 1995. We have grown
significantly from being a niche supplier of wafer-handling
robot modules for vacuum-based processes, to become the largest
merchant supplier of hardware and software automation products
for the semiconductor industry in consecutive calendar years
from 2001 through 2005, and the worlds thirteenth largest
semiconductor front-end capital equipment company in 2005,
according to the independent market research firm Gartner
Dataquest.
Our business is significantly dependent on capital expenditures
by semiconductor manufacturers, which in turn are dependent on
the current and anticipated market demand for integrated circuit
(IC) chips and electronics equipment. To maintain
manufacturing leadership and growth in the semiconductor
industry, companies make significant capital expenditures in
manufacturing equipment and investments in research and
development. For example, investments in the production of chips
that use advanced 90-nanometer (nm) and 65nm process
technology are the enablers (increased chip performance,
decreased power consumption and reduced cost) for a broad range
of new products that are expected to help drive growth in the
chip industry. Further advances in IC designs utilizing 45nm and
smaller sizes continue to enable innovation and are driving the
need for new manufacturing facilities and new generation
processing equipment.
The demand for semiconductors is cyclical and has historically
experienced periodic expansions and contractions, which are
called upturns and downturns. The semiconductor industry
experienced a prolonged downturn from fiscal 2001 to the end of
fiscal 2003. The industry economics improved significantly in
fiscal 2004 and we were able to return to profitability in
fiscal 2004, benefiting from improved market demand and from
some of the cost reduction initiatives that we implemented
during the downturn. The industry conditions weakened again in
our fiscal 2005 leading to a decline in revenues and
profitability for Brooks during 2005, but rebounded in 2006 to
help drive growth and profitability for Brooks in fiscal 2006.
We expect industry conditions to continue to fluctuate
unpredictably.
On October 26, 2005, we acquired all the issued and
outstanding stock of Helix Technology Corporation
(Helix). Helix develops and manufactures vacuum
technology solutions for the semiconductor, data storage, and
flat panel display markets. We believe that the acquisition of
Helix enables us to better serve our current market, increase
our addressable market, reduce the volatility that both
businesses have historically faced and position us to enhance
our financial performance. The aggregate purchase price, net of
cash acquired, was approximately $458.1 million, consisting
of 29.0 million shares of common stock valued at
$444.6 million, the fair value of assumed Helix options of
$3.3 million and transaction costs of $10.2 million.
The market price used to value the Brooks shares issued as
consideration for Helix was $15.32, which represents the average
of the closing market price of Brooks common stock for the
period beginning two trading days before and ending two trading
days after the merger agreement was announced. The actual number
of shares of Brooks common stock issued was determined based on
the actual number of shares of Helix common stock outstanding
immediately prior to the completion of the merger, based on an
exchange ratio of 1.11 shares of Brooks common stock for
each outstanding share of Helix common stock. The Helix business
operates in our hardware segment. This transaction qualified as
a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended.
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On May 8, 2006, we entered into an Agreement and Plan of
Merger (the Merger Agreement) with Synetics
Solutions Inc. (Synetics). We completed our
acquisition of Synetics from Yaskawa Electric Corporation
(Yaskawa), a corporation duly organized and existing
under the laws of Japan, through a merger that became effective
as of June 30, 2006. Synetics provides customized
manufactured solutions for the North American semiconductor
equipment industry. Pursuant to the Merger Agreement, Synetics
became a wholly owned subsidiary of Brooks. The aggregate
purchase price of Synetics, net of cash acquired, was
approximately $50.2 million consisting of a
$28.6 million cash payment to Yaskawa, repayment of
outstanding debt of $19.9 million and transaction costs of
$1.7 million.
Also on May 8, 2006, we entered into a Joint Venture
Agreement (the Agreement) with Yaskawa to form a
50/50 joint venture called Yaskawa Brooks Automation, Inc.
(YBA) to exclusively market and sell Yaskawas
semiconductor robotics products and Brooks automation
hardware products to semiconductor customers in Japan. This
Agreement was executed on June 30, 2006. YBA began
operations on September 21, 2006.
On November 3, 2006, our Board of Directors committed to a
formal plan of disposal of our software division, Brooks
Software and entered into an Asset Purchase Agreement (the
Purchase Agreement) with Applied Materials, Inc.
(Applied), a Delaware corporation. Under the terms
of the Purchase Agreement, we will divest and sell our software
division, Brooks Software, to Applied for $125 million in
cash consideration. We will transfer to Applied substantially
all of our assets primarily related to Brooks Software,
including the stock of several subsidiaries engaged only in the
business of Brooks Software, and Applied will assume certain
liabilities related to Brooks Software. We are selling our
software division in order to focus on our core
semiconductor-related hardware businesses. We expect to
recognize a gain on disposal of the software division and to
reclassify this division as discontinued operations in fiscal
2007.
Completion of the transaction is subject to several conditions,
including expiration or termination of applicable waiting
periods under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and clearance under any
applicable foreign antitrust laws, and other customary closing
conditions. We expect to close the transaction during the second
fiscal quarter of 2007.
Industry
Background
In recent years the semiconductor industry has experienced
significant growth in both the volume and complexity of
integrated circuit devices manufactured. This growth has been
driven by the increased demand for electronic products that
require semiconductors such as computers, telecommunications
equipment, consumer electronics, data storage media and wireless
communications devices.
To meet these demands, semiconductor manufacturers have sought
volume and efficiency improvements through increased equipment
utilization, higher manufacturing yields, capacity expansion of
existing facilities and the construction of new facilities.
Automation and vacuum-based processes perform critical functions
in the manufacturing of semiconductors. The majority of modern
semiconductor fabrication facilities, or fabs, manufacture
semiconductor chips on circular silicon wafers with diameters of
150mm, or 6 inches, and 200mm, or 8 inches. More
recently the industry has begun to adopt wafers with diameter
sizes of 300mm, or 12 inches. The wafers are typically
processed in production lots of 25 wafers, with 150mm and 200mm
wafers contained in either an open cassette or a fully enclosed
pod called SMIF, or standard mechanical interface. Production
lots for 300mm manufacturing typically consist of 25 wafers
contained in a FOUP, or front-opening unified pod. Both SMIF and
FOUP technologies isolate the wafers from their surroundings by
creating an ultra-clean mini-environment within the
pod. One wafer may yield hundreds of chips, and each chip may
contain tens or hundreds of millions of microscopic transistors
in leading-edge devices.
The production of advanced semiconductor chips is an extremely
complex and logistically challenging manufacturing activity. To
create the millions of microscopic transistors and connect them
together horizontally and in vertical layers into a functioning
integrated circuit, or IC chip, the silicon wafers must go
through hundreds of process steps that require complex
processing equipment, or tools, to create the integrated
circuits. A large production fab may have more than 70 different
types of process and metrology tools, totaling as many as 500
tools or more. Up to 40 percent of these tools perform
processes in a vacuum, such as removing, depositing or measuring
material on wafer surfaces. Wafers can go through as many as 400
different process steps before completion. These
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steps, which comprise the initial fabrication of the integrated
circuit and are referred to in the industry as front-end
processes, are repeated many times to create the desired pattern
on the silicon wafer. As the complexity of semiconductors
continues to increase, the number of process steps also
increases, resulting in a greater need for automation due to
more handling and tracking requirements, and higher number of
tools. Upon completing the front-end processing, the wafer is
cut into individual devices, or chips, which then undergo
additional assembly and testing steps before being packaged into
a device that is used in an electronic product.
Vacuum-based processes are fundamental steps integral to chip
manufacturing. High vacuum pumps are required in certain process
steps to remove all potentially contaminating gases and
impurities from the processing environment. In order to achieve
optimal production yields, semiconductor manufacturers must also
ensure that each process operates at carefully controlled
pressure levels. Impurities or incorrect pressure levels can
lower production yields, thereby significantly increasing the
cost per usable semiconductor chip produced. Some key vacuum
processes include dry etching and dry stripping; chemical vapor
deposition, or CVD; physical vapor deposition, or PVD; and ion
implantation.
During manufacturing, the wafers need to be physically
transported between different process tools, repeatedly
identified, tracked, loaded into the equipment and processed,
unloaded, verified and inspected, and dispatched to the next
process step or storage area. All these actions can be
automated. Automation enables the right material to be delivered
at the right time to the right equipment with the right process
recipe. Similarly, non-production wafers and durable goods, such
as wafer carriers and photolithography masks or reticles used in
production, must also be handled, tracked and managed.
Consequently, the automation systems physically touch and handle
nearly every wafer in the fab, while the software systems manage
the tracking and recording of data for virtually every
manufacturing lot, piece of equipment and resource in the fab.
The capital expenditure by a semiconductor company to create a
modern 200mm fab can be as much as $2 billion while the
cost for a 300mm fab can exceed $3 billion. While most
200mm fabs were only partially automated, virtually all 300mm
production fabs are fully automated due to the heavier weight
and value of a production lot. The investment in automation
hardware, software and services has grown from approximately
$50 million in a 200mm fab to $180 million in a 300mm
fab. Typically 75 to 80 percent of the capital investment
for a fab is for manufacturing equipment, while the remainder is
dedicated to the land, the physical building, the clean room
production floor and automation, network and facilities
infrastructure. The served available market for semiconductor
automation approximated $1.8 billion in 2005, according to
Dataquest. We believe we are the only company with a portfolio
of hardware and software products and system integration
services that can address the majority of the automation needs
for semiconductor manufacturing.
Today, almost every aspect of processing includes automation,
from material handling, tracking
work-in-process,
process control and scheduling. Factory and equipment automation
directly impact factory performance. Factory performance, in
turn, drives semiconductor manufacturers ability to:
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reduce manufacturing costs;
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reduce cycle time, making the throughput more predictable;
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deliver products to market first when product profitability is
greatest; and
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reduce defects and improve yield.
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The Company has two reportable segments: hardware and software.
In the fourth quarter of fiscal year 2005, the Companys
equipment automation and factory automation segments were
combined into the hardware segment, which reflects how
management now evaluates its business. The hardware segment also
includes the acquired operations of Helix from the date of
acquisition. Also included in this segment are the acquired
operations of Synetics Solutions from the date of acquisition.
Prior year amounts have been reclassified to conform to the
current year.
The hardware segment provides a wide range of wafer handling
products, vacuum subsystems and wafer transport platforms for
use within the semiconductor process and metrology equipment.
Within the hardware segment, there are four businesses
consisting of automation hardware products, vacuum products and
subsystems, customer-designed automation and the global customer
service organization. The automation hardware products,
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historically the core products of Brooks, include wafer transfer
robots and platforms, or systems that operate in either vacuum
or atmospheric environments that are sold to equipment
manufacturers. The Company also provides hardware directly to
fabs including equipment for lithography that automate the
storage, inspection and transport of photomasks, or reticles.
Another line of business includes the vacuum products and
subsystems acquired from Helix that include vacuum technology
solutions such as cryogenic pumps for creating vacuum, products
for measuring vacuum, and thermal management products that are
used in manufacturing equipment for the semiconductor, data
storage and flat panel display industries. Additionally, the
Company leverages its domain knowledge and manufacturing
expertise to build customer-designed automation systems, or
contract automation systems, in a program designed to help
customers outsource their automation. This assembly and
manufacturing capability was a core competency of Synetics
Solutions, and these offerings have been combined under the line
of business managed by the former Synetics enterprise. The
primary customers for these solutions are manufacturers of
process equipment. Finally, the global customer service
offerings provide customers with support for all our hardware
offerings.
The software segment addresses the need for production
management systems driven by the extensive tracking and tracing
requirements of the semiconductor industry. At the core of these
production systems is the manufacturing execution system
(MES) that is primarily responsible for tracking the
movement of production wafers in a fab, and managing the data
and actions for every wafer, equipment, operator and other
resources in the fab. These mission-critical systems provide
real time information primarily to production operators,
supervisors and fab managers. We provide other important
software applications to meet the critical requirements of the
fab, such as real time dispatching and scheduling, equipment
communications, advanced process control, material control for
the automated material handling systems, or AMHS, activity
execution and control, automated maintenance management of
equipment, and other applications. Customers often purchase more
than one of these software products from Brooks for a single
fab, often driving the need for consulting and integration
services. Our software products enable semiconductor
manufacturers to increase their return on investment by
maximizing production efficiency, and may be sold as part of an
integrated solution or on a stand-alone basis. These software
products and services are also used in many similar
manufacturing industries as semiconductor, including flat panel
display, data storage, and electronic assembly.
Hardware
Modern semiconductor process tools demand fast, error-free
handling of the silicon wafers on which the integrated circuits
are produced. In the late 1980s and early 1990s,
many processes done in vacuum, such as CVD, PVD, dry etching and
other processes, changed from batch processing to single wafer
processing, driving the need for equipment that could process
individual wafers simultaneously in multiple chambers. The
single wafer tool configuration is often referred to as a
cluster tool because of the typically radial layout, or cluster,
of process chambers surrounding one or more central wafer
handling robot. The transition to cluster tools greatly
increased the demands on the automation system, forcing it to
become as much as four to eight times more reliable than
previous generations. The result was a market need for highly
reliable and fast vacuum robots, as well as vacuum cluster tool
platforms, both of which were the genesis of our business model.
Vacuum cluster tools consist of three primary sections: the
equipment front-end module or EFEM, the cluster tool platform,
and the process modules or chambers that are attached to the
tool platform. An intermediate chamber, called a load-lock,
separates the vacuum environment used in processing from the
EFEM, which operates at standard atmosphere. A vacuum robot
performs the task of transferring wafers from the load-lock to
the process chambers that are mounted on the cluster tool
platform. Wafers are placed in the load-lock by atmospheric
robots that are housed in the EFEM. Vacuum tool automation
includes load-locks, robots and other modules as well as the
cluster tool platform. Brooks vacuum subsystems, acquired in the
Helix transaction, create and manage the vacuum environment
needed for several key process steps within semiconductor
manufacturing, including ion implant, PVD and metrology.
The introduction and adoption of new materials and technology in
semiconductor processing drove the emergence of important
non-vacuum processes such as chemical mechanical planarization,
or CMP, and electro-chemical deposition, or ECD, as well as
increased dependence on other atmospheric processes such as
metrology,
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all requiring automation. The growth in atmospheric tool
automation has been further driven by the transition to 300mm
technology and smaller feature sizes on ICs.
The front end of most 300mm and 200mm process equipment require
an atmospheric system called an EFEM. EFEMs have modules called
loadports on which wafer carriers are placed. Loadports have
mechanisms that open the door or lid on the carriers so that the
atmospheric robots can gain access to the wafers in the
carriers. The individual atmospheric modules can be sold
separately or as an integrated atmospheric system which includes
the loadports, the atmospheric robots, and other necessary
modules such as aligners, fan filter units and control software.
Many modern fabs are laid out in a series of processing rooms or
bays that contain similar equipment. Process engineers
recognized early in the history of semiconductor manufacturing
that human handling of wafer carriers or wafers was a
significant source of defects and errors. Automating the
transport and handling of wafers to reduce or eliminate human
handling created a market for factory automation. For 200mm
fabs, AMHS was widely adopted for inter-bay transport only. AMHS
consists of rails that are attached to the ceilings in the main
aisles between bays on which cars transport the wafer carriers
to a stocker at the head of a bay. These stockers automated the
storage and retrieval of the carriers. Virtually all the
movement of materials within a bay, or intra-bay transport, is
done manually in 200mm fabs operators carry the
cassette or SMIF pod from the stocker to a process tool. As
wafer sizes have become larger, carriers have become heavier and
the value per wafer has increased significantly, resulting in
the need for intra-bay automation systems for transporting
wafers directly to and from a tool or stocker. These fully
automated systems have become the standard method of transport
for 300mm manufacturing. Having the capability of
tool-to-tool
or
tool-to-stocker
delivery versus the
stocker-to-stocker
approach used in 200mm manufacturing eliminates the manual
handling of carriers by operators.
The evolution of the wafer carrier technology enabled
semiconductor manufacturers to reduce both fab construction
costs and production defects. Historically, wafer processing has
been performed in clean rooms in order to reduce or eliminate
particulates in the atmosphere that could create defects on
wafers during processing. As the feature sizes on an integrated
circuit became exponentially smaller, the need for cleaner air
became more critical, and more expensive. In the late
1990s the semiconductor industry adopted SMIF technology
to protect and isolate wafers from the environment. The air in a
SMIF pod is 1,000 times cleaner than a typical surgical
operating room; it essentially has its own ultra-pure
mini-environment. The SMIF technology gained acceptance in many
modern 200mm fabs, although open cassettes are still used
widely. In the transition to 300mm wafer sizes, the industry
adopted the FOUP technology as its new standard. While SMIF was
essentially an after-market modification to 200mm equipment,
virtually all 300mm tools since the time of their original
design have integrated the FOUP technology. Automation enabled
the transition from open cassette carriers to mini-environment
pods by providing the loadport modules and robotics to transfer
the wafers into and out of process tools as well as the means to
track and identify the wafers. As a result, the need for
automation has increased for both 300mm and 200mm SMIF fabs.
Software
We are a leading provider of software for:
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manufacturing execution systems, or MES, used within one factory
or to manage multiple sites, for manufacturers of discrete
products;
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factory logistics applications such as simulation, scheduling
and dispatching;
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connecting and integrating equipment with factory management
systems;
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advanced process control; and
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data analysis and management for factory and enterprise
performance monitoring.
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In addition, we provide the necessary training, consulting and
other services required by customers to successfully implement
and use our software.
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The production of semiconductors is arguably one of the most
complex manufacturing environments in the world. Factory
automation software has played an important role in
semiconductor manufacturing since the 1970s. Computer
integrated manufacturing was conceived to control the work flow
of a process, gather data and track product in a fab, and to
measure and analyze fab performance in order to assist in
production and business decisions.
Similar to the MES applications, other software packages were
developed by various companies to meet fab requirements, ranging
from communicating with and controlling process equipment to
factory modeling, scheduling, automated dispatching, planning
and data analysis. Industry standards that established protocols
for equipment to communicate with a host computer system, and
other protocols, paved the way for equipment to be connected
online to fab management systems such as the MES, enabling full
automation when further integrated with the material handling
systems, automated dispatching applications and other software.
We entered the factory automation software market through an
acquisition strategy aimed at consolidating a number of
applications into an integrated software suite.
As semiconductor manufacturing moves towards full automation,
factory automation software takes on even more importance. The
MES software is required to model and store in its database
nearly every resource in the fab production lots,
wafers, non-production wafers, equipment, recipes, process
plans, operators, engineers, durable goods such as carriers,
reticles, and so forth. The MES contains the real-time status of
every item so that, as an example, fab managers can track the
location of virtually any production lot or the state of
virtually any process tool such as running, idle, down, etc.
More importantly, this information is available to other
software applications so that dispatching decisions, reports,
alarms, data analysis and machine commands can be executed
automatically.
We believe it is critical that the major software applications
are integrated together to provide an overall solution that
meets the increasingly complex demands of automation. These
solutions help increase throughput, improve utilization of
resources and factory performance, and reduce in-process
inventory. Although many of the software applications already
have the ability to integrate to other applications or systems,
the implementation of individual pieces require services and
consulting expertise from the software providers. Services can
range from training and best practices consulting to full
integration services that essentially deliver a turnkey solution
to the customer.
The functionality of semiconductor MES software allowed it to be
applied to other complex industries that require tracking and
control of
work-in-process,
such as in the manufacture of liquid crystal displays or LCD,
storage devices such as magnetic thin film heads, medical
devices, and telecommunications fiber optics. New markets are
being opened for Brooks outside of the semiconductor industry as
track and trace capabilities become more in demand in various
industries, driven in part by new government regulations and
compliance standards. Likewise, simulation and modeling software
can be used in a number of different industries where logistics
and planning are important, ranging from airport traffic control
to theme park scheduling. Finally, many engineering data
analysis and statistical process control products are being used
in complex manufacturing environments in addition to the
semiconductor industry, such as LCD, precision electronics,
automotive, aerospace, and life sciences industries.
Products
Hardware
Products
Our hardware for process and metrology equipment is offered as
either modules or systems. Modules are discrete components such
as robots and aligners, cryogenic pumps, chillers and vacuum
gauges, while systems are pre-integrated assemblies such as the
cluster tool platform that may consist of a number of modules
provided by us or other suppliers. We provide automation modules
and systems for vacuum and atmospheric equipment as well as tool
control software, mini-environment products, calibration and
alignment products, and high-precision airflow controls
primarily for the semiconductor industry. Other industries that
we serve in this segment of the market include LCD and data
storage. We use a common architecture in the design and
production of systems and modules. Shared technologies and
common software controls enable us to respond to changing
industry demands, such as processing larger 300mm semiconductor
wafers. Our Original Equipment Manufacturer (OEM)
customers have the option of either buying individual modules
from us and assembling their own systems in-house, or buying the
entire automation system from us, pre-assembled, tested and
certified from our factory. Also included in this
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segment is the assembly and manufacturing of customer designed
automation systems, known as contract automation systems.
The major modules we offer for equipment are vacuum robotics,
atmospheric robotics, wet robotics and loadport modules.
Vacuum modules include:
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MagnaTran 7, a family of robots used in vacuum processes
such as CVD, PVD and etch;
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VacuTran, the legacy vacuum robot product line; and
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MagnaTran 8, a new family of robots that addresses the
needs of specific customers.
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Vacuum pumping components and systems include:
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CTI-Cryogenics cryopumps and systems;
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On-Board monitoring and control systems; and
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Turbo
Plus®
waterpumps and Turbopumps
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Vacuum measurement components and systems include:
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STABL-ION®,
CONVECTRON®
and MICRO-ION components and systems; and
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Vacuum gauging products that are integrated into analytical
instruments such as mass spectrometers
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Our atmospheric robot modules include:
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Razor, a new 2- and 3-FOUP trackless robot;
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Reliance, a family of 3-, 4-, and
5-axis
robots; and
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407, a legacy atmospheric robot with a large installed base of
customers.
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We have introduced a new generation of atmospheric automation
products to replace the current atmospheric product offerings,
the culmination of an extensive R&D program the past
2 years. These new products were developed using a product
life cycle management process designed to meet goals for
performance, manufacturability, cost, reliability and support.
We also offer modules for wet processing, i.e., processes that
utilize liquid chemicals such as acid baths for removing
material from wafer surfaces, developers for photoresist and
cleaning stations. The products we offer include:
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AquaTran 7 wet robot; and
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Reliance 8, a new family of wet robots for CMP.
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Modules for LCD process tools include:
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MagnaTran 70 series vacuum robots for Gen3, Gen4 and Gen5 glass
technologies; and
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DLX and SLX vacuum robots for Gen6 and Gen7 technologies.
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Also within the category of modules sold to OEMs are 300mm FOUP
loadports. Our loadport modules include:
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Vision, a new software-configurable 300mm loadport with
touch-screen LCD;
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FixLoad 6M, a 300mm loadport; and
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SMIFLoad, a 200mm SMIF loadport.
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Vacuum systems for semiconductor manufacturing that we offer
include:
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Gemini Express, a platform for vacuum cluster tools;
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InLine Express, a platform for linear, or in-line, tool
configurations;
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Marathon Express, our legacy cluster tool platform; and
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We have also introduced our next generation of vacuum systems,
including the Marathon Express 2, or M2, line of products.
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Atmospheric systems we offer include:
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Jet, a new EFEM designed for fast setup and easy integration;
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Fab Express, an EFEM for 300mm and 200mm wafer sizes;
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Atmospheric Express, a controlled environment atmospheric
cluster tool for 200mm and smaller wafers; and
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Custom systems, typically a customer-designed system with our
modules.
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For the LCD market, our systems offerings include:
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Hercules Express, a cluster tool platform; and
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Bali 400, an EFEM for LCD process tools.
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Lithography automation solutions for reticle inspection, storage
and management include:
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Guardian Bare Reticle Stocker for storing reticles; and
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Zaris, our reticle sorting, cleaning and macro-inspection tool.
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We provide 200mm SMIF products directly to factory customers,
including:
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ErgoSpeed II loadport for 200mm SMIF that complements a
number of other SMIF products that we provide to our customers;
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Hermos RF readers for RFID applications;
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IRIDnet, a tracking system utilizing infra-red
technology; and
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Custom mini-environments and tool enclosures.
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Automated ID and tracking of carriers in a 300mm fab is provided
by our RFID readers.
Software
Products
We offer a range of products, from MES that manage the
operations of an entire fab, to logistics software for
scheduling and coordinating work flow, to individual software
packages designed to meet specific requirements such as
preventive maintenance systems for equipment. We also offer
integrated systems that incorporate our software on an open
architecture to deliver factory automation solutions tailored
specifically for customers within the context of their industry.
Our software also provides the capabilities to tie fab software
systems into the enterprise and supply chain with planning and
logistics software applications. We provide business system
integration modules to provide integration between our
manufacturing applications and business systems from SAP and
Oracle. Real-time dispatching and factory scheduling
applications can be used to drive manufacturing according to a
customers best practices. Automation and job management
functions help to control manufacturing workflow and automate
decision-making across multiple computer integrated
manufacturing systems. Simulation software allows manufacturers
to model and analyze the use and performance of their tools,
systems and overall manufacturing environment.
Our MES products span a wide spectrum of factory requirements.
Our offerings include:
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FACTORYworks, a high-end MES that is flexible and highly
configurable and can be tailored to meet the advanced
requirements of complex operations such as 300mm
manufacturing; and
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Promis Systems, with its mature
off-the-shelf
functionality and large installed base, more suitable for
customers who do not require extensive customization of
functionality.
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We have built our software suite of applications by acquiring
and developing products that complement our MES offerings.
Products for equipment integration utilizing the SECS protocol
include:
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CELLworks-Grapheq, a UNIX-based cell controller;
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WinSECS, a Windows-based equipment integration package;
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STATIONworks, a Windows-based station control system; and
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FAbuilder, a Windows-based cell controller.
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Real-time execution systems and logistics software include:
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RTD, real-time dispatcher;
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APF Reporter for factory performance reporting and analysis;
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Activity Manager, an adaptive workflow manager that integrates
workflow between multiple plant and enterprise applications
workflow between the transport system and MES;
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AutoSched for simulation and planning of workflow; and
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CLASS-MCS
for transport control that provides an equipment-neutral
software system to manage and control material handling
equipment including AMHS systems, conveyors, wafer and reticle
stockers, and inter-floor lift devices in clean room
environments.
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Composite applications designed to simplify and lower the cost
of integration between enterprise and plant floor systems and
aid demand-driven manufacturing include:
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RealView Manufacturing Intelligence, an enterprise manufacturing
application to enhance overall plant performance;
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Demand Execution, integrating Brooks Real-Time dispatcher
with SAPs APO product;
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Enterprise Quality Management, a framework for quality
management that captures and analyzes data from multiple sources;
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Asset Management, providing detailed production planning
capabilities; and
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Enterprise Integration Hub, which is designed to connect and
integrate the capabilities of the four products listed
immediately above and is certified for us with the products of
SAP, AG, with whom Brooks software is collaborating on joint
development activities.
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We have recognized the growing need for process optimization and
advanced process control, APC, in modern fabs. Our offerings for
these requirements include:
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Patterns for fault detection and classification;
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BAP for advance process control and
run-to-run
control applications; and
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iProcess for factory-wide process and tool health monitoring.
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Engineering data analysis is another important requirement for
managing a fab. We offer products that provide extensive data
analysis and statistical process control, or SPC, including:
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SPACE, a module for real-time SPC; and
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RS Series and Cornerstone for design of experiments and
statistical analysis.
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We offer unique industry-specific systems that address the
comprehensive needs of the customers who prefer a total
solutions approach from one supplier, including:
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300works for 300mm manufacturers; and
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LCDworks for LCD manufacturers.
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These offerings provide applications built around our products.
Our software supports a wide range of manufacturing
environments, from manual and semi-automated to fully automated
operations. In deploying our solutions, manufacturers worldwide
have seen improvements in their cycle times, yields,
work-in-process
levels, customer responsiveness and fulfillment, plant
utilization, and their
return-on-manufacturing-assets.
In addition to software packages, we offer comprehensive
solutions delivery, training, consulting and post-implementation
services designed to empower our customers to realize the
capabilities of our products and solutions.
Customers
We sell our products and services to nearly every major
semiconductor chip manufacturer and OEM in the world, including
all of the top ten chip companies and nine of the top ten
equipment companies. Our customers also include companies who
are in the LCD, data storage and other similar industries. As a
result of the Helix acquisition, certain products are sold
to non-semiconductor customers in imaging and coating and
analytic instruments. We have major customers in the United
States, Europe and Asia. We expect international revenues to
continue to represent a significant percentage of total
revenues. Our industry is seeing an increasing business shift to
Asia. See Note 16, Segment and Geographic
Information of Notes to the Consolidated Financial
Statements for further discussion of our sales by geographic
region and revenue, income and assets by financial reporting
segment. See Part I, Item 1A, Risk Factors
for a discussion of the risks related to foreign operations.
Relatively few customers account for a substantial portion of
our revenues, with the top twenty customers accounting for
approximately 55% of our business in fiscal 2006. We do not have
any single customer who makes up more than ten percent of our
overall revenue for the year.
Sales,
Marketing and Customer Support
We market and sell our equipment and factory automation hardware
and software in the United States, Asia and Europe through our
direct sales organization. The sales process for our products is
often multilevel, involving a team comprised of individuals from
sales, marketing, engineering, operations and senior management.
In many cases a customer is assigned a team that engages the
customer at different levels of its organization to facilitate
planning, provide product customization where required, and to
assure open communication and support.
Our marketing activities include participation in trade shows,
delivery of seminars, participation in industry forums,
distribution of sales literature, and publication of press
releases and articles in business and industry publications. To
enhance communication and support, particularly with our
international customers, we maintain sales and service centers
in the United States, China, Japan, South Korea, Taiwan,
Singapore, Malaysia, the United Kingdom, France and
Germany. These facilities, together with our headquarters,
maintain local support capability and demonstration equipment
for customers to evaluate. Customers are encouraged to discuss
the features and applications of our demonstration equipment
with our engineers located at these facilities.
We provide services to assist customers through our global
customer support organization, including the installation of
hardware products, software implementation, product training,
consulting and sustaining
on-site
support. We strive to provide world-class support to our
customers to help make them successful users of our products
through:
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Service contracts, including multi-year agreements;
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Fixed price repair programs;
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Diagnostic and predictive maintenance support;
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Telephone technical support;
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Direct training programs;
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User symposia and seminars; and
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Operating manuals and other technical support information for
our products.
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We maintain spare parts inventories in regional hubs to enable
our personnel to serve our customers and to service our products
more efficiently.
We provide an extensive range of global support and system
monitoring services that are designed to lower the total costs
of ownership for our customers. We increase our customers
system uptime through rapid response to potential operating
problems. We also develop and deliver enhancements to our
customers installed base of production tools through
upgrades and other services. Our service offerings include
TrueBlue Service Agreements,
GUTS®
(Guaranteed Up Time Support) customer response system and
GOLDLink®
(Global On-Line Diagnostics) support system, which provides a
remote
e-diagnostics
solution that allows us to monitor, in real time, the system
performance of our customers production tools. The
GOLDLink capability has made us a leading total solution
provider in the emerging market for Internet-based, proactive
e-diagnostics
for the semiconductor and semiconductor capital equipment
industries.
Competition
Hardware
The semiconductor fabs and process equipment manufacturing
industries are highly competitive and characterized by continual
changes and improvements in technology. The majority of
equipment automation is still done in-house by OEMs. As a
result, we believe that our primary opportunity in this area is
from the larger semiconductor OEMs that currently satisfy their
substrate handling needs in-house rather than by purchasing them
from an external supplier such as us. For example, Applied
Materials, the leading process equipment OEM, develops and
manufactures a majority of its own central vacuum wafer handling
systems and vacuum modules. Our competitors among external
vacuum automation suppliers are primarily Japanese companies
such as Daihen, Daikin and Rorze. Also, contract manufacturing
companies such as Sanmina, FoxSemicon, and Flextronics are
beginning to offer assembly and manufacturing services to the
OEM companies. Our competitors among vacuum subsystems suppliers
include Sumitomo Heavy Industries (SHI), Genesis, MKS
instruments and Inficon.
Atmospheric tool automation is more outsourced with a number of
competitors due to the low barriers to entry. We compete
directly with other equipment automation suppliers of
atmospheric modules and systems such as Asyst, Hirata, Kawasaki,
Rorze, Sankyo, TDK and Shinko. Contract manufacturers are also
providing assembly and manufacturing services for atmospheric
systems, mainly Flextronics.
Brooks has a significant share of the market for vacuum
cryogenic pumps and faces only a few competitors such as SHI
(Sumitomo Heavy Industries) and Genesis. The measurement gauge
market is more fragmented with a variety of competitors that
include MKS Instruments.
We believe our customers will purchase our equipment automation
products and vacuum subsystems as long as we continue to provide
the necessary throughput, reliability, contamination control and
accuracy for their advanced processing tools at an acceptable
price point. We believe that we have competitive offerings with
respect to all of these factors; however, we cannot guarantee
that we will be successful in selling our products to OEMs who
currently satisfy their automation needs in-house or from other
independent suppliers, regardless of the performance or the
price of our products.
In addressing the Asian markets, we may be at a competitive
disadvantage to local suppliers. We are seeking to improve our
competitive position by establishing stronger local
capabilities, such as the YBA joint venture in Japan and more
material sourcing in China.
We believe that the competitive factors when selling hardware
directly to fabs are technical capabilities, reliability,
price/performance, ease of integration and global sales and
support resources. We believe that our solutions compete
favorably with respect to all these factors.
Software
We believe that the primary competitive factors in the end-user
market for factory automation software are product
functionality, degree of integration with other applications,
compatibility of hardware and software architecture,
price/performance, ease of implementation, cost of ownership,
vendor reputation and financial
11
stability. We believe our products compete favorably with other
systems with regards to the factors listed above due to the
unique nature of the software segment. We also believe that the
relative importance of these competitive factors may change over
time.
We experience direct competition in the factory automation
software market from various companies, including Applied
Materials, Camstar, IBM and numerous small independent software
companies. In some cases, we are able to sell our software
products to our direct competitors. For example, Daifuku uses
our software to control the operations of their AMHS hardware.
Many customers purchase software products from more than one
supplier. Even in cases where a competitor is selected over us
for a particular application, we may still gain substantial
business with that customer since our product offerings cover a
wide range of requirements and are considered
best-in-class
for many applications.
In advanced fabs, a greater burden is placed on software and
implementation of increasingly complex automation applications,
resulting in a critical need for integration of many different
software and hardware components. We cooperate with large
organizations such as IBM, SAP and Hewlett Packard to deliver
complete solutions for customers. When we subcontract our
products and services to another company, our ability to win
business may be highly dependent on the success of the prime
contractor with whom we have partnered.
Research
and Development
Our research and development efforts are focused on developing
new products and services as well as further enhancing the
functionality, degree of integration, reliability and
performance of our existing products. Our engineering,
marketing, operations and management personnel have developed
close collaborative relationships with many of their
counterparts in customer organizations and have used these
relationships to identify market demands and focus our research
and development investment to meet those demands. With the rapid
pace of change that characterizes semiconductor technology it is
essential for us to provide high-performance and reliable
products in order for us to maintain our leadership position.
Software in particular represents a business that relies heavily
on research and development resources to develop, enhance and
support our products.
Manufacturing
Manufacturing is one of our core competencies. Our manufacturing
operations are used for product assembly, integration and
testing. We have adopted 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
our products. Our two major manufacturing facilities in
Chelmsford, Massachusetts and Kiheung, Korea are ISO 9001
certified. Additionally we have a facility in Jena, Germany
whose purpose is to perform integration and final testing of our
products for the European market. We acquired additional
manufacturing facilities in Mansfield, Massachusetts, Longmont,
Colorado and Petaluma, California in connection with the
acquisition of Helix. We also acquired additional manufacturing
facilities in Gresham, Oregon in connection with the acquisition
of Synetics.
We utilize a
just-in-time
manufacturing strategy, based on the concepts of demand flow
technology, for a large portion of our manufacturing process. We
believe that this strategy coupled with the outsourcing of
non-critical components such as machined parts, wire harnesses,
PC boards, etc. reduces fixed operating costs, improves working
capital efficiency, reduces manufacturing cycle times and
improves flexibility to rapidly adjust our production
capacities. While we often use single source suppliers for
certain key components and common assemblies to achieve quality
control and the benefits of economies of scale, we believe that
these parts and materials are readily available from other
supply sources. We are currently focusing our efforts in
implementing global low-cost sourcing and manufacturing
strategies, specifically in Asia.
We have established a subsidiary in India to provide low cost
off-shore engineering resources primarily for sustaining mature
software products. As a result, our core staff of software
engineers should be better enabled to focus on research and
development of new technology and enriching the functions of
currently active products.
12
Patents
and Proprietary Rights
We rely upon patents, trade secret laws, confidentiality
procedures, copyrights, trademarks and licensing agreements to
protect our technology. Due to the rapid technological change
that characterizes the semiconductor and flat panel display
process equipment industries, we believe that the improvement of
existing technology, reliance upon trade secrets and unpatented
proprietary know-how and the development of new products may be
as important as patent protection in establishing and
maintaining competitive advantage. To protect trade secrets and
know-how, it is our policy to require all technical and
management personnel to enter into nondisclosure agreements. We
cannot guarantee that these efforts will meaningfully protect
our trade secrets.
We have obtained patents and will continue to make efforts to
obtain patents, when available, in connection with our product
development program. We cannot guarantee that any patent
obtained will provide protection or be of commercial benefit to
us. Despite these efforts, others may independently develop
substantially equivalent proprietary information and techniques.
As of September 30, 2006, we have obtained 338 United
States patents and had 108 United States patent applications
pending on our behalf. In addition, we have obtained 374 foreign
patents and had 388 foreign patent applications pending on our
behalf. Our United States patents expire at various times
through April 2022. We cannot guarantee that our pending patent
applications or any future applications will be approved, or
that any patents will not be challenged by third parties. Others
may have filed and in the future may file patent applications
that are similar or identical to ours. These patent applications
may have priority over patent applications filed by us.
We have successfully licensed our FOUP load port technology to
several companies and continue to pursue the licensing of this
technology to more companies that we believe are utilizing our
intellectual property.
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor and related
industries. We have in the past been, and may in the future be,
notified that we may be infringing intellectual property rights
possessed by other third parties. We cannot guarantee that
infringement claims by third parties or other claims for
indemnification by customers or end users of our 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 our business, financial
condition and results of operations. If any such claims are
asserted against our intellectual property rights, we may seek
to enter into a royalty or licensing arrangement. We cannot
guarantee, however, that a license will be available on
reasonable terms or at all. We could decide in the alternative
to resort to litigation to challenge such claims or to attempt
to design around the patented technology. Litigation or an
attempted design around could be costly and would divert our
managements attention and resources. In addition, if we do
not prevail in such litigation or succeed in an attempted design
around, we could be forced to pay significant damages or amounts
in settlement. Even if a design around is effective, the
functional value of the product in question could be greatly
diminished.
We acquired certain assets, including a transport system known
as IridNet, from the Infab division of Jenoptik AG on
September 30, 1999. Asyst Technologies, Inc. had previously
filed suit against Jenoptik AG and other defendants, or
collectively, the defendants, in the Northern District of
California charging that products of the defendants, including
IridNet, infringe Asysts U.S. Patent Nos. 4,974,166,
or the 166 patent, and 5,097,421, or the 421 patent.
Asyst later withdrew its claims related to the 166 patent
from the case. Summary judgment of noninfringement was granted
in that case by the District Court and judgment was issued in
favor of Jenoptik on the ground that the product at issue did
not infringe the asserted claims of the 421 patent.
However, Asyst appealed the adverse judgment and the Court of
Appeals for the Federal Circuit. In its decision on that appeal
the Court of Appeals affirmed a portion of the District
Courts grant of summary judgment in favor of Jenoptik but
also reversed another portion of that judgment and reinstated
one of Asysts other claims. On the basis of that order and
the claim construction guidance furnished by the Court of
Appeals, the District Court issued an order granting summary
judgment in favor of Asyst on one of its infringement claims
against Jenoptik. Jenoptik has appealed that order, and that
appeal is currently pending before the Court of Appeals for the
Federal Circuit. In addition, the District Court has set a
January 2007 trial date on the question of the validity of the
Asyst claim upon which summary judgment was granted in
Asysts favor.
We had received notice that Asyst might amend its complaint in
this Jenoptik litigation to name Brooks as an additional
defendant, but no such action was ever taken. Based on our
investigation of Asysts allegations, we do not
13
believe we are infringing any claims of Asysts patents. We
intend to continue to support Jenoptik to argue vigorously,
among other things, the position that the IridNet system does
not infringe the Asyst patent. If Asyst prevails in its appeal
and ultimately in its case against Jenoptik, Asyst may seek to
prohibit us from developing, marketing and using the IridNet
product without a license. We cannot guarantee that a license
would be available to us on reasonable terms, if at all. If a
license from Asyst were not available, we could be forced to
incur substantial costs to reengineer the IridNet product, which
could diminish its value. In any case, we could face litigation
with Asyst. Jenoptik has agreed to indemnify us for any loss we
may incur in this action.
In addition, Asyst made assertions in approximately 1995 that
certain technology employed in products manufactured and sold by
Hermos Informatik GmbH infringed one or more of Asysts
patents. We acquired Hermos in July 2002. To date Asyst has
taken no steps to assert or enforce any such rights against us,
and to our knowledge, Asyst never commenced enforcement
proceedings against Hermos prior to its acquisition by us.
Should Asyst seek to pursue any such claims against Hermos or
us, we would be subject to all of the business and litigation
risks identified in the preceding paragraph.
On August 29, 2006, we acquired a portfolio of
semiconductor-related patents from Newport Corporation,
consisting of 16 registered United States patents, one United
States pending patent application, three registered
non-U.S. patents,
and 11
non-U.S. pending
patent applications. The transferred patents are subject to
certain non-exclusive licenses previously granted by Newport
Corporation. In consideration for this portfolio, we paid
Newport Corporation the sum of $3 million.
Backlog
Backlog for our products as of September 30, 2006, totaled
$181.4 million as compared to $87.2 million at
September 30, 2005. Backlog consists of purchase orders for
which a customer has scheduled delivery within the next
12 months. Backlog for our hardware segment and software
segment was $152.6 million and $28.8 million,
respectively, at September 30, 2006. Orders included in the
backlog may be cancelled or rescheduled by customers without
significant penalty. Backlog as of any particular date should
not be relied upon as indicative of our revenues for any future
period. A substantial percentage of current business generates
no backlog because we deliver our products and services in the
same period in which the order is received.
Employees
At September 30, 2006, we had approximately 2,400 employees
as compared to 1,800 employees at September 30, 2005. The
net increase is reflective of the Companys acquisition of
Helix Technology Corporation in October 2005 and Synetics
Solutions Inc. in June 2006. We believe our future success will
depend in large part on our ability to attract and retain highly
skilled employees.
Approximately 80 employees in our Jena, Germany facility are
covered by a collective bargaining agreement. We consider our
relationships with our employees to be good.
Available
Information
Our Internet website address is http://www.brooks.com. Through
our website, we make available, free of charge, our annual
report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and any amendments to those reports, as soon as reasonable
practicable after we electronically file such material with, or
furnish it to, the SEC. These SEC reports can be accessed
through the investor relations section of our website. The
information found on our website is not part of this or any
other report we file with or furnish to the SEC.
Gartner
Information
Information contained in this annual report on
Form 10-K
attributable to Gartner, Gartner Dataquest or Dataquest as
reflected in their 2005 Semiconductor Manufacturing Equipment
Market Share Analysis published in April 2006 represents
Gartners estimates and we make no representation as to the
accuracy or completeness of this information.
14
Item 1A. Risk
Factors
Factors
That May Affect Future Results
You should carefully consider the risks described below and the
other information in this report before deciding to invest in
shares of our common stock. These are the risks and
uncertainties we believe are most important for you to consider.
Additional risks and uncertainties not presently known to us,
which we currently deem immaterial or which are similar to those
faced by other companies in our industry or business in general,
may also impair our business operations. If any of the following
risks or uncertainties actually occurs, our business, financial
condition and operating results would likely suffer. In that
event, the market price of our common stock could decline and
you could lose all or part of your investment.
Risks
Relating to Our Industry
Due in
part to the cyclical nature of the semiconductor manufacturing
industry and related industries, we have recently incurred
substantial operating losses and may have future
losses.
Our business is largely dependent on capital expenditures in the
semiconductor manufacturing industry and other businesses
employing similar manufacturing technology. The semiconductor
manufacturing industry in turn depends on current and
anticipated demand for integrated circuits and the products that
use them. In recent years, these businesses have experienced
unpredictable and volatile business cycles due in large part to
rapid changes in demand and manufacturing capacity for
semiconductors. The semiconductor industry experienced a
prolonged downturn, which negatively impacted us from the third
quarter of fiscal 2001 until well into 2003. Although our
business became profitable during 2004, a downward trend again
developed during fiscal 2005 in the semiconductor industry, and
our revenues in fiscal 2005 declined from the prior year. We
could continue to experience future operating losses during an
industry downturn and any period of uncertain demand. If an
industry downturn continues for an extended period of time, our
business could be materially harmed. Conversely, if demand
improves rapidly, we could have insufficient inventory and
manufacturing capacity to meet our customer needs on a timely
basis, which could result in the loss of customers and various
other expenses that could reduce gross margins and profitability.
We
face substantial competition which may lead to price pressure
and otherwise adversely affect our sales.
We face substantial competition throughout the world in each of
our product areas. Our primary competitors are Asyst, Camstar,
Genesis, IBM, Inficon, Kawasaki, MKS Instruments, Rorze, Sankyo,
SHI, Shinko and TDK and other smaller, regional companies. We
also endeavor to sell products to OEM manufacturers, such as
Applied Materials, Novellus, KLA-Tencor and TEL, that also
satisfy their semiconductor and flat panel display handling
needs internally rather than by purchasing systems or modules
from a supplier like us. Some of our competitors have
substantially greater financial resources and more extensive
engineering, manufacturing, marketing and customer support
capabilities than we do. We expect our competitors to continue
to improve the performance of their current products and to
introduce new products and technologies that could adversely
affect sales of our current and future products and services.
New products and technologies developed by our competitors or
more efficient production of their products could require us to
make significant price reductions to avoid losing orders. If we
fail to respond adequately to pricing pressures or fail to
develop products with improved performance or developments with
respect to the other factors on which we compete, we could lose
customers or orders. If we are unable to compete effectively,
our business and prospects could be materially harmed.
15
Risks
Relating to Brooks
Our
operating results could fluctuate significantly, which could
negatively impact our business.
Our revenues, operating margins and other operating results
could fluctuate significantly from quarter to quarter depending
upon a variety of factors, including:
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demand for our products as a result of the cyclical nature of
the semiconductor manufacturing industry and the markets upon
which it depends or otherwise;
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changes in the timing and terms of product orders by our
customers as a result of our customer concentration or otherwise;
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changes in the mix of products and services that we offer;
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timing and market acceptance of our new product introductions;
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delays or problems in the planned introduction of new products,
or in the performance of any such products following delivery to
customers;
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our competitors announcements of new products, services or
technological innovations, which can, among other things, render
our products less competitive due to the rapid technological
change in our industry;
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the timing and related costs of any acquisitions, divestitures
or other strategic transactions;
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our ability to reduce our costs in response due to decreased
demand for our products and services;
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disruptions in our manufacturing process or in the supply of
components to us;
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write-offs for excess or obsolete inventory; and
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competitive pricing pressures.
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As a result of these risks, we believe that quarter to quarter
comparisons of our revenue and operating results may not be
meaningful, and that these comparisons may not be an accurate
indicator of our future performance.
Delays
and technical difficulties in our products and operations may
result in lost revenue, lost profit, delayed or limited market
acceptance or product liability claims.
As the technology in our systems and manufacturing operations
has become more complex and customized, it has become
increasingly difficult to design and integrate these
technologies into our newly-introduced systems, procure adequate
supplies of specialized components, train technical and
manufacturing personnel and make timely transitions to volume
manufacturing. Due to the complexity of our manufacturing
processes, we have on occasion failed to meet our
customers delivery or performance criteria, and as a
result we have deferred revenue recognition, incurred late
delivery penalties and had higher warranty and service costs. We
may experience these problems again in the future. We may be
unable to recover expenses we incur due to changes or
cancellations of customized orders. There are also substantial
unanticipated costs associated with ensuring that new products
function properly and reliably in the early stages of their life
cycle. These costs have been and could in the future be greater
than expected as a result of these complexities. Our failure to
control these costs could materially harm our business and
profitability.
Because many of our customers use our products for
business-critical applications, any errors, defects or other
performance or technical problems could result in financial or
other damage to our customers and could significantly impair
their operations. Our customers could seek to recover damages
from us for losses related to any of these issues. A product
liability claim brought against us, even if not successful,
would likely be time- consuming and costly to defend and could
adversely affect our marketing efforts.
16
If we
do not continue to introduce new products and services that
reflect advances in technology in a timely and effective manner,
our products and services will become obsolete and our operating
results will suffer.
Our success is dependent on our ability to respond to the rapid
rate of technological change present in the semiconductor
manufacturing industry. The success of our product development
and introduction depends on our ability to:
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accurately identify and define new market opportunities and
products;
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obtain market acceptance of our products;
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timely innovate, develop and commercialize new technologies and
applications;
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adjust to changing market conditions;
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differentiate our offerings from our competitors offerings;
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obtain intellectual property rights;
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continue to develop a comprehensive, integrated product and
service strategy;
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properly price our products and services; and
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design our products to high standards of manufacturability such
that they meet customer requirements.
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If we cannot succeed in responding in a timely manner to
technological
and/or
market changes or if the new products that we introduce do not
achieve market acceptance, we could lose our competitive
position which could materially harm our business and our
prospects.
The
global nature of our business exposes us to multiple
risks.
For the fiscal year ended September 30, 2006, approximately
41% of our revenues were derived from sales outside North
America, while approximately 48% of our revenues in fiscal 2005
were derived from sales outside North America. We expect that
international sales, including increased sales in Asia, will
continue to account for a significant portion of our revenues.
As a result of our international operations, we are exposed to
many risks and uncertainties, including:
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difficulties in staffing, managing and supporting operations in
multiple countries;
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longer sales-cycles and time to collection;
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tariff and international trade barriers;
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fewer legal protections for intellectual property and contract
rights abroad;
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different and changing legal and regulatory requirements in the
jurisdictions in which we operate;
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government currency control and restrictions on repatriation of
earnings;
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fluctuations in foreign currency exchange and interest
rates; and
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political and economic changes, hostilities and other
disruptions in regions where we operate.
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Negative developments in any of these areas in one or more
countries could result in a reduction in demand for our
products, the cancellation or delay of orders already placed,
threats to our intellectual property, difficulty in collecting
receivables, and a higher cost of doing business, any of which
could materially harm our business and profitability.
17
Our
business could be materially harmed if we fail to adequately
integrate the operations of the businesses that we have acquired
or may acquire.
We acquired Helix effective October 26, 2005 and Synetics
effective June 30, 2006. In addition we have made in the
past, and may make in the future, acquisitions or significant
investments in businesses with complementary products, services
and/or
technologies. Our acquisitions present numerous risks, including:
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difficulties in integrating the operations, technologies,
products and personnel of the acquired companies and realizing
the anticipated synergies of the combined businesses;
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defining and executing a comprehensive product strategy;
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managing the risks of entering markets or types of businesses in
which we have limited or no direct experience;
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the potential loss of key employees, customers and strategic
partners of ours or of acquired companies;
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unanticipated problems or latent liabilities, such as problems
with the quality of the installed base of the target
companys products or infringement of another
Companys intellectual property by a target Companys
activities or products;
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problems associated with compliance with the target
companys existing contracts;
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difficulties in managing geographically dispersed
operations; and
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the diversion of managements attention from normal daily
operations of the business.
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If we acquire a new business, we may be required to expend
significant funds, incur additional debt or issue additional
securities, which may negatively affect our operations and be
dilutive to our stockholders. In periods following an
acquisition, we will be required to evaluate goodwill and
acquisition-related intangible assets for impairment. When such
assets are found to be impaired, they will be written down to
estimated fair value, with a charge against earnings. The
failure to adequately address these risks could materially harm
our business and financial results.
The
planned divestiture of the Brooks Software Division could
adversely affect our business or our financial
results.
On November 3, 2006, we entered into an agreement to sell
the assets of the Brooks software Division (the
Division) to Applied Materials, Inc.
(Applied) pending the completion of necessary
regulatory approvals. If those approvals are not obtained and
the transaction is not completed, the business of the Division
could be adversely affected by a loss of customer confidence, a
reduction in employee morale and a reduction in revenue. If the
sale of the Division is completed, the removal of the Division
from Brooks could have an adverse effect on our relationship
with customers to whom we have sold both hardware and software
products, and the loss of the revenue associated with the
Division and the associated profits could adversely affect both
our financial results and our ability to diminish the impact on
our business of the cyclical nature of the semiconductor
manufacturing industry.
Failure
to retain key personnel could impair our ability to execute our
business strategy.
The continuing service of our executive officers and essential
engineering, technical and management personnel, together with
our ability to attract and retain such personnel, is an
important factor in our continuing ability to execute our
strategy. There is substantial competition to attract such
employees and the loss of any such key employees could have a
material adverse effect on our business and operating results.
The same could be true if we were to experience a high turnover
rate among engineering and technical personnel and we were
unable to replace them.
18
We
face risks related to the restatement of our financial
statements and the pending SEC and US Attorney investigations
regarding our past practices with respect to equity
incentives.
On May 16, 2006, the Securities and Exchange Commission
notified us that it had commenced an informal inquiry into
certain stock option grants and accounting practices.
Subsequently, we have been informed that the informal inquiry
has been converted into a formal inquiry, and we have received a
subpoena from the SEC requesting, among other things, all
documents relating to stock options available for exercise after
January 1, 1999. We are cooperating fully with the SEC and
will continue to do so as the inquiry moves forward. At this
point we are unable to predict what, if any, consequences the
SEC investigation may have on us. However, the investigation
could result in considerable legal expenses, divert
managements attention from other business concerns and
harm our business. If the SEC were to commence legal action, we
could be required to pay significant penalties
and/or fines
and could become subject to an administrative order
and/or a
cease and desist order. The filing of our restated financial
statements to correct the discovered accounting errors has not
resolved the pending SEC investigation into our past practices
with respect to equity incentives. The resolution of the SEC
investigation could require the filing of additional
restatements of our prior financial statements,
and/or our
restated financial statements, or require that we take other
actions not presently contemplated.
On May 19, 2006, we received a grand jury subpoena from the
United States Attorney for the Eastern District of New York (the
US Attorney) requesting all documents relating to
stock option grants between 1995 and the present and documents
concerning the restatement of our financial statements.
Responsibility for this investigation was subsequently assumed
by the United States Attorney for the District of Massachusetts,
and we have received a subpoena from that office requesting,
among other things, similar documents relating to option grants.
The investigation remains ongoing and we are fully cooperating
with the US Attorney. We cannot predict when this inquiry will
conclude or its eventual outcome. The uncertainty associated
with this investigation into our accounting practices and the
restatement of our financial statements could seriously harm our
business, financial condition and reputation.
We
face litigation risks relating to our past practices with
respect to equity incentives that could have a material adverse
effect on the Company.
Several lawsuits, including both putative securities class
actions and shareholder derivative actions, have been filed
against us, our directors and officers and certain of our former
directors and officers relating to our past practices with
respect to equity incentives. See Part I,
Item 3, Legal Proceedings for a more detailed
description of these proceedings. We are and may in the future
be subject to other litigation arising in the normal course of
our business. These actions are in the preliminary stages, and
their ultimate outcome may have a material adverse effect on our
business, financial condition and results of operations.
Litigation may be time-consuming, expensive and disruptive to
normal business operations, and the outcome of litigation is
difficult to predict. The defense of these lawsuits will result
in significant expense and the continued diversion of our
managements time and attention from the operation of our
business, which could impede our ability to achieve our business
objectives. Some or all of the amount we may be required to pay
to satisfy a judgment or settlement of any or all of these
claims may not be covered by insurance.
Under indemnification agreements we have entered into with our
officers and directors, we are required to indemnify them, and
advance expenses to them, in connection with their participation
in proceedings arising out of their service to us. These
payments may be material, in particular if any of these
individuals become targets of regulatory investigations into our
past practices with respect to equity incentives.
Risks
Relating to Our Customers
Because
we rely on a limited number of customers for a large portion of
our revenues, the loss of one or more of these customers could
materially harm our business.
We receive a significant portion of our revenues in each fiscal
period from a relatively limited number of customers, and that
trend is likely to continue. Sales to our ten largest customers
accounted for approximately 43%, 44% and 39% of our total
revenues in the fiscal years ended September 30, 2006, 2005
and 2004, respectively. As
19
the semiconductor manufacturing industry continues to
consolidate and further shifts to foundries which manufacture
semiconductors designed by others, the number of our potential
customers could decrease, which would increase our dependence on
our limited number of customers. The loss of one or more of
these major customers or a decrease in orders from one of these
customers could materially affect our revenue, business and
reputation.
Because
of the lengthy sales cycles of many of our products, we may
incur significant expenses before we generate any revenues
related to those products.
Our customers may need several months to test and evaluate our
products. This increases the possibility that a customer may
decide to cancel or change plans, which could reduce or
eliminate our sales to that customer. The impact of this risk
can be magnified during the periods in which we introduce a
number of new products, as was the case during fiscal 2005, and
will continue in fiscal 2006. As a result of this lengthy sales
cycle, we may incur significant research and development
expenses, and selling, general and administrative expenses
before we generate the related revenues for these products, and
we may never generate the anticipated revenues if our customer
cancels or changes its plans.
In addition, many of our products will not be sold directly to
the end-user but will be components of other products. As a
result, we rely on OEMs of our products to select our products
from among alternative offerings to be incorporated into their
equipment at the design stage; so-called design-ins. The
OEMs decisions often precede the generation of volume
sales, if any, by a year or more. Moreover, if we are unable to
achieve these design-ins from OEMs, we would have difficulty
selling our products to that OEM because changing suppliers
involves significant cost, time, effort and risk on the part of
that OEM.
Customers
generally do not make long term commitments to purchase our
products and our customers may cease purchasing our products at
any time.
Sales of our products are often made pursuant to individual
purchase orders and not under long-term commitments and
contracts. Our customers frequently do not provide any assurance
of minimum or future sales and are not prohibited from
purchasing products from our competitors at any time.
Accordingly, we are exposed to competitive pricing pressures on
each order. Our customers also engage in the practice of
purchasing products from more than one manufacturer to avoid
dependence on sole-source suppliers for certain of their needs.
The existence of these practices makes it more difficult for us
to increase price, gain new customers and win repeat business
from existing customers.
Other
Risks
We may
be subject to claims of infringement of third-party intellectual
property rights, or demands that we license third-party
technology, which could result in significant expense and
prevent us from using our technology.
We rely upon patents, trade secret laws, confidentiality
procedures, copyrights, trademarks and licensing agreements to
protect our technology. Due to the rapid technological change
that characterizes the semiconductor- and flat panel display
process equipment industries, we believe that the improvement of
existing technology, reliance upon trade secrets and unpatented
proprietary know-how and the development of new products may be
as important as patent protection in establishing and
maintaining competitive advantage. To protect trade secrets and
know-how, it is our policy to require all technical and
management personnel to enter into nondisclosure agreements. We
cannot guarantee that these efforts will meaningfully protect
our trade secrets.
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor related
industries. We have in the past been, and may in the future be,
notified that we may be infringing intellectual property rights
possessed by other third parties. We cannot guarantee that
infringement claims by third parties or other claims for
indemnification by customers or end users of our 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 our business, financial
condition and results of operations.
20
Particular elements of our technology could be found to infringe
on the intellectual property rights or patents of others. Other
companies may hold or obtain patents on inventions or otherwise
claim proprietary rights to technology necessary to our
business. For example, twice in 1992 and once in 1994 we
received notice from General Signal Corporation that it believed
that certain of our tool automation products infringed General
Signals patent rights. We believe the matters identified
in the notice from General Signal were also the subject of a
dispute between General Signal and Applied Materials, Inc.,
which was settled in November 1997. There are also claims that
have been made by Asyst Technologies Inc. that certain products
we acquired through acquisition embody intellectual property
owned by Asyst. To date no action has been instituted against us
directly by General Signal, Applied Materials or Asyst.
We cannot predict the extent to which we might be required to
seek licenses or alter our products so that they no longer
infringe the rights of others. We also cannot guarantee that
licenses will be available or the terms of any licenses we may
be required to obtain will be reasonable. Similarly, changing
our products or processes to avoid infringing the rights of
others may be costly or impractical and could detract from the
value of our products. If a judgment of infringement were
obtained against us, we could be required to pay substantial
damages and a court could issue an order preventing us from
selling one or more of our products. Further the cost and
diversion of management attention brought about by such
litigation could be substantial, even if we were to prevail. Any
of these events could result in significant expense to us and
may materially harm our business and our prospects.
Our
failure to protect our intellectual property could adversely
affect our future operations.
Our ability to compete is significantly affected by our ability
to protect our intellectual property. Existing trade secret,
trademark and copyright laws offer only limited protection, and
certain of our patents could be invalidated or circumvented. In
addition, the laws of some countries in which our products are
or may be developed, manufactured or sold may not fully protect
our products. We cannot guarantee that the steps we have taken
to protect our intellectual property will be adequate to prevent
the misappropriation of our technology. Other companies could
independently develop similar or superior technology without
violating our intellectual property rights. In the future, it
may be necessary to engage in litigation or like activities to
enforce our intellectual property rights, to protect our trade
secrets or to determine the validity and scope of proprietary
rights of others, including our customers. This could require us
to incur significant expenses and to divert the efforts and
attention of our management and technical personnel from our
business operations.
If the
site of the majority of our manufacturing operations were to
experience a significant disruption in operations, our business
could be materially harmed.
Most of our manufacturing facilities are concentrated in one
location. If the operations of these facilities were disrupted
as a result of a natural disaster, fire, power or other utility
outage, work stoppage or other similar event, our business could
be seriously harmed because we may be unable to manufacture and
ship products and parts to our customers in a timely fashion.
Our
business could be materially harmed if one or more key suppliers
fail to deliver key components.
We currently obtain many of our key components on an as-needed,
purchase order basis from numerous suppliers. We do not
generally have long-term supply contracts with these suppliers,
and many of them have undertaken cost-containment measures in
light of the recent downturn in the semiconductor industry. In
the event of an industry upturn, these suppliers could face
significant challenges in delivering components on a timely
basis. Our inability to obtain components in required quantities
or of acceptable quality could result in delays or reductions in
product shipments to our customers. In addition, if a supplier
or
sub-supplier
alters their manufacturing processes suffers a production
stoppage for any reason or modifies or discontinues their
products, this could result in a delay or reduction in product
shipments to our customers. Any of the contingencies could cause
us to lose customers, result in delayed or lost revenue and
otherwise materially harm our business.
21
We are
exposed to potential risks and we will continue to incur
increased costs as a result of the internal control testing and
evaluation process mandated by Section 404 of the
Sarbanes-Oxley Act of 2002.
We assessed the effectiveness of our internal control over
financial reporting as of September 30, 2006 and assessed
all deficiencies on both an individual basis and in combination
to determine if, when aggregated, they constitute more than a
significant deficiency. As a result of this evaluation, no
material weaknesses were identified. Although we have completed
the documentation and testing of the effectiveness of our
internal control over financial reporting for fiscal 2006, as
required by Section 404 of the Sarbanes-Oxley Act of 2002,
we expect to continue to incur costs in order to maintain
compliance with that section of the Sarbanes-Oxley Act. We
continue to monitor controls on an ongoing basis in fiscal 2007
for any deficiencies. No evaluation can provide complete
assurance that our internal controls will detect or uncover all
failures of persons within our company to disclose material
information otherwise required to be reported. The effectiveness
of our controls and procedures could also be limited by simple
errors or faulty judgments. In addition, if we continue to
expand globally, the challenges involved in implementing
appropriate internal controls will increase and will require
that we continue to improve our internal controls.
In the future, if we fail to complete the Sarbanes-Oxley 404
evaluation in a timely manner, we could be subject to regulatory
scrutiny and a loss of public confidence in our internal
controls. In addition, any failure to implement required new or
improved controls, or difficulties encountered in their
implementation, could harm our operating results or cause us to
fail to meet our reporting obligations.
Recently completed and future acquisitions of companies, some of
which may have operations outside the United States, may provide
us with challenges in implementing the required processes,
procedures and controls in our acquired operations. Acquired
companies may not have disclosure controls and procedures or
internal control over financial reporting that are as thorough
or effective as those required by securities laws in the United
States. Although we intend to devote substantial time and incur
substantial costs, as necessary, to ensure ongoing compliance,
we cannot be certain that we will be successful in complying
with Section 404.
Our
stock price is volatile.
The market price of our common stock has fluctuated widely. From
the beginning of fiscal year 2005 through the end of fiscal year
2006, our stock price fluctuated between a high of
$18.73 per share and a low of $10.61 per share.
Consequently, the current market price of our common stock may
not be indicative of future market prices, and we may be unable
to sustain or increase the value of an investment in our common
stock. Factors affecting our stock price may include:
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variations in operating results from quarter to quarter;
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changes in earnings estimates by analysts or our failure to meet
analysts expectations;
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changes in the market price per share of our public company
customers;
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market conditions in the semiconductor industry or the
industries upon which it depends;
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general economic conditions;
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political changes, hostilities or natural disasters such as
hurricanes and floods;
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low trading volume of our common stock; and
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the number of firms making a market in our common stock.
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In addition, the stock market has recently experienced
significant price and volume fluctuations. These fluctuations
have particularly affected the market prices of the securities
of high technology companies like ours. These market
fluctuations could adversely affect the market price of our
common stock.
22
Provisions
in our organizational documents and contracts may make it
difficult for someone to acquire control of us.
Our certificate of incorporation, bylaws and contracts contain
provisions that would make more difficult an acquisition of
control of us and could limit the price that investors might be
willing to pay for our securities, including:
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the ability of our board of directors to issue shares of
preferred stock in one or more series without further
authorization of stockholders;
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a prohibition on stockholder action by written consent;
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the elimination of the right of stockholders to call a special
meeting of stockholders;
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a requirement that stockholders provide advance notice of any
stockholder nominations of directors to be considered at any
meeting of stockholders;
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a requirement that the affirmative vote of at least
80 percent of our shares be obtained for certain actions
requiring the vote of our stockholders; and
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a requirement under our shareholder rights plan that, in many
potential takeover situations, rights issued under the plan
become exercisable to purchase our common stock at a price
substantially discounted from the then applicable market price
of our common stock.
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We
will incur significant stock-based compensation charges related
to certain stock options and restricted stock in future
periods.
The Financial Accounting Standards Board (FASB) issued in
December 2004 Statement of Financial Accounting Standards (SFAS)
No. 123R, Share-Based Payment, an amendment of
FASB Statements Nos. 123 and 95, that addresses the accounting
treatment for employee stock options and other share-based
payment transactions. The statement eliminates the ability to
account for share-based compensation transactions using
Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and
requires that such transactions be accounted for using a
fair-value-based method and recognized as expenses. These
expenses have been incorporated into our financial statements
beginning in the quarter ending December 31, 2005. Our
stock-based compensation cost, which reflects the adoption of
Statement 123R, was $8.3 million in fiscal 2006. In
future periods, stock-based compensation cost could have a
material effect on our net income as a result of
Statement 123R, and could adversely affect the market price
of our common stock.
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Item 1B.
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Unresolved
Staff Comments
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We have not received written comments from the Securities and
Exchange Commission regarding its periodic or current reports
under the Securities Exchange Act of 1934, as amended, that were
received 180 days or more before September 30, 2006
and remain unresolved.
Our corporate headquarters and primary manufacturing/research
and development facilities are currently located in three
buildings in Chelmsford, Massachusetts, which we purchased in
January 2001. We have a lease on a
23
fourth building in Chelmsford adjacent to the three that we own.
In summary, we maintain the following active facilities:
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Square Footage
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Ownership Status/Lease
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Location
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Functions
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(approx.)
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Expiration
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Chelmsford, Massachusetts
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Corporate headquarters, training,
manufacturing, R&D hardware and software
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295,000
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Owned
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Chelmsford, Massachusetts
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Manufacturing, training and
warehouse
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93,000
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October 2014
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Jena, Germany
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Manufacturing, R&D hardware,
sales, support and training (4 buildings)
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38,700
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Several leases with terms that end
through July 2009
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Salt Lake City, Utah
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R&D software and training
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33,500
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September 2011
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San Jose, California
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Sales & support and
R&D hardware
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55,600
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January 2010
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Gresham, Oregon
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Manufacturing and R&D hardware
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154,800
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December 2010
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Petaluma, California
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Manufacturing and R&D hardware
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77,300
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December 2007
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Kiheung, South Korea
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Manufacturing, R&D hardware
and sales & support
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63,000
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November 2015
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Phoenix, Arizona
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R&D software
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19,500
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Owned
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Mansfield, Massachusetts
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Manufacturing and R&D hardware
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80,000
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December 2006
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Longmont, Colorado
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Engineering, manufacturing and
R&D hardware
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60,900
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February 2015
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Our hardware segment utilizes the facilities in Massachusetts,
California, Colorado, Oregon, South Korea, and Germany. Our
software segment utilizes facilities in Massachusetts, Utah and
Arizona.
We maintain additional sales, support, service, and training
offices in the United States (Florida, North Carolina,
Pennsylvania and Texas), in Toronto, Canada and overseas in
Europe (France, Germany and UK), as well as in Asia (Japan,
China, Malaysia, Singapore, South Korea, India and Taiwan) and
the Middle East (Israel).
We currently sublease a total of 188,700 square feet of
space previously exited as a result of our various restructuring
activities. Another 122,300 of square feet of mixed office and
manufacturing/research and development space located in
Massachusetts is not in use and unoccupied at this time. We are
actively exploring options to sublease, sell or negotiate an
early termination agreement on this vacant property.
|
|
Item 3.
|
Legal
Proceedings
|
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor and related
industries. Brooks 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. Brooks cannot guarantee
that infringement claims by third parties or other claims for
indemnification by customers or end users of its 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 Brooks business, financial
condition and results of operations. If any such claims are
asserted against Brooks intellectual property rights, we
may seek to enter into a royalty or licensing arrangement.
Brooks cannot guarantee, however, that a license will be
available on reasonable terms or at all. Brooks could decide in
the alternative to resort to litigation to challenge such claims
or to attempt to design around the patented technology.
Litigation or an attempted design around could be costly and
would divert our managements attention and resources. In
addition, if Brooks does not prevail in such litigation or
succeed in
24
an attempted design around, Brooks could be forced to pay
significant damages or amounts in settlement. Even if a design
around is effective, the functional value of the product in
question could be greatly diminished.
In addition to the material set forth below, please see
Patents and Proprietary Rights in Part 1,
Item 1, Business for a description of certain
potential patent disputes.
ITI
Lawsuit
On or about April 21, 2005, we were served with a
third-party complaint seeking to join us as a party to a patent
lawsuit brought by an entity named Information Technology
Innovation, LLC based in Northbrook, Illinois (ITI)
against Motorola, Inc. (Motorola) and Freescale
Semiconductor, Inc. (Freescale). In the lawsuit (the
ITI Lawsuit), ITI claimed that Motorola and
Freescale had infringed a U.S. patent that ITI asserted
covers processes used to model a semiconductor manufacturing
plant. ITI asserted that we had induced and contributed to the
infringement of the patent. Subsequently Intel Corporation
(Intel) filed a lawsuit against ITI seeking a
declaratory judgment that Intel had not infringed and was not
infringing the patent (the Intel Lawsuit) and
notified us that Intel believed that we had an indemnification
obligation to Intel, but that, at that time, Intel was not
seeking to have those obligations determined and enforced in the
Intel Lawsuit.
Freescale alleged that we had a duty to indemnify Freescale and
Motorola from any infringement claims asserted against them
based on their use of our AutoSched software program by paying
all costs and expenses and all or part of any damages that
either of them might incur as a result of the ITI Lawsuit
brought by ITI.
Pursuant to an agreement executed on April 28, 2006, we
settled and concluded with ITI and the other parties all of the
matters that were or might have been raised in this litigation.
In exchange for a cash payment, the settlement affords a
license, releases and covenants from ITI not to sue us, the
other parties named above, and all users of certain of our
factory modeling software products such as the
Autosched product. The Intel Lawsuit was also
dismissed as a result of this settlement. In addition, we
settled the claim for indemnification brought against us by
Freescale by the payment to Freescale of $400,000 to defray a
portion of the legal expenses borne by Freescale in the defense
of the ITI litigation.
Other
Commercial Litigation Matters
In January 2006 a ruling was issued against us by a
Massachusetts state court in a commercial litigation matter
involving us and BlueShift Technologies, Inc. Awards of damages
and costs were assessed against us in January and April 2006 in
the amount of approximately $1.6 million, which had been
accrued for at December 31, 2005. We have filed a notice of
appeal in the case with the Massachusetts Appeals Court and that
appeal is now pending.
Regulatory
Proceedings
On May 12, 2006, we announced that the Company had received
notice that the Boston Office of the United States
Securities and Exchange Commission (the SEC) was
conducting an informal inquiry concerning stock option grant
practices to determine whether violations of the securities laws
had occurred. On June 2, 2006, the SEC issued a voluntary
request for information to us in connection with an informal
inquiry by that office regarding a loan we previously reported
had been made to former Chairman and CEO Robert Therrien in
connection with the exercise by him of stock options in 1999. On
June 23, 2006, we were informed that the SEC had opened a
formal investigation into this matter and on the general topic
of the timing of stock option grants. On June 28, 2006, the
SEC issued subpoenas to the Company and to the Special
Committee, which had previously been formed on March 8,
2006, requesting documents related to the Companys stock
option grant practices and to the loan to Mr. Therrien.
On May 19, 2006, we received a grand jury subpoena from the
United States Attorney (the DOJ) for the Eastern
District of New York requesting documents relating to stock
option grants. Responsibility for the DOJs investigation
was subsequently assumed by the United States Attorney for the
District of Massachusetts. On June 22, 2006 the United
States Attorneys Office for the District of Massachusetts
issued a grand jury subpoena to us in connection with an
investigation by that office into the timing of stock option
grants by us and the loan to Mr. Therrien mentioned above.
25
The Company is cooperating fully with the investigations being
conducted by the SEC and the DOJ.
Private
Litigation
On May 22, 2006, a derivative action was filed nominally on
our behalf in the Superior Court for Middlesex County,
Massachusetts, captioned as Mollie Gedell, Derivatively on
Behalf of Nominal Defendant Brooks Automation, Inc. v. A.
Clinton Allen, et al. The Defendants
named in the complaint are: A. Clinton Allen, Director of the
Company; Roger D. Emerick, former Director of the Company;
Edward C. Grady, Director, President and CEO of the Company;
Amin J. Khoury, former Director of the Company; Joseph R.
Martin, Director of the Company; John K. McGillicuddy, Director
of the Company; and Robert J. Therrien, former Director,
President and CEO of the Company.
On May 26, 2006, a derivative action was filed in the
Superior Court for Middlesex County, Massachusetts nominally on
our behalf, captioned as Ralph Gorgone, Derivatively on Behalf
of Nominal Defendant Brooks Automation, Inc. v. Edward C.
Grady, et al. The Defendants named in the complaint
are: Mr. Grady; Mr. Allen; Mr. Emerick;
Mr. Khoury; Robert J. Lepofsky, Director of the Company;
Mr. Martin; Mr. McGillicuddy; Krishna G. Palepu,
Director of the Company; Alfred Woollacott, III, Director
of the Company; Mark S. Wrighton, Director of the Company; and
Marvin Schorr, Director Emeritus of the Company.
On August 4, 2006 the Superior Court for Middlesex County,
Massachusetts, entered an order consolidating the above state
derivative actions under docket number
06-1808 and
the caption In re Brooks Automation, Inc. Derivative
Litigation. On September 5, 2006, the Plaintiffs filed
a Consolidated Shareholder Derivative Complaint; the Defendants
named therein are: Mr. Allen, Mr. Martin,
Mr. Grady, Mr. McGillicuddy, Mr. Therrien,
Mr. Emerick, and Mr. Khoury; Robert W.
Woodbury, Jr., the Companys Chief Financial Officer;
Joseph Bellini, and Thomas S. Grilk, Secretary and General
Counsel of the Company, current Officers of the Company; Stanley
D. Piekos and Ellen B. Richstone, the Companys former
Chief Financial Officers; and David R. Beaulieu, Jeffrey A.
Cassis, Santo DiNaro, Peter Frasso, Robert A. McEachern,
Dr. Charles M. McKenna, James A. Pelusi, Michael W. Pippins
and Michael F. Werner, former Officers and employees of the
Company. The Consolidated Shareholder Derivative Complaint
alleges that certain current and former directors and officers
breached fiduciary duties owed to Brooks by backdating stock
option grants, issuing inaccurate financial results and false or
misleading public filings, and that Messrs. Therrien,
Emerick and Khoury breached their fiduciary duties, and
Mr. Therrien was unjustly enriched, as a result of the loan
to and stock option exercise by Mr. Therrien mentioned
above, and seeks, on our behalf, damages for breaches of
fiduciary duty and unjust enrichment, disgorgement to the
Company of all profits from allegedly backdated stock option
grants, equitable relief, and Plaintiffs costs and
disbursements, including attorneys fees, accountants
and experts fees, costs, and expenses. The Defendants have
served motions to dismiss the Consolidated Shareholder
Derivative Complaint.
On May 30, 2006, a derivative action was filed in the
United States District Court for the District of Massachusetts,
captioned as Mark Collins, Derivatively on Behalf of Nominal
Defendant Brooks Automation, Inc. v. Robert J. Therrien,
et al. The defendants in the action are:
Mr. Therrien; Mr. Allen; Mr. Emerick;
Mr. Grady; Mr. Khoury; Mr. Martin; and
Mr. McGillicuddy.
On June 7, 2006, a derivative action was filed in the
United States District Court for the District of Massachusetts,
captioned as City of Pontiac General Employees Retirement
System, Derivatively on Behalf of Brooks Automation,
Inc. v. Robert J. Therrien, et al. The
Defendants in this action are: Mr. Therrien;
Mr. Emerick; Mr. Khoury; Mr. Allen;
Mr. Grady; Mr. Lepofsky; Mr. Martin;
Mr. McGillicuddy; Mr. Palepu;
Mr. Woollacott, III; Mr. Wrighton; and
Mr. Schorr.
The District Court issued an Order consolidating the above
federal derivative actions on August 15, 2006, and a
Consolidated Verified Shareholder Derivative Complaint was filed
on October 6, 2006; the Defendants named therein are:
Mr. Allen, Mr. Grady, Mr. Lepofsky,
Mr. Martin, Mr. McGillicuddy, Mr. Palepu,
Mr. Schorr, Mr. Woollacott, Mr. Wrighton,
Mr. Woodbury, Mr. Therrien, Mr. Emerick,
Mr. Khoury, and Mr. Werner. The Consolidated Verified
Shareholder Derivative Complaint alleges violations of
Section 10(b) and
Rule 10b-5
of the Exchange act; Section 14(a) of the Exchange Act;
Section 20(a) of the Exchange Act; breach of fiduciary
duty; corporate waste; and unjust enrichment, and seeks, on
behalf of Brooks, damages, extraordinary equitable relief
including disgorgement and a constructive trust for
improvidently granted stock options or proceeds from alleged
26
insider trading by certain defendants, Plaintiffs costs
and disbursements including attorneys fees,
accountants and experts fees, costs and expenses.
The Defendants have filed motions to dismiss the Consolidated
Verified Shareholder Derivative Complaint and to Stay this
action pending the outcome of motions to dismiss in the state
derivative action described above.
On June 19, 2006, a putative class action was filed in the
United States District Court, District of Massachusetts,
captioned as Charles E. G. Leech Sr. v. Brooks Automation,
Inc., et al. The defendants in this action are: the
Company; Mr. Therrien; Ellen Richstone, the Companys
former Chief Financial Officer; Mr. Emerick;
Mr. Khoury; Robert W. Woodbury, Jr., the
Companys Chief Financial Officer; and Mr. Grady. The
complaint alleges violations of Section 10(b) of the
Exchange Act and
Rule 10b-5
against us and the individual defendants; Section 20(a) of
the Exchange Act against the individual defendants;
Section 11 of the Securities Act against us and
Messrs. Grady, Woodbury, Emerick, Khoury and Therrien;
Section 12 of the Securities Act against us and
Messrs. Grady, Woodbury, Emerick, Khoury and Therrien; and
Section 15 of the Securities Act against
Messrs. Grady, Woodbury, Emerick, Khoury and Therrien. The
complaint seeks, inter alia, damages, including interest,
and plaintiffs costs. The Defendants have filed motions to
dismiss the Leech complaint.
On July 19, 2006, a putative class action was filed in the
United States District Court for the District of Massachusetts,
captioned as James R. Shaw v. Brooks Automation,
Inc. et al.,
No. 06-11239-RWZ.
The Defendants in the case are the Company, Mr. Therrien,
Ms Richstone, Mr. Emerick, Mr. Khoury,
Mr. Woodbury, and Mr. Grady. As of this date, the
Company has not been served with the complaint. The complaint
alleges violations of Section 10(b) of the Exchange Act and
Rule 10b-5
against all defendants and violations of Section 20(a) of
the Exchange Act against all individual defendants. The
complaint seeks, inter alia, damages, including interest,
and plaintiffs costs. Competing plaintiffs and their
counsel have moved for consolidation with the Leech
action described above, and for appointment as lead counsel.
On August 22, 2006, an action captioned as Mark
Levy v. Robert J. Therrien and Brooks Automation, Inc.,
was filed in the United States District Court for the District
of Delaware, seeking recovery, on behalf of the Company, from
Mr. Therrien under Section 16(b) of the Securities
Exchange Act of 1934 for alleged short-swing profits
earned by Mr. Therrien due the loan and stock option
exercise in November 1999 referenced above, and a sale by
Mr. Therrien of Brooks stock in March 2000. The Complaint
seeks disgorgement of all profits earned by Mr. Therrien on
the transactions, attorneys fees and other expenses.
Defendants have filed motions to dismiss.
We are aware of additional proposed class actions, posted on the
websites of various law firms. We are not yet aware of the
filing of any such actions and have not been served with a
complaint or any other process in any of these matters.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
During the quarter ended September 30, 2006, no matters
were submitted to a vote of security holders through the
solicitation of proxies or otherwise.
27
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Our common stock is traded on the Nasdaq National Market under
the symbol BRKS. The following table sets forth, for
the periods indicated, the high and low close prices per share
of our common stock, as reported by the Nasdaq National Market:
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Fiscal year ended
September 30, 2006
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
13.74
|
|
|
$
|
11.70
|
|
Second quarter
|
|
|
17.65
|
|
|
|
12.72
|
|
Third quarter
|
|
|
14.85
|
|
|
|
11.00
|
|
Fourth quarter
|
|
|
14.14
|
|
|
|
10.61
|
|
Fiscal year ended
September 30, 2005
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
18.26
|
|
|
$
|
13.48
|
|
Second quarter
|
|
|
18.73
|
|
|
|
14.38
|
|
Third quarter
|
|
|
16.21
|
|
|
|
12.86
|
|
Fourth quarter
|
|
|
16.60
|
|
|
|
13.00
|
|
Number of
Holders
As of November 30, 2006, there were 1,262 holders on record
of our common stock.
Dividend
Policy
We have never declared or paid any cash dividends on our capital
stock. Our current policy is to retain all of our earnings to
finance future growth. In addition, we have never declared or
issued any stock dividends on our capital stock and do not plan
to issue any stock dividends in the foreseeable future.
Issuance
of Unregistered Common Stock
Not applicable.
Issuers
Purchases of Equity Securities
We did not repurchase any of our equity securities during the
fourth quarter of fiscal 2006.
28
|
|
Item 6.
|
Selected
Financial Data
|
The selected consolidated financial data set forth below should
be read in conjunction with our consolidated financial
statements and notes thereto and Managements
Discussion and Analysis of Financial Condition and Results of
Operations, appearing elsewhere in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006(4)(7)
|
|
|
2005(4)
|
|
|
2004(4)
|
|
|
2003(1)(2)(4)(5)
|
|
|
2002(3)(4)(6)
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
692,870
|
|
|
$
|
463,746
|
|
|
$
|
535,053
|
|
|
$
|
340,092
|
|
|
$
|
300,538
|
|
Gross profit
|
|
$
|
244,784
|
|
|
$
|
160,136
|
|
|
$
|
199,666
|
|
|
$
|
95,211
|
|
|
$
|
63,681
|
|
Income (loss) from continuing
operations before income taxes and minority interests
|
|
$
|
29,907
|
|
|
$
|
(2,751
|
)
|
|
$
|
32,398
|
|
|
$
|
(194,806
|
)
|
|
$
|
(637,491
|
)
|
Income (loss) from continuing
operations
|
|
$
|
25,841
|
|
|
$
|
(8,096
|
)
|
|
$
|
24,134
|
|
|
$
|
(199,926
|
)
|
|
$
|
(732,222
|
)
|
Net income (loss)
|
|
$
|
25,930
|
|
|
$
|
(11,612
|
)
|
|
$
|
14,659
|
|
|
$
|
(203,024
|
)
|
|
$
|
(738,637
|
)
|
Basic earnings (loss) from
continuing operations per share
|
|
$
|
0.36
|
|
|
$
|
(0.18
|
)
|
|
$
|
0.56
|
|
|
$
|
(5.44
|
)
|
|
$
|
(28.37
|
)
|
Diluted earnings (loss) from
continuing operations per share
|
|
$
|
0.36
|
|
|
$
|
(0.18
|
)
|
|
$
|
0.55
|
|
|
$
|
(5.44
|
)
|
|
$
|
(28.37
|
)
|
Shares used in computing basic
earnings (loss) per share
|
|
|
72,323
|
|
|
|
44,919
|
|
|
|
43,006
|
|
|
|
36,774
|
|
|
|
25,807
|
|
Shares used in computing diluted
earnings (loss) per share
|
|
|
72,533
|
|
|
|
44,919
|
|
|
|
43,573
|
|
|
|
36,774
|
|
|
|
25,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands)
|
|
|
Total assets
|
|
$
|
992,577
|
|
|
$
|
624,080
|
|
|
$
|
671,039
|
|
|
$
|
493,245
|
|
|
$
|
657,497
|
|
Working capital
|
|
$
|
252,633
|
|
|
$
|
168,231
|
|
|
$
|
294,137
|
|
|
$
|
135,156
|
|
|
$
|
176,338
|
|
Current portion of long-term debt
and other obligations
|
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
11
|
|
|
$
|
98
|
|
|
$
|
8
|
|
Subordinated notes due 2008
|
|
$
|
|
|
|
$
|
175,000
|
|
|
$
|
175,000
|
|
|
$
|
175,000
|
|
|
$
|
175,000
|
|
Other long-term debt (less current
portion)
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
14
|
|
|
$
|
25
|
|
|
$
|
177
|
|
Stockholders equity
|
|
$
|
799,134
|
|
|
$
|
309,835
|
|
|
$
|
312,895
|
|
|
$
|
162,830
|
|
|
$
|
308,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2006
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
127,175
|
|
|
$
|
169,177
|
|
|
$
|
186,195
|
|
|
$
|
210,323
|
|
Gross profit
|
|
$
|
36,934
|
|
|
$
|
59,740
|
|
|
$
|
71,483
|
|
|
$
|
76,627
|
|
Income (loss) from continuing
operations
|
|
$
|
(11,752
|
)
|
|
$
|
4,354
|
|
|
$
|
17,158
|
|
|
$
|
16,081
|
|
Basic earnings (loss) from
continuing operations per share
|
|
$
|
(0.18
|
)
|
|
$
|
0.06
|
|
|
$
|
0.23
|
|
|
$
|
0.22
|
|
Diluted earnings (loss) from
continuing operations per share
|
|
$
|
(0.18
|
)
|
|
$
|
0.06
|
|
|
$
|
0.23
|
|
|
$
|
0.22
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2005
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
117,233
|
|
|
$
|
129,454
|
|
|
$
|
113,760
|
|
|
$
|
103,299
|
|
Gross profit
|
|
$
|
41,086
|
|
|
$
|
43,297
|
|
|
$
|
39,523
|
|
|
$
|
36,230
|
|
Income (loss) from continuing
operations
|
|
$
|
(1,404
|
)
|
|
$
|
(274
|
)
|
|
$
|
1,260
|
|
|
$
|
(7,678
|
)
|
Basic earnings (loss) from
continuing operations per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.17
|
)
|
Diluted earnings (loss) from
continuing operations per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.17
|
)
|
|
|
|
(1) |
|
Amounts include results of operations of Microtool, Inc.
(acquired October 9, 2002) for the periods subsequent
to its acquisition. |
|
(2) |
|
Amounts include our share of the results of operations of Brooks
Switzerland in accordance with the equity method of accounting. |
|
(3) |
|
Amounts include results of operations of Hermos Informatik GmbH
(acquired July 3, 2002); PRI Automation, Inc. (acquired
May 14, 2002); Intelligent Automation Systems, Inc. and IAS
Products, Inc. (acquired February 15, 2002); Fab Air
Control (acquired December 15, 2001); the Automation
Systems Group of Zygo Corporation (acquired December 13,
2001); Tec-Sem A.G. (acquired October 9, 2001) and
General Precision, Inc. (acquired October 5, 2001) for
the periods subsequent to their respective acquisitions. |
|
(4) |
|
Amounts from continuing operations exclude results of operations
of the Specialty Equipment and Life Sciences division,
previously reported as the Companys Other
reportable segment, which was reclassified as a discontinued
operation in June 2005. |
|
(5) |
|
Amounts include $40.0 million for asset impairments. |
|
(6) |
|
Amounts include $474.4 million for asset impairments and
$106.7 million for deferred tax write-offs. |
|
(7) |
|
Amounts include results of operations of Helix Technology
Corporation (acquired October 26, 2005) and Synetics
Solutions Inc. (acquired June 30, 2006) for the
periods subsequent to their respective acquisitions. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Certain statements in this
Form 10-K
constitute forward-looking statements which involve
known risks, uncertainties and other factors which may cause the
actual results, our performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements such as
estimates of future revenue, gross margin, and expense levels as
well as the performance of the semiconductor industry as a
whole. Such factors include the Risk Factors set
forth in Part I, Item 1A. Precautionary statements
made herein should be read as being applicable to all related
forward-looking statements whenever they appear in this report.
Overview
We are a leading supplier of automation products and solutions
primarily serving the worldwide semiconductor market. We supply
hardware, software and services to both chip manufacturers and
original equipment manufacturers, or OEMs, who make
semiconductor device manufacturing equipment. We are a
technology and market leader with offerings ranging from
individual hardware and software modules to fully integrated
systems as well as services to install and support our products
world-wide. Although our core business addresses the
increasingly complex automation requirements of the global
semiconductor industry, we also provide automation solutions for
a number of related industries, including flat panel display
manufacturing, data storage and other complex manufacturing.
We operate in two segments: hardware and software.
The hardware segment provides a wide range of wafer handling
products, vacuum subsystems and wafer transport platforms for
use within the semiconductor process and metrology equipment.
Within the hardware
30
segment, there are four businesses consisting of automation
hardware products, vacuum products and subsystems,
customer-designed automation and the global customer service
organization. The automation hardware products, historically the
core products of Brooks, include wafer transfer robots and
platforms, or systems that operate in either vacuum or
atmospheric environments that are sold to equipment
manufacturers. The Company also provides hardware directly to
fabs including equipment for lithography that automate the
storage, inspection and transport of photomasks, or reticles.
Another line of business includes the vacuum products and
subsystems acquired from Helix that include vacuum technology
solutions such as cryogenic pumps for creating vacuum, products
for measuring vacuum, and thermal management products that are
used in manufacturing equipment for the semiconductor, data
storage and flat panel display industries. Additionally, the
Company leverages its domain knowledge and manufacturing
expertise to build customer-designed automation systems, or
contract automation systems, in a program designed to help
customers outsource their automation. This assembly and
manufacturing capability was a core competency of Synetics
Solutions, and these offerings have been combined under the line
of business managed by the former Synetics enterprise. The
primary customers for these solutions are manufacturers of
process equipment. Finally, the global customer service
offerings provide customers with support for all our hardware
offerings.
The software segment addresses the need for production
management systems driven by the extensive tracking and tracing
requirements of the semiconductor industry. At the core of these
production systems is the manufacturing execution system
(MES) that is primarily responsible for tracking the
movement of production wafers in a fab, and managing the data
and actions for every wafer, equipment, operator and other
resources in the fab. These mission-critical systems provide
real time information primarily to production operators,
supervisors and fab managers. We provide other important
software applications to meet the critical requirements of the
fab, such as real time dispatching and scheduling, equipment
communications, advanced process control, material control for
the AMHS, activity execution and control, automated maintenance
management of equipment, and other applications. Customers often
purchase more than one of these software products from Brooks
for a single fab, often driving the need for consulting and
integration services. Our software products enable semiconductor
manufacturers to increase their return on investment by
maximizing production efficiency, and may be sold as part of an
integrated solution or on a stand-alone basis. These software
products and services are also used in many similar
manufacturing industries as semiconductor, including flat panel
display, data storage, and electronic assembly.
We are currently focusing our major efforts in the following
aspects of our business:
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Implementing global low-cost sourcing and manufacturing
strategies, specifically in Mexico and Asia;
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Expanding our global customer service business;
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Sustaining our ability to meet our customers requirements
on a timely basis;
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Successfully operating our newly-formed joint venture in Japan
with Yaskawa;
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Continuing to integrate Helix and Synetics into our operations,
systems, processes and controls;
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Expanding our sales of equipment automation products to process
tool manufacturers that currently produce automation equipment
internally;
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Continuing to develop our customer designed automation
(CDA) business with process tool manufacturers;
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Greater expansion of our hardware products into the China market;
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Improving the efficiency of our internal information and
business systems, which could result in the upgrade or
replacement of certain applications; and
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Continuing to evaluate on an opportunistic basis whether new
acquisitions of or alliances with other companies would be
beneficial to our business and shareholders.
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31
In fiscal 2006, our total revenues increased 49.4% to
$692.9 million from the prior year compared to a 13.3%
decline in fiscal 2005. This increase is primarily due to the
additional revenues related to our acquisitions of Helix
Technology Corporation and Synetics Solutions Inc., along with
higher industry demand for semiconductor capital equipment in
fiscal 2006. Our revenue by segment for fiscal 2006 and 2005 is
as follows (in thousands):
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|
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For the Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Hardware
|
|
$
|
607,494
|
|
|
|
87.7
|
%
|
|
$
|
369,778
|
|
|
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79.7
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%
|
Software
|
|
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85,376
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|
|
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12.3
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%
|
|
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93,968
|
|
|
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20.3
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
692.870
|
|
|
|
100.0
|
%
|
|
$
|
463,746
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Our hardware segment revenues increased 64.3% from the prior
year to $607.5 million. This increase is primarily
attributable to the additional revenues related to our Helix and
Synetics acquisitions along with higher demand for semiconductor
capital equipment during fiscal year 2006. Our software segment
revenues decreased 9.1% from the prior year to
$85.4 million. The decrease is primarily attributable to
lower market demand for our software products. We expect fiscal
2007 total hardware revenues to increase over 2006 due to the
inclusion of Helix and Synetics for a full year, although there
are indications that demand for semiconductor capital equipment
may soften in the later half of fiscal 2007.
Gross margins increased to 35.3% for fiscal 2006 from 34.5% in
the prior year. The increase is primarily attributable to higher
overhead absorption due to higher sales volumes, improved
product mix and the result of various cost reduction measures.
We expect our gross margins to continue to increase in the near
term as a result of new product introductions and material cost
reduction initiatives.
We recorded income from continuing operations of
$25.8 million or $0.36 per diluted share in fiscal 2006
compared to a loss from continuing operations of
$8.1 million or $0.18 per diluted share in fiscal
2005. This improvement is the result of higher revenues and
gross margins, lower restructuring charges and higher interest
income. We generated $65.2 million of cash from operations
in fiscal year 2006, compared to a cash flow from operations of
$31.1 million in fiscal 2005. At September 30, 2006,
we had cash, cash equivalents and marketable securities
aggregating $191.4 million.
Recent
Developments
On July 11, 2005, we entered into an Agreement and Plan of
Merger (the Merger Agreement) with Helix Technology
Corporation (Helix), a Delaware corporation and Mt.
Hood Corporation (Mt. Hood), a newly-formed Delaware
corporation and a direct wholly-owned subsidiary of the Company.
This acquisition closed on October 26, 2005. Under the
terms of the Merger Agreement, Mt. Hood merged (the
Merger) with and into Helix, with Helix continuing
as the surviving corporation. Each share of Helix common stock,
par value $1.00 per share, other than shares held by Helix
as treasury stock and shares held by the Company or Mt. Hood,
was cancelled and extinguished and automatically converted into
1.11 (Exchange Ratio) shares of the Companys
common stock. In addition, we assumed all options then
outstanding under Helixs existing equity incentive plans,
each of which is now exercisable into a number of shares of the
Companys common stock (and at an exercise price) adjusted
to reflect the Exchange Ratio. The Helix acquisition is valued
at approximately $458.1 million, consisting of
29.0 million shares of common stock valued at
$444.6 million, the fair value of assumed Helix options of
$3.3 million, and cash of $10.2 million. This
transaction qualified as a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986. Helix
was a leader in the development, manufacture, and application of
innovative vacuum technology solutions for the semiconductor,
data storage, and flat panel display markets. The acquisition of
Helix enables us to better serve our current market, increase
our addressable market, reduce the volatility that both
businesses have historically faced and position us to enhance
our financial performance.
On May 8, 2006 we entered into an Agreement and Plan of
Merger (the Merger Agreement) with Synetics
Solutions Inc. (Synetics). We completed our
acquisition of Synetics from Yaskawa Electric Corporation
(Yaskawa), a corporation duly organized and existing
under the laws of Japan, through a merger that became effective
as of June 30, 2006. Synetics provides customized
manufacturing solutions for the North American
32
semiconductor equipment industry. The Synetics acquisition is
valued at $50.2 million consisting of a $28.6 million
cash payment to Yaskawa, repayment of outstanding debt of
$19.9 million and transaction costs of $1.7 million.
Also on May 8, 2006, we entered into Joint Venture
Agreement (the Agreement) with Yaskawa to form a
50/50 joint venture called Yaskawa Brooks Automation, Inc.(
YBA) to exclusively market and sell Yaskawas
semiconductor robotics products and Brooks automation
hardware products to semiconductor customers in Japan. This
Agreement was executed on June 30, 2006. YBA began
operations on September 21, 2006.
On November 3, 2006, we entered into a definitive agreement
to sell our Software Division to Applied Materials for
$125 million. We expect to close this transaction during
the second fiscal quarter of 2007. We are selling our software
division in order to focus on our core semiconductor-related
hardware businesses. We expect to operate in one segment,
hardware, in fiscal 2007. We expect to recognize a gain on
disposal of the software division and to reclassify this
division as discontinued operations in fiscal 2007.
Related
Parties
On June 11, 2001, we appointed Joseph R. Martin to our
Board of Directors. Mr. Martin served as a director of
Fairchild Semiconductor International, Inc.
(Fairchild), one of our customers, until May 3,
2006. Accordingly, Fairchild is considered a related party for
the period from June 11, 2001 through May 3, 2006.
Revenues from Fairchild from October 1, 2005 to
March 31, 2006 were approximately $205,000 and for the
years ended September 30, 2005 and 2004 were approximately
$319,000, and $409,000, respectively. The amounts due from
Fairchild included in accounts receivable at March 31, 2006
and September 30, 2005 were $40,000 and $33,000,
respectively.
Related party transactions and amounts included in accounts
receivable and revenue are on standard pricing and contractual
terms and manner of settlement for products and services of
similar types and at comparable volumes.
Critical
Accounting Policies and Estimates
The preparation of the Consolidated Financial Statements
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On
an ongoing basis, we evaluate our estimates, including those
related to bad debts, inventories, intangible assets, goodwill,
income taxes, warranty obligations, the adequacy of
restructuring reserves and contingencies. We base our estimates
on historical experience and on various other assumptions that
are believed to be reasonable under the circumstances, including
current and anticipated worldwide economic conditions both in
general and specifically in relation to the semiconductor
industry, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. As discussed
in the year over year comparisons below, actual results may
differ from these estimates under different assumptions or
conditions.
We believe the following critical accounting policies affect our
more significant judgments and estimates used in the preparation
of our Consolidated Financial Statements.
Revenues
Product revenues are associated with the sale of hardware
systems and components as well as software licenses. Service
revenues are associated with hardware-related field service,
training, software maintenance and software-related consulting
and integration services.
Revenue from product sales that do not include significant
customization is recorded upon delivery and transfer of risk of
loss to the customer provided there is evidence of an
arrangement, fees are fixed or determinable, collection of the
related receivable is reasonably assured and, if applicable,
customer acceptance criteria have been successfully
demonstrated. Customer acceptance provisions include final
testing and acceptance carried out prior to shipment. These
pre-shipment testing and acceptance procedures ensure that the
product meets the published specification requirements before
the product is shipped. In the limited situations where the
arrangement contains extended payment terms, revenue is
recognized as the payments become due. Shipping terms are
customarily FCA
33
shipping point. Amounts charged to customers for costs incurred
for shipping and handling are credited to cost of revenues where
the associated costs are charged. When significant on site
customer acceptance provisions are present in the arrangement,
revenue is recognized upon completion of customer acceptance
testing.
Revenue from the sale of
off-the-shelf
software licenses is recognized upon delivery to the customer
provided there is evidence of an arrangement, fees are fixed or
determinable, collection of the related receivable is probable,
and there are no unusual acceptance criteria or extended payment
terms. If the arrangement contains acceptance criteria or
testing, then revenue is recognized upon acceptance or the
successful completion of the testing. If the arrangement
contains extended payment terms, revenue is recognized as the
payments become due. Revenue related to post-contract support is
deferred and recognized ratably over the contract period.
For tailored software contracts, we provide significant
consulting services to tailor the software to the
customers environment. If we are able to reasonably
estimate the level of effort and related costs to complete the
contract, we recognize revenue using the
percentage-of-completion
method, which compares costs incurred to total estimated project
cost. Revisions in revenue and cost estimates are recorded in
the period in which the facts that require such revisions become
known. If our ability to complete the tailored software is
uncertain or if we cannot reasonably estimate the level of
effort and related costs, completed contract accounting is
applied. Losses, if any, are provided for in the period in which
such losses are first identified by management. Generally, the
terms of long-term contracts provide for progress billing based
on completion of certain phases of work. For maintenance
contracts, service revenue is deferred based on vendor specific
objective evidence of its fair value and is recognized ratably
over the term of the maintenance contract. Deferred revenue
primarily relates to services and maintenance agreements and
billings in excess of revenue recognized on long term contracts
accounted for using the
percentage-of-completion
method and contracts awaiting final customer acceptance.
In transactions that include multiple products
and/or
services, such as tailored software arrangements, described
above, or software sales with post-contract support, we allocate
the sales value among each of the elements based on their
relative fair values and recognize such revenue when each
element is delivered. If these relative fair values are not
known, the Company uses the residual method to recognize revenue
from arrangements with one or more elements to be delivered at a
future date, when evidence of the fair value of all undelivered
elements exists. Under the residual method, the fair value of
any the undelivered elements at the date of delivery, such as
post-contract support, are deferred and the remaining portion of
the total arrangement fee is recognized as revenue. The Company
determines fair value of undelivered services based on the
prices that are charged when the same element is sold separately
to customers.
Intangible
Assets and Goodwill
We have made a number of acquisitions in previous years, and as
a result, identified significant intangible assets and generated
significant goodwill. Intangible assets are valued based on
estimates of future cash flows and amortized over their
estimated useful life. Goodwill is subject to annual impairment
testing as well as testing upon the occurrence of any event that
indicates a potential impairment. Intangible assets and other
long-lived assets are subject to an impairment test if there is
an indicator of impairment. The carrying value and ultimate
realization of these assets is dependent upon estimates of
future earnings and benefits that we expect to generate from
their use. If our expectations of future results and cash flows
are significantly diminished, intangible assets and goodwill may
be impaired and the resulting charge to operations may be
material. When we determine that the carrying value of
intangibles or other long-lived assets may not be recoverable
based upon the existence of one or more indicators of
impairment, we use the projected undiscounted cash flow method
to determine whether an impairment exists, and then measure the
impairment using discounted cash flows. For goodwill, we compare
the fair value of our reporting units by measuring discounted
cash flows to the book value of the reporting units and measure
impairment, if any, as the difference between the resulting
implied fair value of goodwill and the recorded book value of
the goodwill.
The estimation of useful lives and expected cash flows require
us to make significant judgments regarding future periods that
are subject to some factors outside of our control. Changes in
these estimates can result in significant revisions to the
carrying value of these assets and may result in material
charges to the results of operations.
34
We have elected to perform our annual goodwill impairment
testing as required under FAS 142 on September 30 of
each fiscal year. During this process estimates of revenue and
expense were developed for each of our segments and as a whole
based on internal as well as external market forecasts. Our
analyses indicated no impairment of the goodwill in fiscal 2006
or fiscal 2005. In fiscal 2004, we determined that the implied
fair value of the goodwill associated with the SELS division was
$7.4 million less than its book value and recorded a charge
to write-down the value of this goodwill in the fourth quarter.
This charge has been recorded as a component of the loss from
discontinued operations of $9.5 million for fiscal year
2004.
Accounts
Receivable
We record trade accounts receivable at the invoiced amount.
Trade accounts receivables do not bear interest. The allowance
for doubtful accounts is the Companys best estimate of the
amount of probable credit losses in its existing accounts
receivable. The Company determines the allowance based on
historical write-off experience by customer. The Company reviews
its allowance for doubtful accounts quarterly. Past due balances
over 90 days and over a specified amount are reviewed
individually for collectibility. All other balances are reviewed
on a pooled basis by type of receivable. Account balances are
charged off against the allowance when the Company feels it is
probable the receivable will not be recovered. The Company does
not have any off-balance-sheet credit exposure related to its
customers.
Warranty
We provide for the estimated cost of product warranties at the
time revenue is recognized. While we engage in extensive product
quality programs and processes, including actively monitoring
and evaluating the quality of our component suppliers, our
warranty obligation is estimated by assessing product failure
rates and material usage and service delivery costs incurred in
correcting a product failure. Should actual product failure
rates, material usage or service delivery costs differ from our
estimates, revisions to the estimated warranty liability would
be required and may result in additional benefits or charges to
operations.
Inventory
We provide reserves for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory
and the estimated market value based upon assumptions about
future demand and market conditions. We fully reserve for
inventories and noncancelable purchase orders for inventory
deemed obsolete. We perform periodic reviews of all inventory
items to identify excess inventories on hand by comparing
on-hand balances to anticipated usage using recent historical
activity as well as anticipated or forecasted demand, based upon
sales and marketing inputs through our planning systems. If
estimates of demand diminish further or actual market conditions
are less favorable than those projected by management,
additional inventory write-downs may be required.
Deferred
Taxes
We record a valuation allowance to reduce our deferred tax
assets to the amount that is more likely than not to be
realized. We have considered future taxable income and ongoing
prudent and feasible tax planning strategies in assessing the
need for the valuation allowance. In the event we determine that
we would be able to realize our deferred tax assets in excess of
their net recorded amount, an adjustment to the deferred tax
asset would increase income in the period such determination was
made. Likewise, should we subsequently determine that we would
not be able to realize all or part of our net deferred tax
assets in the future, an adjustment to the deferred tax assets
would be charged to income in the period such determination was
made.
Stock-Based
Compensation
Prior to October 1, 2005, our employee stock compensation
plans were accounted for in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and related
interpretations. Under this method, no compensation expense was
recognized as long as the exercise price equaled or exceeded the
market price of the underlying stock on the measurement date of
the grant. The Company elected
35
the disclosure-only alternative permitted under
SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS 123), as amended by
SFAS No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure
(SFAS 148), for fixed stock-based awards to employees.
On December 23, 2004, the Company accelerated the vesting
of certain unvested stock options awarded to employees, officers
and other eligible participants under the Companys various
stock option plans, other than its 1993 Non-Employee Director
Stock Option Plan. As such, the Company fully vested options to
purchase 1,229,239 shares of the Companys common
stock with exercise prices greater than or equal to
$24.00 per share. The acceleration of the vesting of these
options resulted in a charge based on generally accepted
accounting principles of approximately $1.0 million. We
took this action because it produced a more favorable impact on
our results from operations in light of the effective date of
SFAS 123R, which took place in our first fiscal quarter of
2006.
As of October 1, 2005, the Company adopted SFAS 123R
using the modified prospective method, which requires
measurement of compensation cost for all stock awards at fair
value on date of grant and recognition of compensation over the
service period for awards expected to vest. The fair value of
restricted stock is determined based on the number of shares
granted and the excess of the quoted price of the Companys
common stock over the exercise price of the restricted stock,
and the fair value of stock options is determined using the
Black-Scholes valuation model, which is consistent with our
valuation techniques previously utilized for options in footnote
disclosures required under SFAS 123, as amended by
SFAS 148. Such value is recognized as expense over the
service period, net of estimated forfeitures. The estimation of
stock awards that will ultimately vest requires significant
judgment. We consider many factors when estimating expected
forfeitures, including types of awards, employee class, and
historical experience. Actual results, and future changes in
estimates, may differ substantially from our current estimates.
Prior periods have not been restated to incorporate the
stock-based compensation charge.
Year
Ended September 30, 2006, Compared to Year Ended
September 30, 2005
Revenues
We reported revenues of $692.9 million for the year ended
September 30, 2006, compared to $463.7 million in the
previous year, a 49.4% increase. The increase reflects the
additional revenues of $183.3 million and
$23.7 million related to the Helix and Synetics
acquisitions respectively, along with higher revenues related to
our legacy Brooks hardware segment of $30.8 million due to
higher demand for semiconductor capital equipment experienced in
fiscal 2006, offset by lower revenues from our software segment
of $8.6 million. The decrease in our software revenues is
reflective of reduced demand for software products and tailored
software projects from the prior year.
Our hardware segment reported revenues of $607.5 million in
the year ended September 30, 2006, an increase of 64.3%
from the prior year. This increase reflects the additional
revenues of $183.3 million and $23.7 million related
to the Helix and Synetics acquisitions respectively, along with
higher revenues related to our legacy Brooks hardware segment of
$30.8 million due to higher demand for semiconductor
capital equipment experienced in fiscal 2006.
Our software segment reported revenues of $85.4 million, a
9.1% decrease from $94.0 million in the prior year. The
decrease is primarily attributable to lower software license
sales of $2.6 million driven by reduced market demand,
along with lower revenues from tailored software services
project of $6.7 million, offset by higher revenues of
$0.7 million from software maintenance contracts.
Product revenues increased $176.2 million, or 52.1%, to
$514.3 million, in the year ended September 30, 2006,
from $338.1 million in the previous year. This increase is
attributable to additional revenues of $133.1 million and
$22.7 million related to the Helix and Synetics
acquisitions respectively, along with higher revenues of legacy
Brooks hardware of $23.0 million due to increased demand
for semiconductor capital equipment in fiscal 2006, offset by
lower software license revenues of $2.6 million reflective
of industry trends of decreased demand for software products in
fiscal 2006. Product revenues associated with our hardware
segment increased by 57.7% from fiscal 2005 levels, while
product revenues from our software segment decreased by 9.2%.
Service revenues
36
increased $52.9 million, or 42.1%, to $178.6 million.
This increase is attributable to additional revenues of
$50.2 million and $1.0 million related to the Helix
and Synetics acquisitions respectively, along with higher
revenues of legacy Brooks hardware services of $7.7 million
due to higher demand for spares and additional revenues from new
service contracts, offset by lower software services revenues of
$6.0 million primarily due to reduced activity on tailored
software projects.
Revenues outside the United States were $283.3 million, or
40.9% of total revenues, and $223.1 million, or 48.1% of
total revenues, in the years ended September 30, 2006 and
2005, respectively. We expect that foreign revenues will
continue to account for a significant portion of total revenues.
Deferred revenue of $26.1 million at September 30,
2006 consisted of $13.2 million related to deferred
maintenance contracts and $12.9 million related to revenues
deferred for
percentage-of-completion
method arrangements and contracts awaiting final customer
acceptance.
Gross
Margin
Gross margin increased to $244.8 million or 35.3% for the
year ended September 30, 2006, compared to
$160.1 million or 34.5% for the previous year. This overall
increase in gross margin reflects the additional gross margin
from the Helix acquisition of $55.8 million, plus the
additional gross margin from the Synetics acquisition of
$4.2 million, plus higher gross margin of
$26.9 million associated with the legacy Brooks hardware
segment from higher revenues, better overhead absorption and
improved product mix, offset by reduced gross margin of
$2.2 million associated with the legacy Brooks software
segment from lower revenues. The overall increase in the gross
margin percentage reflects the impact of cost reduction
initiatives, favorable product mix, and greater overhead
absorption associated with the legacy Brooks hardware and
software businesses along with slightly higher margins
associated with the Helix business, offset by the lower margins
associated with Synetics business as well as the write-off of
the inventory
step-up
totaling $11.6 million associated with Helix and Synetics
acquisition and the amortization of completed technology
associated with these acquisitions totaling $8.1 million in
fiscal 2006.
Our hardware segment gross margin increased to
$186.7 million or 30.7% in the year ended
September 30, 2006, from $99.8 million or 27.0% in the
prior year. This increase reflects the additional gross margin
of $55.8 million related to the Helix acquisition,
$4.2 million of additional gross margin related to the
Synetics acquisition, along with higher margin on higher
revenues from legacy Brooks hardware. The additional gross
margin related to the Helix acquisition is net of a
$11.2 million charge to write-off the
step-up in
inventory associated with the acquisition, a charge of
$8.0 million for the amortization of completed technology
acquired in the Helix transaction, and $1.3 million of
additional costs incurred to bring our new Mexico manufacturing
operations on line. The additional gross margin related to the
Synetics acquisition is net of a $0.4 million charge to
write-off the
step-up in
inventory associated with the acquisition, and a charge of
$0.2 million for the amortization of completed technology
acquired in the Synetics transaction. Our software
segments gross margin for the year ended
September 30, 2006, decreased to $58.1 million or
68.1%, compared to $60.4 million or 64.2% in the prior
year. The decrease in gross margin is primarily attributable to
lower software license sales, offset by reduced costs realized
by our cost reduction program.
Gross margin on product revenues was $168.7 million or
32.8% for the year ended September 30, 2006, compared to
$99.0 million or 29.3% for the prior year. The increase in
product margins is primarily attributable to additional margin
of $36.8 million related to the Helix acquisition, and
$3.9 million of additional margin associated with the
Synetics acquisition, along with higher margin from the legacy
Brooks hardware products of $30.6 million, offset by lower
margin from software products of $1.6 million.
Gross margin on service revenues was $76.1 million or 42.6%
for the year ended September 30, 2006, compared to
$61.1 million or 48.6% in the previous year. The increase
is primarily attributable to incremental gross profit of
$19.0 million, or 37.8%, from Helix customer support
services, additional gross margin of $0.3 million from
Synetics customer support services, offset by lower margin from
legacy Brooks hardware-related services of $3.7 million and
lower profit of $0.6 million on software-related services.
37
Research
and Development
Research and development expenses for the year ended
September 30, 2006, were $70.7 million, an increase of
$7.6 million, compared to $63.1 million in the
previous year. Research and development expenses decreased as a
percentage of revenues, to 10.2%, from 13.6% in the prior year.
The increase in absolute spending is primarily attributable to
the additional spending of $9.3 million and
$0.9 million related to the Helix and Synetics acquisition
respectively, offset by lower spending in our legacy Brooks
hardware and software businesses. The decrease in absolute
legacy Brooks spending and the overall decrease in R&D
spending as a percentage of revenue is the result of our
continued efforts to control costs and focus our development
activities.
Selling,
General and Administrative
Selling, general and administrative expenses were
$141.0 million for the year ended September 30, 2006,
an increase of $56.2 million, compared to
$84.8 million in the prior year. Selling, general and
administrative expenses increased as a percentage of revenues,
to 20.4% in the year ended September 30, 2006, from 18.3%
in the previous year. The increase in absolute spending is
primarily attributable to the additional spending of
$30.3 million and $2.0 million related to the Helix
and Synetics acquisitions respectively, additional amortization
of various intangible assets of $3.8 million and
$0.4 million related to the Helix and Synetics acquisitions
respectively, higher management incentive costs of
$7.4 million, higher legal expenses of $2.6 million
mostly associated with the ITI and Blueshift litigation matters,
$4.8 million of additional costs incurred to conduct our
review of prior years stock option compensation, and the
$1.3 million write-off of the remaining depreciation of a
sales management application recorded in the quarter ended
December 31, 2005 which was phased out of use.
Restructuring
and Acquisition-related Charges
We recorded a charge to operations of $5.3 million in the
year ended September 30, 2006. This charge, which consists
of $2.0 million of excess facilities charges primarily
related to a vacant facility in Billerica Massachusetts due to a
longer period than initially estimated to
sub-lease
the facility, $2.4 million of severance costs associated
with the termination of approximately 40 legacy Brooks employees
worldwide in sales, service, operations and administrative
functions, whose positions were made redundant as a result of
the Helix acquisition and further downsizing in our software
segment, and $1.8 million for retention bonuses earned in
the period by employees who have been notified of their
termination in the current and prior periods, offset by the
$0.9 million reversal of previously accrued termination
costs to employees who will no longer be terminated or whose
termination was settled at a reduced cost. The accruals for
workforce reductions are expected to be paid over the next
twelve months. We estimate that salary and benefit savings as a
result of these actions will be approximately $4.3 million
annually. The impact of these cost reductions on our liquidity
is not significant, as these cost savings are expected to yield
actual cash savings within twelve months.
We recorded a charge to continuing operations of
$16.5 million in the year ended September 30, 2005, of
which $13.3 million related to workforce reductions of
approximately 270 employees worldwide and $3.2 million to
excess facilities charges. Workforce reduction charges included
$4.3 million for headcount reductions of approximately 100
employees associated with our software segment,
$3.6 million for reductions of approximately 65 employees
in our Jena, Germany facility and $5.4 million related to
various other actions undertaken in fiscal 2005. Excess
facilities charges of $3.2 million consisted of excess
facilities identified in fiscal 2005 that were recorded to
recognize the expected amount of the remaining lease
obligations. Of the $3.2 million of facilities charges,
$1.5 million represents an additional accrual on a previous
vacated facility due to a longer period than initially estimated
to sub-lease
the facility. This revision, including lower estimates of
expected
sub-rental
income over the remainder of the lease terms, was based on
managements evaluation of the rental space available. The
balance of these excess facilities charges primarily related to
excess and abandoned facilities in Toronto Canada, Jena Germany,
Austin Texas, and Livingston Scotland.
We also recorded a charge of $1.0 million in fiscal year
2005 for workforce reductions of approximately 25 employees
related to our discontinued SELS division, which is included in
the loss from discontinued operations.
38
Interest
Income and Expense
Interest income increased by $4.4 million, to
$13.7 million, in the year ended September 30, 2006,
from $9.3 million the previous year. This increase is due
primarily to higher average cash balances in fiscal 2006
available for investment. We recorded interest expense of
$9.4 million in fiscal year 2006 compared to
$9.5 million in the previous year. This expense primarily
relates to the 4.75% Convertible Subordinated Notes which
were paid off in the quarter ended September 30, 2006.
Interest expense of $9.4 million in fiscal year 2006
includes the write-off of the balance of unamortized debt
issuance costs of $1.6 million recorded in the fourth
quarter.
Equity
in Earnings of Ulvac Cryogenics, Inc
We participate in a joint venture, ULVAC Cryogenics, Inc., or
UCI, with ULVAC Corporation of Chigasaki, Japan, which was part
of the acquired operations of Helix in October 2005. Income
associated with our 50% interest in UCI was $1.0 million in
the year ended September 30, 2006.
Other
(Income) Expense
Other expense, net of $3.2 million for the year ended
September 30, 2006 consisted of the accrual of
$5.0 million related to various legal contingencies and
foreign exchanges losses of $0.5 million, offset by the
receipt of $2.0 million of principal repayment on a note
that had been previously written off, and a gain of
$0.3 million on the sale of other assets. Other income, net
of $1.8 million for the year ended September 30, 2005
consisted primarily of the receipt of principal repayments on a
note that had been previously written off, foreign exchange
gains, and gain on the sales of other assets.
Income
Tax Provision
We recorded an income tax provision of $4.7 million in the
year ended September 30, 2006 and an income tax provision
of $5.2 million in the year ended September 30, 2005.
The tax provision recorded in fiscal 2006 and 2005 is
attributable to foreign income and withholding taxes. We
continued to provide a full valuation allowance for our net
deferred tax assets at September 30, 2006 and 2005, as we
believe it is more likely than not that the future tax benefits
from accumulated net operating losses and deferred taxes will
not be realized. However, it is possible that the more
likely than not criterion could be met in fiscal 2007 or a
future period, which could result in the reversal of a
significant portion or all of the valuation allowance, which, at
that time, would be recorded as a tax benefit in the
consolidated statements of operations.
We are subject to income taxes in various jurisdictions.
Significant judgment is required in determining the world-wide
provision for income taxes. While it is often difficult to
predict the final outcome or the timing of resolution of any
particular tax matter, we believe that the tax reserves reflect
the probable outcome of known contingencies. Tax reserves
established include, but are not limited to, business
combinations, transfer pricing, withholding taxes, and various
state and foreign audit matters, some of which may be resolved
in the near future resulting in an adjustment to the reserve.
Discontinued
Operations
We recorded income from operations for our discontinued SELS
business of $0.1 million for the year ended
September 30, 2006, compared to a loss of $3.5 million
in the previous year. The income in fiscal year 2006 relates to
maintenance revenues earned during the year that had previously
been deferred, while the loss in fiscal year 2005 reflects the
winding down of this business.
Year
Ended September 30, 2005, Compared to Year Ended
September 30, 2004
Revenues
We reported revenues of $463.7 million for the year ended
September 30, 2005, compared to $535.1 million in the
previous year, a 13.3% decrease. The decrease is consistent with
and reflective of the lower demand for semiconductor capital
equipment experienced in fiscal 2005.
39
Our hardware segment reported revenues of $369.8 million in
the year ended September 30, 2005, a decrease of 11.0% from
the prior year. This decrease reflects the lower demand for
semiconductor capital equipment during fiscal year 2005.
Our software segment reported revenues of $94.0 million, a
21.4% decrease from $119.6 million in the prior year. The
decrease is primarily attributable to lower software license
sales driven by reduced market demand. Included in the
March 31, 2004 quarter we recognized $17.3 million of
revenue on a European software services project which had been
accounted for on the completed contract basis. Excluding the
impact of this contract for fiscal year 2004, software revenues
decreased by $8.3 million or 8.1%. A significant portion of
revenue for the software segment relates to maintenance
contracts. Maintenance revenues are only slightly affected by an
economic downturn, as customers typically continue to use
previously purchased software products and renew related
maintenance arrangements.
Product revenues decreased $64.2 million, or 16.0%, to
$338.1 million, in the year ended September 30, 2005,
from $402.3 million in the previous year. This decrease is
attributable to reduced demand for our hardware products and
software license revenues reflective of industry trends of
decreased demand for semiconductor capital equipment in fiscal
2005. Product revenues associated with our hardware segment
decreased by 13.2% from fiscal 2004 levels, while product
revenues from our software segment decreased by 37.6%. Service
revenues decreased $7.1 million, or 5.4%, to
$125.7 million. This decrease is primarily attributable to
the completion and acceptance by the customer of a major
European software project for approximately $17.3 million
in the second quarter of fiscal 2004.
Revenues outside the United States were $223.1 million, or
48.1% of total revenues, and $262.4 million, or 49.0% of
total revenues, in the years ended September 30, 2005 and
2004, respectively.
Deferred revenue of $22.1 million at September 30,
2005 consisted of $11.9 million related to deferred
maintenance contracts and $10.2 million related to revenues
deferred for
percentage-of-completion
method arrangements and contracts awaiting final customer
acceptance.
Gross
Margin
Gross margin decreased to $160.1 million or 34.5% for the
year ended September 30, 2005, compared to
$199.7 million or 37.3% for the previous year. Our hardware
segment gross margin decreased to $99.8 million or 27.0% in
the year ended September 30, 2005, from $130.1 million
or 31.3% in the prior year. The decrease is primarily
attributable to reduced overhead absorption due to reduced sales
volumes. Our software segments gross margin for the year
ended September 30, 2005, decreased to $60.4 million
or 64.2%, compared to $69.5 million or 58.2% in the prior
year. The decrease in gross margin is primarily attributable to
lower software license sales. The increase in the gross margin
as a percentage of revenue primarily reflects the impact of
lower gross margins realized on the $17.3 million of
software project revenue recognized upon completion and
acceptance by the customer in the second quarter of fiscal 2004.
Gross margin on product revenues was $99.0 million or 29.3%
for the year ended September 30, 2005, compared to
$157.4 million or 39.1% for the prior year. The decrease in
product margins is primarily attributable to reduced overhead
absorption due to reduced sales volumes.
Gross margin on service revenues was $61.1 million or 48.6%
for the year ended September 30, 2005, compared to
$42.3 million or 31.9% in the previous year. The increase
is primarily the result of the higher margins on hardware
segment services coupled with the impact of lower gross margins
realized on the $17.3 million software project revenue
discussed above.
Research
and Development
Research and development expenses for the year ended
September 30, 2005, were $63.1 million, a decrease of
$3.2 million, compared to $66.3 million in the
previous year. Research and development expenses increased as a
percentage of revenues, to 13.6%, from 12.4% in the prior year.
The decrease in absolute spending is primarily the result of our
cost reduction actions, while the increase as a percentage of
revenue reflects the lower revenue levels against which these
costs were measured.
40
Selling,
General and Administrative
Selling, general and administrative expenses were
$84.8 million for the year ended September 30, 2005, a
decrease of $5.4 million, compared to $90.2 million in
the prior year. Selling, general and administrative expenses
increased as a percentage of revenues, to 18.3% in the year
ended September 30, 2005, from 16.9% in the previous year.
The decrease in absolute spending is primarily due to lower
expenses for incentive compensation plans of approximately
$5.2 million, while the increase as a percentage of revenue
reflects the lower revenue levels against which these costs were
measured.
Restructuring
and Acquisition-related Charges
We recorded a charge to continuing operations of
$16.5 million in the year ended September 30, 2005, of
which $13.3 million related to workforce reductions of
approximately 270 employees worldwide and $3.2 million to
excess facilities charges. Workforce reduction charges included
$4.3 million for headcount reductions of approximately 100
employees associated with our software segment,
$3.6 million for reductions of approximately 65 employees
in our Jena, Germany facility and $5.4 million related to
various other actions undertaken in fiscal 2005. Excess
facilities charges of $3.2 million consisted of excess
facilities identified in fiscal 2005 that were recorded to
recognize the expected amount of the remaining lease
obligations. These costs were estimated from the time when the
space is vacant; costs incurred prior to vacating the facilities
were charged to operations. Of the $3.2 million of
facilities charges, $1.5 million represents an additional
accrual on a previous vacated facility due to a longer period
than initially estimated to
sub-lease
the facility. This revision, including lower estimates of
expected
sub-rental
income over the remainder of the lease terms, are based on
managements evaluation of the rental space available. The
balance of these excess facilities charges primarily relates to
excess and abandoned facilities in Toronto Canada, Jena Germany,
Austin Texas, and Livingston Scotland.
We also recorded a charge of $1.0 million in fiscal year
2005 for workforce reductions of approximately 25 employees
related to our discontinued SELS division, which is included in
the loss from discontinued operations.
We recorded a charge to continuing operations of
$5.4 million in the year ended September 30, 2004, of
which $0.1 million related to acquisitions and
$5.3 million to restructuring costs. The $0.1 million
related to acquisitions is comprised of $0.1 million of
legal and consulting costs to integrate and consolidate acquired
entities into our existing entities. The $5.3 million of
restructuring costs consisted of $3.9 million related to
workforce reductions of approximately 60 employees world wide,
across all functions of the business and $1.4 million
related to excess facilities. Excess facilities charges of
$1.4 million consisted of $0.2 million for excess
facilities identified in fiscal 2004 that we recorded to
recognize the amount of remaining lease obligations. These costs
have been estimated from the time when the space is vacant, and
there are no plans to utilize the facility. Costs incurred prior
to vacating the facilities were charged to operations. Final
exit costs for facilities abandoned in previous restructurings
amounted to $0.7 million. The remaining $0.5 million
represents a reevaluation of the assumptions used in determining
the fair value of certain lease obligations related to
facilities abandoned in a previous restructuring.
Interest
Income and Expense
Interest income increased by $4.3 million, to
$9.3 million, in the year ended September 30, 2005,
from $5.0 million the previous year. This increase is due
primarily to higher cash balances available for investment.
Interest expense of $9.5 million in each of the years ended
September 30, 2005 and 2004 relates primarily to the
4.75% Convertible Subordinated Notes.
Other
(Income) Expense
Other income, net of $1.8 million for the year ended
September 30, 2005 consisted of the receipt of principal
repayments on a note that had been previously written off,
foreign exchange gains, and gains on the sales of other assets.
Other expense, net of $0.9 million for the year ended
September 30, 2004 consisted primarily of the settlement of
an arbitration proceeding in Israel of $0.7 million and
realized losses on foreign currency transactions during the year.
41
Income
Tax Provision
We recorded an income tax provision of $5.2 million in the
year ended September 30, 2005 and an income tax provision
of $8.1 million in the year ended September 30, 2004.
The tax provision recorded in fiscal 2005 and 2004 is
attributable to foreign income and withholding taxes. We
continued to provide a full valuation allowance for our net
deferred tax assets at September 30, 2005 and 2004, as we
believe it is more likely than not that the future tax benefits
from accumulated net operating losses and deferred taxes will
not be realized. If we generate future taxable income against
which these tax attributes may be applied, some portion or all
of the valuation allowance would be reversed and a corresponding
increase in net income would be reported in future periods.
Discontinued
Operations
We recorded a loss from operations for our discontinued SELS
business of $3.5 million for the year ended
September 30, 2005, compared to a loss of $9.5 million
in the previous year. The reduced loss reflects the winding down
of this business in fiscal year 2005, and the $7.4 million
goodwill impairment charge recorded in fiscal year 2004 as
previously discussed in Intangible Assets and
Goodwill.
Liquidity
and Capital Resources
Our business is significantly dependent on capital expenditures
by semiconductor manufacturers and OEMs that are, in turn,
dependent on the current and anticipated market demand for
semiconductors. Demand for semiconductors is cyclical and has
historically experienced periodic downturns. In response to
these downturns, we have implemented cost reduction programs
aimed at aligning our ongoing operating costs with our currently
expected revenues over the near term. These cost management
initiatives have included consolidating facilities, reductions
to headcount, salary and wage reductions and reduced spending.
The cyclical nature of the industry make estimates of future
revenues, results of revenues, results of operations and net
cash flows inherently uncertain.
On May 23, 2001, we completed the private placement of
$175.0 million aggregate principal amount of
4.75% Convertible Subordinated Notes due in 2008. Interest
on the notes was paid on June 1 and December 1 of each
year. The notes were scheduled to mature on June 1, 2008.
We did not file our quarterly report on
Form 10-Q
for the period ended March 31, 2006 by the prescribed due
date. As a result of this delay, we were not in compliance with
our obligation under Section 6.2 of the indenture with
respect to our 4.75% Convertible Subordinated Notes due
2008 to file with the SEC all reports and other information and
documents which we are required to file with the SEC pursuant to
Sections 13 or 15(d) of the Securities Exchange Act of
1934. On May 15, 2006, we received a notice from holders of
more than 25% in aggregate principal amount of notes outstanding
that we were in default of Section 6.2 of the indenture
based on our failure to file our
Form 10-Q.
On Friday July 14, 2006, we received a further notice from
holders of more than 25% of the aggregate outstanding principal
amount of the notes accelerating our obligation to repay the
unpaid principal on the notes because our Report on
Form 10-Q
for the quarter ended March 31, 2006 had not yet been
filed. On Monday, July 17, 2006, we paid the outstanding
$175.0 million principal balance to the trustee and
subsequently paid all accrued interest. The notes are now
retired, having been paid in full.
At September 30, 2006, we had cash, cash equivalents and
marketable securities aggregating $191.4 million. This
amount was comprised of $115.8 million of cash and cash
equivalents, $68.3 million of investments in short-term
marketable securities and $7.3 million of investments in
long-term marketable securities.
At September 30, 2005, we had cash, cash equivalents and
marketable securities aggregating $357.0 million. This
amount was comprised of $202.5 million of cash and cash
equivalents, $121.6 million of investments in short-term
marketable securities and $32.9 million of investments in
long-term marketable securities.
Cash and cash equivalents were $115.8 million at
September 30, 2006, a decrease of $86.7 million from
September 30, 2005. This decrease in cash and cash
equivalents was primarily due to the debt repayment of
$175.0 million, the net acquisitions of Helix and Synetics
of $41.4 million and the $18.0 million used for
capital additions, partially offset by cash provided by
operations of $65.2 million, the net sales/maturities of
marketable securities of $83.1 million and
$3.7 million of net proceeds from the issuance of common
stock.
42
Cash provided by operations was $65.2 million for the year
ended September 30, 2006, and was primarily attributable to
our net income of $25.9 million, adjustments for non-cash
depreciation and amortization of $31.7 million,
compensation expense related to common stock and options of
$8.3 million and changes in our net working capital of
$1.2 million, partially offset by discount of marketable
securities of $3.0 million. The $1.2 million increase
in working capital was primarily the result of increased
accounts payable levels of $22.5 million primarily as a
result of higher inventory purchases, and increased accrued
compensation and benefits of $9.6 million, primarily
associated with variable compensation plans. Offsetting changes
in working capital included increased accounts receivable
balances of $20.5 million and net cash outlays of
$10.4 million of restructuring-related spending. The
increase in accounts receivable is a result of our increased
level of business.
Cash provided by investing activities was $19.1 million for
the year ended September 30, 2006, and is principally
comprised of net sales/maturities of marketable securities of
$83.1 million, offset by the net acquisitions of Helix and
Synetics of $41.4 million and $18.0 million used for
capital additions.
Cash used in financing activities was $171.4 million for
the year ended September 30, 2006 from the debt repayment
of $175.0 million partially offset by $3.6 million due
to the issuance of stock under our employee stock purchase plan
and the exercise of options to purchase our common stock.
While we have no significant capital commitments, as we expand
our product offerings, we anticipate that we will continue to
make capital expenditures to support our business and improve
our computer systems infrastructure. We may also use our
resources to acquire companies, technologies or products that
complement our business.
At September 30, 2006, we had approximately
$0.7 million of letters of credit outstanding.
Our contractual obligations consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
One to
|
|
|
Four to
|
|
|
|
|
|
|
Total
|
|
|
One Year
|
|
|
Three Years
|
|
|
Five Years
|
|
|
Thereafter
|
|
|
Contractual obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
continuing
|
|
$
|
36,766
|
|
|
$
|
7,431
|
|
|
$
|
15,987
|
|
|
$
|
6,059
|
|
|
$
|
7,289
|
|
Operating leases
exited facilities
|
|
|
25,330
|
|
|
|
5,180
|
|
|
|
15,486
|
|
|
|
4,664
|
|
|
|
|
|
Purchase commitments
|
|
|
99,427
|
|
|
|
99,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
161,523
|
|
|
$
|
112,038
|
|
|
$
|
31,473
|
|
|
$
|
10,723
|
|
|
$
|
7,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We believe that our existing resources will be adequate to fund
our currently planned working capital and capital expenditure
requirements for both the short and long-term. In addition, we
expect to receive $125 million from the sale of the
software division during the second fiscal quarter of 2007.
However, the cyclical nature of the semiconductor industry makes
it difficult for us to predict future liquidity requirements
with certainty. We may be unable to obtain any required
additional financing on terms favorable to us, if at all. If
adequate funds are not available on acceptable terms, we may be
unable to fund our expansion, successfully develop or enhance
products, respond to competitive pressure or take advantage of
acquisition opportunities, any of which could have a material
adverse effect on our business. In addition, we are subject to
litigation related to our stock-based compensation restatement
which could have an adverse affect on our existing resources.
Recently
Enacted Accounting Pronouncements
In May 2005, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 154, Accounting
Changes and Error Corrections, a replacement of APB Opinion
No. 20, Accounting Changes and FASB Statement No. 3,
Reporting Accounting Changes in Interim Financial
Statements (SFAS 154). SFAS 154
provides guidance on the accounting for and reporting of
accounting changes and error corrections. It establishes, unless
impracticable, retrospective application as the required method
for reporting a change in accounting principle in the absence of
explicit transition requirements specific to the newly adopted
accounting principle. SFAS 154 also provides guidance for
determining whether retrospective application of a change in
accounting principle is impracticable and for reporting a change
when retrospective application is impracticable. The provisions
of this Statement are effective for accounting changes and
corrections of errors made in fiscal periods beginning after
December 15, 2005.
43
In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109
(FIN No. 48). FIN No. 48
clarifies the accounting for uncertainty in income taxes
recognized in an enterprises financial statements in
accordance with FAS No. 109, Accounting for
Income Taxes. FIN No. 48 prescribes a two-step
process to determine the amount of tax benefit to be recognized.
First, the tax position must be evaluated to determine the
likelihood that it will be sustained upon external examination.
If the tax position is deemed more-likely-than-not
to be sustained, the tax position is then assessed to determine
the amount of benefit to recognize in the financial statements.
The amount of the benefit that may be recognized is the largest
amount that has a greater than 50 percent likelihood of
being realized upon ultimate settlement. The guidance will
become effective as of the beginning of our fiscal year
beginning after December 15, 2006. We are currently
evaluating the potential impact of FIN No. 48 on our
financial position and results of operations.
In September 2006, the SEC issued Staff Accounting
Bulletin No. 108, Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements
(SAB 108) expressing the Staffs views
regarding the process of quantifying financial statement
misstatements. There have been two widely-recognized methods for
quantifying the effects of financial statement errors: the
roll-over method and the iron curtain
method. The roll-over method focuses primarily on the impact of
a misstatement on the income statement, including the reversing
effect of prior year misstatements, but its use can lead to the
accumulation of misstatements in the balance sheet. The
iron-curtain method, on the other hand, focuses primarily on the
effect of correcting the period-end balance sheet with less
emphasis on the reversing effects of prior year errors on the
income statement. SAB 108 establishes an approach that
requires quantification of financial statement errors based on
the effects of the error on each of our financial statements and
the related financial statement disclosures. This model is
commonly referred to as a dual approach because it
essentially requires quantification of errors under both the
iron-curtain and the roll-over methods. The provisions of
SAB 108 should be applied to annual financial statements
covering the first fiscal year ending after November 15,
2006. We are currently evaluating the provisions of SAB 108.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS 157).
SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles
(GAAP) and expands disclosures about fair value
measurements. SFAS 157 applies under other accounting
pronouncements that require or permit fair value measurements,
the FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement
attribute. Accordingly, SFAS 157 does not require any new
fair value measurements. SFAS 157 is effective for fiscal
years beginning after November 15, 2007, and interim
periods within those fiscal years, with earlier adoption
permitted. The provisions of SFAS 157 should be applied
prospectively as of the beginning of the fiscal year in which it
is initially applied, with limited exceptions. We are currently
evaluating the provisions of SFAS 157.
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)
(SFAS 158). SFAS 158 requires an employer
that is a business entity and sponsors one or more
single-employer defined benefit plans to:
a. Recognize the funded status of a benefit plan, measured
as the difference between plan assets at fair value and the
benefit obligation, in its statement of financial position. For
a pension plan, the benefit obligation is the projected benefit
obligation; for any other postretirement benefit plan, such as a
retiree health care plan, the benefit obligation is the
accumulated postretirement benefit obligation.
b. Recognize as a component of other comprehensive income,
net of tax, the gains or losses and prior service costs or
credits that arise during the period but are not recognized as
components of net periodic benefit cost pursuant to
SFAS No. 87, Employers Accounting for
Pensions, or SFAS No. 106,
Employers Accounting for Postretirement Benefits
Other Than Pensions. Amounts recognized in
accumulated other comprehensive income, including the gains or
losses, prior service costs or credits, and the transition asset
or obligation remaining from the initial application of
SFAS No. 87 and SFAS No. 106, are adjusted
as they are subsequently recognized as components of net
periodic benefit cost pursuant to the recognition and
amortization provisions of those Statements.
44
c. Measure defined benefit plan assets and obligations as
of the date of the employers fiscal year-end statement of
financial position (with limited exceptions).
d. Disclose in the notes to financial statements additional
information about certain effects on net periodic benefit cost
for the next fiscal year that arise from delayed recognition of
the gains or losses, prior service costs or credits, and
transition asset or obligation.
An employer with publicly traded equity securities is required
to initially recognize the funded status of a defined benefit
postretirement plan and to provide the required disclosures as
of the end of the fiscal year ending after December 15,
2006. Retrospective application is not permitted. We are
currently evaluating the provisions of SFAS 158.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosure About Market Risk
|
Our primary market risk exposures are to changes in foreign
currency exchange rates. A portion of our business is conducted
outside the United States through foreign subsidiaries which
maintain accounting records in their local currencies.
Consequently, some of our assets and liabilities are denominated
in currencies other than the United Stated dollar. Fluctuations
in foreign currency exchange rates affect the carrying amount of
these assets and liabilities and our operating results. We do
not enter into market risk sensitive instruments to hedge these
exposures.
45
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
46
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of Brooks Automation, Inc.:
We have completed integrated audits of Brooks Automation,
Inc.s 2006 and 2005 consolidated financial statements and
of its internal control over financial reporting as of
September 30, 2006 and an audit of its 2004 consolidated
financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Our
opinions, based on our audits, are presented below.
Consolidated
financial statements
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Brooks Automation, Inc. and its
subsidiaries at September 30, 2006 and 2005, and the
results of their operations and their cash flows for each of the
three years in the period ended September 30, 2006 in
conformity with accounting principles generally accepted in the
United States of America. These financial statements are the
responsibility of the Companys 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 the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit of financial statements
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 our opinion.
As discussed in Note 2 to the consolidated financial
statements, the Company changed the manner in which it accounts
for share-based compensation in fiscal 2006.
Internal
control over financial reporting
Also, in our opinion, managements assessment, included in
Managements Report on Internal Control Over Financial
Reporting appearing under Item 9A, that the Company
maintained effective internal control over financial reporting
as of September 30, 2006 based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material respects,
based on those criteria. Furthermore, in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of September 30, 2006,
based on criteria established in Internal Control
Integrated Framework issued by the COSO. The Companys
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express opinions on managements
assessment and on the effectiveness of the Companys
internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting
in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over
financial reporting was maintained in all material respects. An
audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and
evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we consider
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made
47
only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
As described in Managements Report on Internal Control
Over Financial Reporting, management has excluded Helix
Technology Corporation (Helix) and Synetics
Solutions Inc. (Synetics) from its assessment of
internal control over financial reporting as of
September 30, 2006 because those entities were acquired by
the Company in purchase business combinations during fiscal
2006. We have also excluded Helix and Synetics from our audit of
internal control over financial reporting. The total assets and
total revenues of the acquired businesses of Helix and Synetics
represent 18% and 30%, respectively, of the related consolidated
financial statement amounts as of and for the year ended
September 30, 2006.
/s/ PricewaterhouseCoopers
LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 13, 2006
48
BROOKS
AUTOMATION, INC.
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except share and per share data)
|
|
|
ASSETS
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
115,773
|
|
|
$
|
202,462
|
|
Marketable securities
|
|
|
68,280
|
|
|
|
121,561
|
|
Accounts receivable, net
|
|
|
127,195
|
|
|
|
77,555
|
|
Inventories, net
|
|
|
99,854
|
|
|
|
48,434
|
|
Current assets from discontinued
operations
|
|
|
|
|
|
|
55
|
|
Prepaid expenses and other current
assets
|
|
|
21,710
|
|
|
|
18,259
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
432,812
|
|
|
|
468,326
|
|
Property, plant and equipment, net
|
|
|
78,833
|
|
|
|
54,165
|
|
Long-term marketable securities
|
|
|
7,307
|
|
|
|
32,935
|
|
Goodwill
|
|
|
351,444
|
|
|
|
62,094
|
|
Intangible assets, net
|
|
|
94,067
|
|
|
|
3,828
|
|
Equity investment in Ulvac
Cryogenics, Inc.
|
|
|
21,489
|
|
|
|
|
|
Other assets
|
|
|
6,625
|
|
|
|
2,732
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
992,577
|
|
|
$
|
624,080
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, MINORITY INTERESTS
AND STOCKHOLDERS EQUITY
|
Current liabilities
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
11
|
|
|
$
|
12
|
|
Short-term debt
|
|
|
|
|
|
|
175,000
|
|
Accounts payable
|
|
|
69,392
|
|
|
|
30,820
|
|
Deferred revenue
|
|
|
26,119
|
|
|
|
22,143
|
|
Accrued warranty and retrofit costs
|
|
|
11,608
|
|
|
|
9,782
|
|
Accrued compensation and benefits
|
|
|
27,712
|
|
|
|
15,886
|
|
Accrued restructuring costs
|
|
|
7,254
|
|
|
|
12,171
|
|
Accrued income taxes payable
|
|
|
17,773
|
|
|
|
17,331
|
|
Current liabilities from
discontinued operations
|
|
|
|
|
|
|
399
|
|
Accrued expenses and other current
liabilities
|
|
|
20,310
|
|
|
|
16,551
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
180,179
|
|
|
|
300,095
|
|
Long-term debt
|
|
|
2
|
|
|
|
2
|
|
Accrued long-term restructuring
|
|
|
9,289
|
|
|
|
10,959
|
|
Other long-term liabilities
|
|
|
3,579
|
|
|
|
2,129
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
193,049
|
|
|
|
313,185
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
(Note 19)
|
|
|
|
|
|
|
|
|
Minority interests
|
|
|
394
|
|
|
|
1,060
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par
value, 1,000,000 shares authorized, no shares issued and
outstanding at September 30, 2006 and 2005, respectively
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value,
125,000,000 shares authorized, 75,431,592 and
45,434,709 shares issued and outstanding at
September 30, 2006 and 2005, respectively
|
|
|
754
|
|
|
|
454
|
|
Additional paid-in capital
|
|
|
1,763,247
|
|
|
|
1,307,145
|
|
Deferred compensation
|
|
|
|
|
|
|
(3,493
|
)
|
Accumulated other comprehensive
income
|
|
|
15,432
|
|
|
|
11,958
|
|
Accumulated deficit
|
|
|
(980,299
|
)
|
|
|
(1,006,229
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
799,134
|
|
|
|
309,835
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, minority
interests and stockholders equity
|
|
$
|
992,577
|
|
|
$
|
624,080
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
49
BROOKS
AUTOMATION, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
514,294
|
|
|
$
|
338,072
|
|
|
$
|
402,252
|
|
Services
|
|
|
178,576
|
|
|
|
125,674
|
|
|
|
132,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
692,870
|
|
|
|
463,746
|
|
|
|
535,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
345,592
|
|
|
|
239,024
|
|
|
|
244,894
|
|
Services
|
|
|
102,494
|
|
|
|
64,586
|
|
|
|
90,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
448,086
|
|
|
|
303,610
|
|
|
|
335,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
244,784
|
|
|
|
160,136
|
|
|
|
199,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
70,671
|
|
|
|
63,115
|
|
|
|
66,266
|
|
Selling, general and administrative
|
|
|
141,032
|
|
|
|
84,797
|
|
|
|
90,227
|
|
Restructuring charges
|
|
|
5,297
|
|
|
|
16,542
|
|
|
|
5,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
217,000
|
|
|
|
164,454
|
|
|
|
161,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
27,784
|
|
|
|
(4,318
|
)
|
|
|
37,817
|
|
Interest income
|
|
|
13,715
|
|
|
|
9,284
|
|
|
|
4,984
|
|
Interest expense
|
|
|
9,384
|
|
|
|
9,469
|
|
|
|
9,492
|
|
Equity in earnings of Ulvac
Cryogenics, Inc.
|
|
|
985
|
|
|
|
|
|
|
|
|
|
Other (income) expense, net
|
|
|
3,193
|
|
|
|
(1,752
|
)
|
|
|
911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes and minority interests
|
|
|
29,907
|
|
|
|
(2,751
|
)
|
|
|
32,398
|
|
Income tax provision
|
|
|
4,732
|
|
|
|
5,204
|
|
|
|
8,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before minority interests
|
|
|
25,175
|
|
|
|
(7,955
|
)
|
|
|
24,345
|
|
Minority interests in income
(loss) of consolidated subsidiary
|
|
|
(666
|
)
|
|
|
141
|
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
25,841
|
|
|
|
(8,096
|
)
|
|
|
24,134
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
89
|
|
|
|
(3,492
|
)
|
|
|
(9,475
|
)
|
Loss on disposal
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued
operations, net of income taxes
|
|
|
89
|
|
|
|
(3,516
|
)
|
|
|
(9,475
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
25,930
|
|
|
$
|
(11,612
|
)
|
|
$
|
14,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share from
continuing operations
|
|
$
|
0.36
|
|
|
$
|
(0.18
|
)
|
|
$
|
0.56
|
|
Basic income (loss) per share from
discontinued operations
|
|
|
0.00
|
|
|
|
(0.08
|
)
|
|
|
(0.22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share
|
|
$
|
0.36
|
|
|
$
|
(0.26
|
)
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
from continuing operations
|
|
$
|
0.36
|
|
|
$
|
(0.18
|
)
|
|
$
|
0.55
|
|
Diluted income (loss) per share
from discontinued operations
|
|
|
0.00
|
|
|
|
(0.08
|
)
|
|
|
(0.22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share
|
|
$
|
0.36
|
|
|
$
|
(0.26
|
)
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing earnings
(loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
72,323
|
|
|
|
44,919
|
|
|
|
43,006
|
|
Diluted
|
|
|
72,533
|
|
|
|
44,919
|
|
|
|
43,573
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
50
BROOKS
AUTOMATION, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
25,930
|
|
|
$
|
(11,612
|
)
|
|
$
|
14,659
|
|
Adjustments to reconcile net income
(loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
31,664
|
|
|
|
16,351
|
|
|
|
17,541
|
|
Impairment of assets
|
|
|
|
|
|
|
|
|
|
|
7,421
|
|
Stock-based compensation
|
|
|
8,287
|
|
|
|
3,640
|
|
|
|
4,824
|
|
Discount on marketable securities
|
|
|
(3,012
|
)
|
|
|
(1,936
|
)
|
|
|
|
|
Amortization of debt issuance costs
|
|
|
2,237
|
|
|
|
839
|
|
|
|
839
|
|
Undistributed earnings of joint
venture
|
|
|
(985
|
)
|
|
|
|
|
|
|
|
|
Minority interests
|
|
|
(666
|
)
|
|
|
141
|
|
|
|
211
|
|
Loss on disposal of long-lived
assets
|
|
|
534
|
|
|
|
178
|
|
|
|
505
|
|
Changes in operating assets and
liabilities, net of acquired assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(20,466
|
)
|
|
|
47,922
|
|
|
|
(53,960
|
)
|
Inventories
|
|
|
(1,459
|
)
|
|
|
23,933
|
|
|
|
(17,744
|
)
|
Prepaid expenses and other assets
|
|
|
2,575
|
|
|
|
(3,048
|
)
|
|
|
8,376
|
|
Accounts payable
|
|
|
22,513
|
|
|
|
(14,202
|
)
|
|
|
17,967
|
|
Deferred revenue
|
|
|
3,705
|
|
|
|
(12,718
|
)
|
|
|
(91
|
)
|
Accrued warranty and retrofit costs
|
|
|
540
|
|
|
|
(2,104
|
)
|
|
|
231
|
|
Accrued compensation and benefits
|
|
|
9,553
|
|
|
|
(9,847
|
)
|
|
|
10,621
|
|
Accrued restructuring costs
|
|
|
(10,364
|
)
|
|
|
3,300
|
|
|
|
(9,123
|
)
|
Accrued expenses and other
liabilities
|
|
|
(5,394
|
)
|
|
|
(9,723
|
)
|
|
|
6,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
65,192
|
|
|
|
31,114
|
|
|
|
8,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and
equipment
|
|
|
(17,954
|
)
|
|
|
(11,704
|
)
|
|
|
(8,203
|
)
|
Purchases of intangible assets
|
|
|
(3,000
|
)
|
|
|
|
|
|
|
|
|
Acquisition of Helix Technology
Corporation, cash acquired net of expenses
|
|
|
8,805
|
|
|
|
|
|
|
|
|
|
Acquisition of Synetics Solutions
Inc., net of cash acquired
|
|
|
(50,182
|
)
|
|
|
|
|
|
|
|
|
Investment in Yaskawa Brooks
Automation, Inc. joint venture
|
|
|
(1,955
|
)
|
|
|
|
|
|
|
|
|
Purchases of marketable securities
|
|
|
(851,884
|
)
|
|
|
(635,683
|
)
|
|
|
(231,687
|
)
|
Sale/maturity of marketable
securities
|
|
|
934,961
|
|
|
|
618,453
|
|
|
|
169,141
|
|
Dividends from equity investment
|
|
|
281
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of long-lived
assets
|
|
|
|
|
|
|
1,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
19,072
|
|
|
|
(27,640
|
)
|
|
|
(70,749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments of short- and long-term
debt and capital lease obligations
|
|
|
(175,015
|
)
|
|
|
(11
|
)
|
|
|
(98
|
)
|
Proceeds from issuance of common
stock, net of issuance costs
|
|
|
3,659
|
|
|
|
5,313
|
|
|
|
130,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
(171,356
|
)
|
|
|
5,302
|
|
|
|
130,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rate changes on
cash and cash equivalents
|
|
|
403
|
|
|
|
405
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
(86,689
|
)
|
|
|
9,181
|
|
|
|
68,282
|
|
Cash and cash equivalents,
beginning of year
|
|
|
202,462
|
|
|
|
193,281
|
|
|
|
124,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
year
|
|
$
|
115,773
|
|
|
$
|
202,462
|
|
|
$
|
193,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for
interest
|
|
$
|
9,932
|
|
|
$
|
8,603
|
|
|
$
|
8,653
|
|
Cash paid during the year for
income taxes, net of refunds
|
|
$
|
6,280
|
|
|
$
|
3,696
|
|
|
$
|
2,237
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of Helix Technology,
net of transaction costs
|
|
$
|
447,949
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
51
BROOKS
AUTOMATION, INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
Total
|
|
|
|
Stock
|
|
|
Stock at
|
|
|
Paid-In
|
|
|
Deferred
|
|
|
Comprehensive
|
|
|
Income
|
|
|
Accumulated
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
par Value
|
|
|
Capital
|
|
|
Compensation
|
|
|
Income (Loss)
|
|
|
(Loss)
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
(In thousands, except share data)
|
|
|
Balance September 30,
2003
|
|
|
37,266,181
|
|
|
$
|
373
|
|
|
$
|
1,165,427
|
|
|
$
|
(6,084
|
)
|
|
|
|
|
|
$
|
12,390
|
|
|
$
|
(1,009,276
|
)
|
|
$
|
162,830
|
|
Shares issued under stock option
and purchase plans
|
|
|
487,161
|
|
|
|
5
|
|
|
|
5,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,922
|
|
Common stock offering
|
|
|
6,900,000
|
|
|
|
69
|
|
|
|
124,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,282
|
|
Common stock issued in acquisitions
|
|
|
38,502
|
|
|
|
|
|
|
|
1,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,181
|
|
Deferred compensation, net of
forfeitures
|
|
|
|
|
|
|
|
|
|
|
(188
|
)
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,052
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,659
|
|
|
|
|
|
|
|
14,659
|
|
|
|
14,659
|
|
Currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
928
|
|
|
|
928
|
|
|
|
|
|
|
|
928
|
|
Unrealized loss on marketable
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(959
|
)
|
|
|
(959
|
)
|
|
|
|
|
|
|
(959
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30,
2004
|
|
|
44,691,844
|
|
|
|
447
|
|
|
|
1,296,550
|
|
|
|
(1,844
|
)
|
|
|
|
|
|
|
12,359
|
|
|
|
(994,617
|
)
|
|
|
312,895
|
|
Shares issued under stock option
and purchase plans
|
|
|
708,432
|
|
|
|
7
|
|
|
|
5,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,313
|
|
Common stock issued in acquisitions
|
|
|
34,433
|
|
|
|
|
|
|
|
628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
628
|
|
Deferred compensation, net of
forfeitures
|
|
|
|
|
|
|
|
|
|
|
4,661
|
|
|
|
(4,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,012
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(11,612
|
)
|
|
|
|
|
|
|
(11,612
|
)
|
|
|
(11,612
|
)
|
Currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
353
|
|
|
|
353
|
|
|
|
|
|
|
|
353
|
|
Unrealized loss on marketable
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(754
|
)
|
|
|
(754
|
)
|
|
|
|
|
|
|
(754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(12,013
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30,
2005
|
|
|
45,434,709
|
|
|
|
454
|
|
|
|
1,307,145
|
|
|
|
(3,493
|
)
|
|
|
|
|
|
|
11,958
|
|
|
|
(1,006,229
|
)
|
|
|
309,835
|
|
Shares issued under stock option
and purchase plans
|
|
|
975,519
|
|
|
|
10
|
|
|
|
3,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,659
|
|
Common stock issued in acquisitions
|
|
|
29,021,364
|
|
|
|
290
|
|
|
|
447,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
447,949
|
|
Reclassification of deferred
compensation upon adoption of SFAS 123R
|
|
|
|
|
|
|
|
|
|
|
(3,493
|
)
|
|
|
3,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
8,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,287
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,930
|
|
|
|
|
|
|
|
25,930
|
|
|
|
25,930
|
|
Currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,626
|
|
|
|
2,626
|
|
|
|
|
|
|
|
2,626
|
|
Unrealized gain on marketable
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
848
|
|
|
|
848
|
|
|
|
|
|
|
|
848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30,
2006
|
|
|
75,431,592
|
|
|
$
|
754
|
|
|
$
|
1,763,247
|
|
|
$
|
|
|
|
|
|
|
|
$
|
15,432
|
|
|
$
|
(980,299
|
)
|
|
$
|
799,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
52
BROOKS
AUTOMATION, INC.
|
|
1.
|
Nature of
the Business
|
Brooks Automation, Inc. (Brooks or the
Company) is a leading supplier of technology
products and solutions primarily serving the worldwide
semiconductor market. Brooks supplies hardware, software and
services to both chip manufacturers and original equipment
manufacturers, or OEMs, who make semiconductor device
manufacturing equipment. Brooks has offerings ranging from
individual hardware and software modules to fully integrated
systems as well as services to install and support our products
world-wide. Although Brooks core business addresses the
increasingly complex automation and integrated subsystems
requirements of the global semiconductor industry, Brooks
provides solutions for a number of related industries, including
the flat panel display manufacturing, data storage and certain
other industries which have complex manufacturing environments.
|
|
2.
|
Summary
of Significant Accounting Policies
|
Principles
of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of
the Company and all majority-owned subsidiaries. All
intercompany accounts and transactions are eliminated. Equity
investments in which we exercise significant influence but do
not control and are not the primary beneficiary are accounted
for using the equity method.
Use of
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant estimates are associated with accounts
receivable, inventories, intangible assets, goodwill, deferred
income taxes and warranty obligations. Although the Company
regularly assesses these estimates, actual results could differ
from those estimates. Changes in estimates are recorded in the
period in which they become known.
Foreign
Currency Translation
Some transactions of the Company and its subsidiaries are made
in currencies different from their functional currency. Foreign
currency gains (losses) on these transactions or balances are
recorded in Other (income) expense, net when
incurred. Net foreign currency transaction gains (losses)
included in income (loss) before income taxes and minority
interest totaled $(0.5) million, $0.4 million and
$(0.4) million for the years ended September 30, 2006,
2005 and 2004, respectively. For
non-U.S. subsidiaries,
assets and liabilities are translated at period-end exchange
rates, and income statement items are translated at the average
exchange rates for the period. The local currency for all
foreign subsidiaries is considered to be the functional currency
and, accordingly, translation adjustments are reported in
Accumulated other comprehensive income. Foreign
currency translation adjustments are one of the components added
to the Companys net income (loss) in the calculation of
comprehensive net income (loss).
Cash
and Cash Equivalents
Cash and cash equivalents include cash and highly liquid
investments with original maturities of three months or less. At
September 30, 2006 and 2005, cash equivalents were
$16.5 million and $111.3 million, respectively. Cash
equivalents are held at fair value.
Concentration
of Credit Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist primarily of trade
receivables and temporary and long-term cash investments in
treasury bills and commercial paper. The
53
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Company restricts its investments to repurchase agreements with
major banks, U.S. government and corporate securities, and
mutual funds that invest in U.S. government securities,
which are subject to minimal credit and market risk. The
Companys customers are concentrated in the semiconductor
industry, and relatively few customers account for a significant
portion of the Companys revenues. The Companys top
twenty largest customers account for approximately 55% of
revenues. The Company regularly monitors the creditworthiness of
its customers and believes that it has adequately provided for
exposure to potential credit losses.
Accounts
Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the invoiced amount
and do not bear interest. The allowance for doubtful accounts is
the Companys best estimate of the amount of probable
credit losses in its existing accounts receivable. The Company
determines the allowance based on historical write-off
experience by customer. The Company reviews its allowance for
doubtful accounts quarterly. Past due balances over 90 days
and over a specified amount are reviewed individually for
collectibility. All other balances are reviewed on a pooled
basis by type of receivable. Account balances are charged off
against the allowance when the Company feels it is probable the
receivable will not be recovered. The Company does not have any
off-balance-sheet credit exposure related to its customers.
Inventories
Inventories are stated at the lower of cost or market, cost
being determined using the
first-in,
first-out method. The Company provides inventory reserves for
excess, obsolete or damaged inventory based on changes in
customer demand, technology and other economic factors.
Fixed
Assets and Impairment of Long-lived Assets
Property, plant and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the
straight-line method. Depreciable lives are summarized below:
|
|
|
|
|
Buildings
|
|
|
20 - 40 years
|
|
Computer equipment and software
|
|
|
2 - 6 years
|
|
Machinery and equipment
|
|
|
2 - 10 years
|
|
Furniture and fixtures
|
|
|
3 - 10 years
|
|
Leasehold improvements and equipment held under capital leases
are amortized over the shorter of their estimated useful lives
or the term of the respective leases. Equipment used for
demonstrations to customers is included in machinery and
equipment and is depreciated over its estimated useful life.
Repair and maintenance costs are expensed as incurred.
The Company periodically evaluates the recoverability of
long-lived assets, including its intangible assets, whenever
events and changes in circumstances indicate that the carrying
amount of an asset may not be fully recoverable. This periodic
review may result in an adjustment of estimated depreciable
lives or an asset impairment. When indicators of impairment are
present, the carrying values of the asset are evaluated in
relation to their operating performance and future undiscounted
cash flows of the underlying business. If the future
undiscounted cash flows are less than their book value, an
impairment exists. The impairment is measured as the difference
between the book value and the fair value of the underlying
asset. Fair values are based on estimates of market prices and
assumptions concerning the amount and timing of estimated future
cash flows and assumed discount rates, reflecting varying
degrees of perceived risk.
When an asset is retired, the cost of the asset disposed of, and
the related accumulated depreciation, are removed from the
accounts, and any resulting gain or loss is included in the
determination of operating profit (loss).
54
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Intangible
Assets and Goodwill
Patents include capitalized direct costs associated with
obtaining patents as well as assets that were acquired as a part
of purchase business combinations. Capitalized patent costs are
amortized using the straight-line method over the estimated
economic life of the patents. As of September 30, 2006 and
2005, the net book value of the Companys patents was
$3.1 million and $0.2 million, respectively.
Goodwill represents the excess of purchase price over the fair
value of net tangible and identifiable intangible assets of the
businesses the Company acquired. The Company performs an annual
impairment test of its goodwill as required under the provisions
of FAS 142 on September 30 of each fiscal year unless
interim indicators of impairment exist (see Note 6).
The amortizable lives of intangible assets, including those
identified as a result of purchase accounting, are summarized as
follows:
|
|
|
|
|
Patents
|
|
|
3 - 8 years
|
|
Completed technology
|
|
|
2 - 10 years
|
|
License agreements
|
|
|
5 years
|
|
Trademarks and trade names
|
|
|
3 - 6 years
|
|
Non-competition agreements
|
|
|
3 - 5 years
|
|
Customer relationships
|
|
|
4 - 11 years
|
|
Revenue
Recognition
Product revenues are associated with the sale of hardware
systems and components as well as software licenses. Service
revenues are associated with hardware-related field service,
training, software maintenance and software-related consulting
and integration services.
Revenue from product sales that do not include significant
customization is recorded upon delivery and transfer of risk of
loss to the customer provided there is evidence of an
arrangement, fees are fixed or determinable, collection of the
related receivable is reasonably assured and, if applicable,
customer acceptance criteria have been successfully
demonstrated. Customer acceptance provisions include final
testing and acceptance carried out prior to shipment. These
pre-shipment testing and acceptance procedures ensure that the
product meets the published specification requirements before
the product is shipped. In the limited situations where the
arrangement contains extended payment terms, revenue is
recognized as the payments become due. Shipping terms are
customarily FCA shipping point. Amounts charged to customers for
costs incurred for shipping and handling are credited to cost of
revenues where the associated costs are charged. When
significant on site customer acceptance provisions are present
in the arrangement, revenue is recognized upon completion of
customer acceptance testing.
Revenue from the sale of
off-the-shelf
software licenses is recognized upon delivery to the customer
provided there is evidence of an arrangement, fees are fixed or
determinable, collection of the related receivable is probable,
and there are no unusual acceptance criteria or extended payment
terms. If the arrangement contains acceptance criteria or
testing, then revenue is recognized upon acceptance or the
successful completion of the testing. If the arrangement
contains extended payment terms, revenue is recognized as the
payments become due. Revenue related to post-contract support is
deferred and recognized ratably over the contract period.
For tailored software contracts, we provide significant
consulting services to tailor the software to the
customers environment. If we are able to reasonably
estimate the level of effort and related costs to complete the
contract, we recognize revenue using the
percentage-of-completion
method, which compares costs incurred to total estimated project
costs. Revisions in revenue and cost estimates are recorded in
the period in which the facts that require such revisions become
known. If our ability to complete the tailored software is
uncertain or if we cannot reasonably estimate the level of
effort and related costs, completed contract accounting is
applied. Losses, if any, are provided for in the period in which
such losses are first identified by management. Generally, the
terms of long-term
55
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
contracts provide for progress billing based on completion of
certain phases of work. For maintenance contracts, service
revenue is deferred based on vendor specific objective evidence
of its fair value and is recognized ratably over the term of the
maintenance contract. Deferred revenue primarily relates to
services and maintenance agreements and billings in excess of
revenue recognized on long term contracts accounted for using
the
percentage-of-completion
method and contracts awaiting final customer acceptance.
In transactions that include multiple products
and/or
services, such as tailored software arrangements, described
above, or software sales with post-contract support, we allocate
the sales value among each of the elements based on their
relative fair values and recognize such revenue when each
element is delivered. If these relative fair values are not
known, the Company uses the residual method to recognize revenue
from arrangements with one or more elements to be delivered at a
future date, when evidence of the fair value of all undelivered
elements exist. Under the residual method, the fair value of any
the undelivered elements at the date of delivery, such as
post-contract support, are deferred and the remaining portion of
the total arrangement fee is recognized as revenue. The Company
determines fair value of undelivered services based on the
prices that are charged when the same element is sold separately
to customers.
Warranty
The Company offers warranties on the sales of certain of its
products and records an accrual for estimated future claims.
Such accruals are based upon historical experience and
managements estimate of the level of future claims.
Research
and Development Expenses
Research and development costs are charged to expense when
incurred, except for certain software development costs.
Software development costs are expensed prior to establishing
technological feasibility and capitalized thereafter until the
product is available for general release to customers.
Capitalized software development costs are amortized to cost of
sales on a
product-by-product
basis over the estimated lives of the related products,
typically three years. The Company did not capitalize any such
costs during fiscal 2006, 2005 or 2004.
Stock-Based
Compensation
Effect of
Adoption of SFAS 123R, Share-Based Payment
Prior to October 1, 2005, the Companys employee stock
compensation plans were accounted for in accordance with
Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees
(APB 25) and related interpretations. Under
this method, no compensation expense was recognized as long as
the exercise price equaled or exceeded the market price of the
underlying stock on the measurement date of the grant. The
Company elected the disclosure-only alternative permitted under
SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS 123), as amended by
SFAS No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure
(SFAS 148), for fixed stock-based awards to employees.
On December 23, 2004, the Company accelerated the vesting
of certain unvested stock options awarded to employees, officers
and other eligible participants under the Companys various
stock option plans, other than its 1993 Non-Employee Director
Stock Option Plan. As such, the Company fully vested options to
purchase 1,229,239 shares of the Companys common
stock with exercise prices greater than or equal to
$24.00 per share. The acceleration of the vesting of these
options resulted in a charge based on generally accepted
accounting principles of approximately $1.0 million. The
Company took this action because it produced a more favorable
impact on the Companys results from operations in light of
the effective date of SFAS 123R, which took place in the
Companys first fiscal quarter of 2006.
As of October 1, 2005, the Company adopted SFAS 123R
using the modified prospective method, which requires
measurement of compensation cost for all stock awards at fair
value on date of grant and recognition of
56
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
compensation over the service period for awards expected to
vest. The fair value of restricted stock is determined based on
the number of shares granted and the excess of the quoted price
of the Companys common stock over the exercise price of
the restricted stock, and the fair value of stock options is
determined using the Black-Scholes valuation model, which is
consistent with our valuation techniques previously utilized for
options in footnote disclosures required under SFAS 123, as
amended by SFAS 148. Such value is recognized as expense
over the service period, net of estimated forfeitures. The
estimation of stock awards that will ultimately vest requires
significant judgment. We consider many factors when estimating
expected forfeitures, including types of awards, employee class,
and historical experience. Actual results, and future changes in
estimates, may differ substantially from our current estimates.
Prior periods have not been restated to incorporate the
stock-based compensation charge.
The following table reflects compensation expense recorded
during the year ended September 30, 2006 in accordance with
SFAS 123R (in thousands):
|
|
|
|
|
|
|
Year Ended
|
|
|
|
September 30, 2006
|
|
|
Stock options
|
|
$
|
4,769
|
|
Restricted stock
|
|
|
2,714
|
|
Employee stock purchase plan
|
|
|
804
|
|
|
|
|
|
|
|
|
$
|
8,287
|
|
|
|
|
|
|
Valuation
Assumptions for Stock Options and Employee Stock Purchase
Plans
For the years ended September 30, 2006, 2005 and 2004,
217,000, 652,250 and 2,486,159 stock options were granted,
respectively. The fair value of each option was estimated on the
date of grant using the Black-Scholes option-pricing model with
the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Risk-free interest rate
|
|
|
4.4
|
%
|
|
|
3.3% - 4.0%
|
|
|
|
2.6% - 3.3%
|
|
Volatility
|
|
|
55
|
%
|
|
|
65
|
%
|
|
|
60
|
%
|
Expected life (years)
|
|
|
4.9
|
|
|
|
4.0
|
|
|
|
4.0
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
The fair value of shares issued under the employee stock
purchase plan was estimated on the commencement date of each
offering period using the Black-Scholes option-pricing model
with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Risk-free interest rate
|
|
|
4.5
|
%
|
|
|
3.2
|
%
|
|
|
1.6
|
%
|
Volatility
|
|
|
39
|
%
|
|
|
39
|
%
|
|
|
55
|
%
|
Expected life
|
|
|
6 months
|
|
|
|
6 months
|
|
|
|
6 months
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected volatilities are based on historical volatilities of
our common stock; the expected life represents the weighted
average period of time that options granted are expected to be
outstanding giving consideration to vesting schedules and our
historical exercise patterns; and the risk-free rate is based on
the U.S. Treasury yield curve in effect at the time of
grant for periods corresponding with the expected life of the
option.
57
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fair
Value Disclosures Prior to SFAS 123R
Adoption
The following table provides supplemental information for the
years ended September 30, 2005 and 2004 as if stock-based
compensation had been computed under SFAS 123 (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2005
|
|
|
2004
|
|
|
Net income (loss), as reported
|
|
$
|
(11,612
|
)
|
|
$
|
14,659
|
|
Add stock-based employee
compensation expense included in reported net income (loss)
|
|
|
3,012
|
|
|
|
4,052
|
|
Deduct pro forma stock-based
compensation expense
|
|
|
24,319
|
|
|
|
21,889
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss
|
|
$
|
(32,919
|
)
|
|
$
|
(3,178
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share,
as reported
|
|
$
|
(0.26
|
)
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share,
as reported
|
|
$
|
(0.26
|
)
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share, pro forma
|
|
$
|
(0.73
|
)
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
Diluted loss per share, pro forma
|
|
$
|
(0.73
|
)
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
Equity
Incentive Plans
The Companys equity incentive plans are intended to
attract and retain employees and to provide an incentive for
them to assist the Company to achieve long-range performance
goals and to enable them to participate in the long-term growth
of the Company. The equity incentive plans consist of plans
under which employees may be granted options to purchase shares
of the Companys stock, restricted stock and other equity
incentives. Stock options generally have a vesting period of
4 years and are exercisable for a period not to exceed
7 years from the date of issuance. Restricted stock awards
generally vest over one to four years. At September 30,
2006, a total of 5,972,077 shares were reserved and
available for the issuance of stock and restricted stock, which
reflects an increase of 3,000,000 shares approved by the
shareholders in March 2006.
Income
Taxes
The Company records income taxes using the asset and liability
method. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective income tax
bases, and operating loss and tax credit carryforwards. The
Companys consolidated financial statements contain certain
deferred tax assets which have arisen primarily as a result of
operating losses, as well as other temporary differences between
financial and tax accounting. Statement of Financial Accounting
Standards No. 109 Accounting for Income Taxes,
requires the Company to establish a valuation allowance if the
likelihood of realization of the deferred tax assets is reduced
based on an evaluation of objective verifiable evidence.
Significant management judgment is required in determining the
Companys provision for income taxes, the Companys
deferred tax assets and liabilities and any valuation allowance
recorded against those net deferred tax assets. The Company
evaluates the weight of all available evidence to determine
whether it is more likely than not that some portion or all of
the net deferred income tax assets will not be realized.
Earnings
(Loss) Per Share
Basic earnings (loss) per share is calculated based on the
weighted average number of common shares outstanding during the
period. Diluted earnings (loss) per share is calculated based on
the weighted average number
58
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of common shares and dilutive common equivalent shares assumed
outstanding during the period. Shares used to compute diluted
earnings (loss) per share exclude common share equivalents if
their inclusion would have an anti-dilutive effect.
Fair
Value of Financial Instruments
The Companys financial instruments consist of cash and
cash equivalents, investments in long- and short-term debt
securities, accounts receivable, accounts payable and accrued
expenses. The carrying amounts reported in the balance sheets
approximate their fair value at September 30, 2006 and
2005. The Companys financial instruments at
September 30, 2005 also included its convertible notes,
which were paid in full in July 2006. At September 30,
2005, the estimated fair value of the Companys convertible
notes was approximately $169.3 million compared to the
carrying value of $175.0 million. The estimated fair value
of the convertible notes is based on the quoted market price of
the convertible notes on September 30, 2005.
Reclassifications
Certain reclassifications have been made in the 2005 and 2004
Consolidated Financial Statements to conform to the 2006
presentation.
Recent
Accounting Pronouncements
In May 2005, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 154, Accounting
Changes and Error Corrections, a replacement of APB Opinion
No. 20, Accounting Changes and FASB Statement No. 3,
Reporting Accounting Changes in Interim Financial
Statements (SFAS 154). SFAS 154
provides guidance on the accounting for and reporting of
accounting changes and error corrections. It establishes, unless
impracticable, retrospective application as the required method
for reporting a change in accounting principle in the absence of
explicit transition requirements specific to the newly adopted
accounting principle. SFAS 154 also provides guidance for
determining whether retrospective application of a change in
accounting principle is impracticable and for reporting a change
when retrospective application is impracticable. The provisions
of this Statement are effective for accounting changes and
corrections of errors made in fiscal periods beginning after
December 15, 2005.
In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109
(FIN No. 48). FIN No. 48
clarifies the accounting for uncertainty in income taxes
recognized in an enterprises financial statements in
accordance with FAS No. 109, Accounting for
Income Taxes. FIN No. 48 prescribes a two-step
process to determine the amount of tax benefit to be recognized.
First, the tax position must be evaluated to determine the
likelihood that it will be sustained upon external examination.
If the tax position is deemed more-likely-than-not
to be sustained, the tax position is then assessed to determine
the amount of benefit to recognize in the financial statements.
The amount of the benefit that may be recognized is the largest
amount that has a greater than 50 percent likelihood of
being realized upon ultimate settlement. The guidance will
become effective as of the beginning of the Companys
fiscal year beginning after December 15, 2006. The Company
is currently evaluating the potential impact of
FIN No. 48 on its financial position and results of
operations.
In September 2006, the SEC issued Staff Accounting
Bulletin No. 108, Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements
(SAB 108) expressing the Staffs views
regarding the process of quantifying financial statement
misstatements. There have been two widely-recognized methods for
quantifying the effects of financial statement errors: the
roll-over method and the iron curtain
method. The roll-over method focuses primarily on the impact of
a misstatement on the income statement, including the reversing
effect of prior year misstatements, but its use can lead to the
accumulation of misstatements in the balance sheet. The
iron-curtain method, on the other hand, focuses primarily on the
effect of correcting the period-end balance sheet with less
emphasis on the reversing effects of prior year errors on the
income statement.
59
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
SAB 108 establishes an approach that requires
quantification of financial statement errors based on the
effects of the error on each of the Companys financial
statements and the related financial statement disclosures. This
model is commonly referred to as a dual approach
because it essentially requires quantification of errors under
both the iron-curtain and the roll-over methods. The provisions
of SAB 108 should be applied to annual financial statements
covering the first fiscal year ending after November 15,
2006. The Company is currently evaluating the provisions of
SAB 108.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS 157).
SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles
(GAAP) and expands disclosures about fair value
measurements. SFAS 157 applies under other accounting
pronouncements that require or permit fair value measurements,
the FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement
attribute. Accordingly, SFAS 157 does not require any new
fair value measurements. SFAS 157 is effective for fiscal
years beginning after November 15, 2007, and interim
periods within those fiscal years, with earlier adoption
permitted. The provisions of SFAS 157 should be applied
prospectively as of the beginning of the fiscal year in which it
is initially applied, with limited exceptions. The Company is
currently evaluating the provisions of SFAS 157.
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)
(SFAS 158). SFAS 158 requires an employer
that is a business entity and sponsors one or more
single-employer defined benefit plans to:
a. Recognize the funded status of a benefit plan, measured
as the difference between plan assets at fair value and the
benefit obligation, in its statement of financial position. For
a pension plan, the benefit obligation is the projected benefit
obligation; for any other postretirement benefit plan, such as a
retiree health care plan, the benefit obligation is the
accumulated postretirement benefit obligation.
b. Recognize as a component of other comprehensive income,
net of tax, the gains or losses and prior service costs or
credits that arise during the period but are not recognized as
components of net periodic benefit cost pursuant to
SFAS No. 87, Employers Accounting for
Pensions, or SFAS No. 106,
Employers Accounting for Postretirement Benefits
Other Than Pensions. Amounts recognized in
accumulated other comprehensive income, including the gains or
losses, prior service costs or credits, and the transition asset
or obligation remaining from the initial application of
SFAS No. 87 and SFAS No. 106, are adjusted
as they are subsequently recognized as components of net
periodic benefit cost pursuant to the recognition and
amortization provisions of those Statements.
c. Measure defined benefit plan assets and obligations as
of the date of the employers fiscal year-end statement of
financial position (with limited exceptions).
d. Disclose in the notes to financial statements additional
information about certain effects on net periodic benefit cost
for the next fiscal year that arise from delayed recognition of
the gains or losses, prior service costs or credits, and
transition asset or obligation.
An employer with publicly traded equity securities is required
to initially recognize the funded status of a defined benefit
postretirement plan and to provide the required disclosures as
of the end of the fiscal year ending after December 15,
2006. Retrospective application is not permitted. The Company is
currently evaluating the provisions of SFAS 158.
60
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Helix
Technology Corporation
On October 26, 2005, the Company acquired all the issued
and outstanding stock of Helix Technology Corporation
(Helix). Helix develops and manufactures vacuum
technology solutions for the semiconductor, data storage, and
flat panel display markets. The Company believes that the
acquisition of Helix enables it to better serve its current
market, increase its addressable market, reduce the volatility
that both businesses have historically faced and positions the
Company to enhance its financial performance. The aggregate
purchase price, net of cash acquired, was approximately
$458.1 million, consisting of 29.0 million shares of
common stock valued at $444.6 million, the fair value of
assumed Helix options of $3.3 million and transaction costs
of $10.2 million. The market price used to value the
Brooks shares issued as consideration for Helix was
$15.32, which represents the average of the closing market price
of Brooks common stock for the period beginning two trading days
before and ending two trading days after the merger agreement
was announced. The actual number of shares of Brooks common
stock issued was determined based on the actual number of shares
of Helix common stock outstanding immediately prior to the
completion of the merger, based on an exchange ratio of
1.11 shares of Brooks common stock for each outstanding
share of Helix common stock. The Helix business operates in the
Companys hardware segment. This transaction qualified as a
tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended.
The consolidated financial statements include the results of
Helix from the date of acquisition.
The following table summarizes the estimated fair value of the
assets acquired and liabilities assumed at the date of
acquisition based upon a third-party valuation (in millions):
|
|
|
|
|
Current assets
|
|
$
|
79.9
|
|
Property, plant and equipment
|
|
|
15.4
|
|
Intangible assets
|
|
|
84.4
|
|
Goodwill
|
|
|
276.8
|
|
Other assets
|
|
|
20.8
|
|
|
|
|
|
|
Total assets acquired
|
|
|
477.3
|
|
|
|
|
|
|
Current liabilities
|
|
|
18.1
|
|
Other liabilities
|
|
|
1.1
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
19.2
|
|
|
|
|
|
|
Total purchase price including
acquisition costs
|
|
$
|
458.1
|
|
|
|
|
|
|
Of the $84.4 million of acquired intangible assets, the
following table reflects the allocation of the acquired
intangible assets and related estimates of useful lives (in
millions):
|
|
|
|
|
|
|
Completed and core technology
|
|
$
|
56.4
|
|
|
6.9 years weighted average
estimated useful life
|
Customer and contract relationships
|
|
|
23.3
|
|
|
6.9 years weighted average
estimated economic consumption life
|
Trade names and trademarks
|
|
|
4.7
|
|
|
6 year weighted average
estimated useful life
|
|
|
|
|
|
|
|
|
|
$
|
84.4
|
|
|
|
|
|
|
|
|
|
|
Synetics
Solutions Inc.
On May 8, 2006, the Company entered into an Agreement and
Plan of Merger (the Merger Agreement) with Synetics
Solutions Inc. (Synetics). Brooks completed its
acquisition of Synetics from Yaskawa Electric Corporation
(Yaskawa), a corporation duly organized and existing
under the laws of Japan, through a merger that
61
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
became effective as of June 30, 2006. Synetics provides
customized manufactured solutions for the North American
semiconductor equipment industry. Pursuant to the merger
agreement, Synetics became a wholly owned subsidiary of Brooks.
The aggregate purchase price of Synetics, net of cash acquired,
was approximately $50.2 million consisting of a
$28.6 million cash payment to Yaskawa, repayment of
outstanding debt of $19.9 million and transaction costs of
$1.7 million. The acquisition of Synetics will provide the
Company with the opportunity to enhance its existing
capabilities with respect to manufacturing customer designed
automation systems. The Synetics business operates in the
Companys hardware segment.
Also on May 8, 2006, the Company agreed to enter into a
Joint Venture Agreement (the Agreement) with Yaskawa
to form a 50/50 joint venture called Yaskawa Brooks Automation,
Inc. (YBA) to exclusively market and sell
Yaskawas semiconductor robotics products and Brooks
automation hardware products to semiconductor customers in
Japan. This Agreement was executed on June 30, 2006. YBA
began operations on September 21, 2006.
The consolidated financial statements include the results of
Synetics from the date of acquisition.
The following table summarizes the estimated fair value of the
assets acquired and liabilities assumed at the date of
acquisition based upon a third-party valuation (in millions):
|
|
|
|
|
Current assets
|
|
$
|
19.8
|
|
Property, plant and equipment
|
|
|
8.6
|
|
Intangible assets
|
|
|
17.4
|
|
Goodwill
|
|
|
12.6
|
|
Other assets
|
|
|
0.1
|
|
|
|
|
|
|
Total assets acquired
|
|
|
58.5
|
|
|
|
|
|
|
Current liabilities
|
|
|
8.3
|
|
|
|
|
|
|
Total purchase price including
acquisition costs
|
|
$
|
50.2
|
|
|
|
|
|
|
Of the $17.4 million of acquired intangible assets, the
following table reflects the allocation of the acquired
intangible assets and related estimates of useful lives (in
millions):
|
|
|
|
|
Core technology
|
|
$4.2
|
|
7 years weighted average
estimated useful life
|
Customer and contract relationships
|
|
4.8
|
|
7 years weighted average
estimated economic consumption life
|
Customer supply agreement
|
|
8.4
|
|
10 year weighted average
estimated useful life
|
|
|
|
|
|
|
|
$17.4
|
|
|
|
|
|
|
|
Proforma
Information of Acquisitions
The following unaudited proforma information gives effect to the
acquisition of Helix and Synetics as if the acquisitions
occurred at the beginning of the years presented (in thousands,
except per share data):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
$
|
756,325
|
|
|
$
|
669,377
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
20,576
|
|
|
$
|
(36,932
|
)
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
0.28
|
|
|
$
|
(0.50
|
)
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
|
|
$
|
0.28
|
|
|
$
|
(0.50
|
)
|
|
|
|
|
|
|
|
|
|
62
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Proforma information above includes adjustments to reflect
increased amortization expense, the write-off of the entire fair
value
step-up in
inventory, and a full valuation allowance for deferred tax
assets.
The Company invests its cash in marketable debt securities and
classifies them as
available-for-sale.
The Company records these securities at fair value in accordance
with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity
Securities (FAS 115). Marketable
securities reported as current assets represent investments that
mature within one year from the balance sheet date. Long-term
marketable securities represent investments with maturity dates
greater than one year from the balance sheet date. At the time
that the maturity dates of these investments become one year or
less, the securities are reclassified to current assets.
Unrealized gains and losses are excluded from earnings and
reported in a separate component of stockholders equity
until they are sold. At the time of sale, any gains or losses,
calculated by the specific identification method, will be
recognized as a component of operating results.
The following is a summary of marketable securities (included in
short and long-term marketable securities in the consolidated
balance sheets), including accrued interest receivable, as of
September 30, 2006 and 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
September 30,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and
obligations of U.S. government agencies
|
|
$
|
62,220
|
|
|
$
|
1
|
|
|
$
|
(80
|
)
|
|
$
|
62,141
|
|
U.S. corporate securities
|
|
|
5,871
|
|
|
|
|
|
|
|
(54
|
)
|
|
|
5,817
|
|
Mortgage-backed securities
|
|
|
3,640
|
|
|
|
|
|
|
|
(110
|
)
|
|
|
3,530
|
|
Other debt securities
|
|
|
4,167
|
|
|
|
|
|
|
|
(68
|
)
|
|
|
4,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75,898
|
|
|
$
|
1
|
|
|
$
|
(312
|
)
|
|
$
|
75,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and
obligations of U.S. government agencies
|
|
$
|
108,083
|
|
|
$
|
1
|
|
|
$
|
(545
|
)
|
|
$
|
107,539
|
|
U.S. corporate securities
|
|
|
29,428
|
|
|
|
12
|
|
|
|
(240
|
)
|
|
|
29,200
|
|
Mortgage-backed securities
|
|
|
5,004
|
|
|
|
|
|
|
|
(108
|
)
|
|
|
4,896
|
|
Other debt securities
|
|
|
13,140
|
|
|
|
|
|
|
|
(279
|
)
|
|
|
12,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
155,655
|
|
|
$
|
13
|
|
|
$
|
(1,172
|
)
|
|
$
|
154,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains and losses realized on sales of
available-for-sale
marketable securities included in Other (income)
expense in the Consolidated Statements of Operations for
the years ended September 30, 2006, 2005 and 2004 are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Gross realized gains
|
|
$
|
226
|
|
|
$
|
|
|
|
$
|
148
|
|
Gross realized losses
|
|
|
|
|
|
|
|
|
|
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains
|
|
$
|
226
|
|
|
$
|
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
From April 2004 through September 2005, the Company held its
available-for-sale
marketable securities until maturity and, as such, did not incur
any realized gains or losses.
The fair value of the marketable securities at
September 30, 2006, by contractual maturity, are shown
below. Expected maturities will differ from contractual
maturities because the issuers of the securities may have the
right to prepay obligations without prepayment penalties (in
thousands).
|
|
|
|
|
|
|
Fair Value
|
|
|
Due in one year or less
|
|
$
|
68,280
|
|
Due after one year through five
years
|
|
|
794
|
|
Due after ten years
|
|
|
6,513
|
|
|
|
|
|
|
|
|
$
|
75,587
|
|
|
|
|
|
|
|
|
5.
|
Property,
Plant and Equipment
|
Property, plant and equipment as of September 30, 2006 and
2005 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Buildings and land
|
|
$
|
44,961
|
|
|
$
|
40,019
|
|
Computer equipment and software
|
|
|
67,759
|
|
|
|
62,190
|
|
Machinery and equipment
|
|
|
40,584
|
|
|
|
27,572
|
|
Furniture and fixtures
|
|
|
14,648
|
|
|
|
12,471
|
|
Leasehold improvements
|
|
|
24,233
|
|
|
|
16,093
|
|
Construction in progress
|
|
|
5,382
|
|
|
|
2,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
197,567
|
|
|
|
161,027
|
|
Less accumulated depreciation and
amortization
|
|
|
(118,734
|
)
|
|
|
(106,862
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
78,833
|
|
|
$
|
54,165
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense was $17.1 million, $13.3 million
and $13.8 million for the years ended September 30,
2006, 2005 and 2004, respectively.
In the fourth quarter of fiscal 2005, the Company accelerated
the depreciation on its existing Customer Relations Management
system which was phased out in December 31, 2005. The
impact of this accelerated depreciation was $1.3 million
during the fourth quarter of fiscal 2005.
|
|
6.
|
Goodwill
and Intangible Assets
|
The Company performs an annual impairment test of its goodwill
as required under the provisions of FAS 142 on
September 30 of each fiscal year unless interim indicators
of impairment exist. Goodwill is considered to be impaired when
the net book value of a reporting unit exceeds its estimated
fair value. Fair values are estimated using a discounted cash
flow methodology. Discounted cash flows are based on the
businesses strategic plans and managements best
estimate of revenue growth and gross profit by each reporting
unit. In the fourth quarter of fiscal year 2005, the
Companys equipment automation and factory automation
segments were combined into the hardware segment, which reflects
how management now evaluates its business (see Note 16).
In fiscal 2004, in connection with a third party letter of
intent to purchase the assets of the SELS, which made up the
Companys Other segment, the Company assessed
the potential impairment of goodwill for this segment (See
Note 20). The Company considered the offer in the letter of
intent as an indication of fair value. Based on its analysis,
the Company determined that the implied fair value of the then
Other segments goodwill was
64
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$7.4 million less than its book value and therefore
recorded a charge to write-down the value of this goodwill in
the fourth quarter, which has been recorded as a component of
the loss from discontinued operations for fiscal year 2004. As
there were no interim indicators of potential impairment of
goodwill in the Companys other segments, the Company
performed its annual impairment test under FAS 142 in the
fourth quarter of fiscal 2004 using the present value of
expected cash flows. The Companys analysis indicated no
impairment of the goodwill in these segments.
In fiscal 2005 and 2006, the Company performed its annual
impairment test for goodwill and determined that no adjustment
to goodwill was necessary.
The changes in the carrying amount of goodwill by segment for
the years ended September 30, 2006 and 2005 are as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware
|
|
|
Software
|
|
|
Total
|
|
|
Balance at September 30,
2004
|
|
$
|
25,020
|
|
|
$
|
37,014
|
|
|
$
|
62,034
|
|
Adjustments to goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
|
|
|
|
60
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30,
2005
|
|
|
25,020
|
|
|
|
37,074
|
|
|
|
62,094
|
|
Adjustments to goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Helix
|
|
|
276,801
|
|
|
|
|
|
|
|
276,801
|
|
Synetics
|
|
|
12,631
|
|
|
|
|
|
|
|
12,631
|
|
Purchase accounting adjustments on
prior period acquisitions
|
|
|
|
|
|
|
(232
|
)
|
|
|
(232
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
150
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30,
2006
|
|
$
|
314,452
|
|
|
$
|
36,992
|
|
|
$
|
351,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of the Companys identifiable intangible assets
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2006
|
|
|
September 30, 2005
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Value
|
|
|
Cost
|
|
|
Amortization
|
|
|
Value
|
|
|
Patents
|
|
$
|
10,024
|
|
|
$
|
6,899
|
|
|
$
|
3,125
|
|
|
$
|
7,179
|
|
|
$
|
6,934
|
|
|
$
|
245
|
|
Completed technology
|
|
|
90,585
|
|
|
|
38,386
|
|
|
|
52,199
|
|
|
|
30,385
|
|
|
|
29,120
|
|
|
|
1,265
|
|
License agreements
|
|
|
305
|
|
|
|
305
|
|
|
|
|
|
|
|
305
|
|
|
|
305
|
|
|
|
|
|
Trademark and trade names
|
|
|
7,232
|
|
|
|
3,120
|
|
|
|
4,112
|
|
|
|
2,532
|
|
|
|
2,336
|
|
|
|
196
|
|
Non-competition agreements
|
|
|
1,726
|
|
|
|
1,721
|
|
|
|
5
|
|
|
|
1,726
|
|
|
|
1,716
|
|
|
|
10
|
|
Customer relationships
|
|
|
43,017
|
|
|
|
8,391
|
|
|
|
34,626
|
|
|
|
6,517
|
|
|
|
4,405
|
|
|
|
2,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
152,889
|
|
|
$
|
58,822
|
|
|
$
|
94,067
|
|
|
$
|
48,644
|
|
|
$
|
44,816
|
|
|
$
|
3,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for intangible assets was
$14.6 million, $3.1 million and $3.7 million for
the years ended September 30, 2006, 2005 and 2004,
respectively.
65
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Estimated future amortization expense for the intangible assets
recorded by the Company as of September 30, 2006 is as
follows (in millions):
|
|
|
|
|
Year ended September 30,
|
|
|
|
|
2007
|
|
$
|
16.0
|
|
2008
|
|
|
17.0
|
|
2009
|
|
|
18.1
|
|
2010
|
|
|
14.9
|
|
2011
|
|
|
9.9
|
|
Thereafter
|
|
|
18.2
|
|
|
|
7.
|
Investment
in Affiliates
|
Joint
Ventures
The Company participates in a joint venture, ULVAC Cryogenics,
Inc., or UCI, with ULVAC Corporation of Chigasaki, Japan, which
was part of the acquired operations of Helix in October 2005.
The joint venture was formed in 1981 by Helix and ULVAC
Corporation. UCI manufactures and sells cryogenic vacuum pumps,
principally to ULVAC Corporation, one of the largest
semiconductor and flat panel OEMs in Japan. Each company
owns 50% of UCI. The joint venture arrangement includes a
license and technology agreement exclusively involving
technology previously owned by Helix.
The Company owns 50% of the outstanding common stock of UCI.
This investment is accounted for using the equity method. Under
this method of accounting, the Company records in income its
proportionate share of the earnings of UCI with a corresponding
increase in the carrying value of the investment.
66
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On May 8, 2006, the Company entered into a Joint Venture
Agreement (the Agreement) with Yaskawa Electric
Corporation (Yaskawa) to form a 50/50 joint venture called
Yaskawa Brooks Automation, Inc. (YBA) to exclusively
market and sell Yaskawas semiconductor robotics products
and Brooks automation hardware products to semiconductor
customers in Japan. This Agreement was executed on June 30,
2006. The Company invested $1,955,000 into this joint venture.
YBA began operations on September 21, 2006.
|
|
8.
|
Earnings
(Loss) Per Share
|
Below is a reconciliation of earnings (loss) per share and
weighted average common shares outstanding for purposes of
calculating basic and diluted earnings (loss) per share (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Net income (loss)
|
|
$
|
25,930
|
|
|
$
|
(11,612
|
)
|
|
$
|
14,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding used in computing basic earnings (loss) per share
|
|
|
72,323
|
|
|
|
44,919
|
|
|
|
43,006
|
|
Dilutive common stock options
|
|
|
210
|
|
|
|
|
|
|
|
567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding for purposes of computing diluted earnings (loss)
per share
|
|
|
72,533
|
|
|
|
44,919
|
|
|
|
43,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
0.36
|
|
|
$
|
(0.26
|
)
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
0.36
|
|
|
$
|
(0.26
|
)
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximately 4,796,000, 5,374,000 and 4,985,000 options to
purchase common stock and 1,000, 21,000 and 0 shares of
restricted stock were excluded from the computation of diluted
earnings (loss) per share attributable to common stockholders
for the years ended September 30, 2006, 2005 and 2004,
respectively, as their effect would be anti-dilutive. The
4,796,000 and 4,985,000 options for the years ended
September 30, 2006 and 2004 had an exercise price greater
than the average market price of the common stock. These options
and restricted stock awards could, however, become dilutive in
future periods. In addition, 1,980,000, 2,492,000 and
2,492,000 shares of common stock for the assumed conversion
of the Companys convertible debt were excluded from this
calculation for the years ended September 30, 2006, 2005
and 2004, respectively, as the effect of conversion would be
anti-dilutive. On July 17, 2006, the Company paid the
convertible debt in full.
The components of the income tax provision are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
680
|
|
|
$
|
|
|
|
$
|
|
|
State
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
Foreign
|
|
|
4,046
|
|
|
|
5,198
|
|
|
|
8,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,732
|
|
|
|
5,204
|
|
|
|
8,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2004
|
|
|
2003
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,732
|
|
|
$
|
5,204
|
|
|
$
|
8,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of income (loss) from continuing operations
before income taxes and minority interests, are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Domestic
|
|
$
|
19,562
|
|
|
$
|
(7,015
|
)
|
|
$
|
10,820
|
|
Foreign
|
|
|
10,345
|
|
|
|
4,264
|
|
|
|
21,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,907
|
|
|
$
|
(2,751
|
)
|
|
$
|
32,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The differences between the income tax provision (benefit) and
income taxes computed using the applicable U.S. statutory
federal tax rate are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Income tax provision (benefit)
computed at federal statutory rate
|
|
$
|
10,467
|
|
|
$
|
(963
|
)
|
|
$
|
11,339
|
|
State income taxes, net of federal
benefit
|
|
|
4
|
|
|
|
(643
|
)
|
|
|
286
|
|
Research and development tax
credits
|
|
|
|
|
|
|
|
|
|
|
(1,079
|
)
|
ETI tax benefit/Sec. 199
manufacturing deduction
|
|
|
(1,009
|
)
|
|
|
(357
|
)
|
|
|
(621
|
)
|
Foreign income taxed at different
rates
|
|
|
1,661
|
|
|
|
2,035
|
|
|
|
(3,090
|
)
|
Dividends
|
|
|
1,148
|
|
|
|
3,531
|
|
|
|
223
|
|
Change in deferred tax asset
valuation allowance
|
|
|
(9,289
|
)
|
|
|
(1,164
|
)
|
|
|
(4,618
|
)
|
Other permanent differences
|
|
|
135
|
|
|
|
56
|
|
|
|
45
|
|
Deferred compensation
|
|
|
117
|
|
|
|
636
|
|
|
|
1,124
|
|
Nondeductible meals and
entertainment
|
|
|
259
|
|
|
|
220
|
|
|
|
254
|
|
Withholding taxes
|
|
|
1,540
|
|
|
|
3,328
|
|
|
|
3,895
|
|
Foreign taxes deducted
|
|
|
(539
|
)
|
|
|
(1,475
|
)
|
|
|
|
|
Other
|
|
|
238
|
|
|
|
|
|
|
|
295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
4,732
|
|
|
$
|
5,204
|
|
|
$
|
8,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company does not provide for U.S. income taxes
applicable to undistributed earnings of its foreign subsidiaries
since these earnings are indefinitely reinvested.
68
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The significant components of the net deferred tax assets are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Reserves not currently deductible
|
|
$
|
30,151
|
|
|
$
|
25,630
|
|
Federal, state and foreign tax
credits
|
|
|
14,700
|
|
|
|
13,546
|
|
Amortization
|
|
|
|
|
|
|
27,370
|
|
Depreciation
|
|
|
8,505
|
|
|
|
8,399
|
|
Stock-based compensation
|
|
|
4,866
|
|
|
|
6,749
|
|
Net operating loss carryforwards
|
|
|
157,721
|
|
|
|
166,079
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
215,943
|
|
|
|
247,773
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
7,706
|
|
|
|
|
|
Other liabilities
|
|
|
2,877
|
|
|
|
2,054
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
10,583
|
|
|
|
2,054
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
205,360
|
|
|
|
245,719
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
As a result of recognizing substantial operating losses in prior
years, including the year ended September 30, 2005, and the
continuing uncertainty in the semiconductor sector, the Company
has determined that it is more likely than not that the net
deferred tax assets will not be realized and has maintained a
full valuation allowance against its net deferred tax assets
from continuing operations at September 30, 2006 and 2005.
The amount of the deferred tax asset considered realizable is
subject to change based on future events, including generating
taxable income in future periods. The Company continues to
assess the need for the valuation allowance at each balance
sheet date based on all available evidence. However, it is
possible that the more likely than not criterion
could be met in fiscal 2007 or a future period, which could
result in the reversal of a significant portion or all of the
valuation allowance, which, at that time, would be recorded as a
tax benefit in the consolidated statements of operations.
The approximate $40.4 million decrease in the valuation
allowance at September 30, 2006 compared to
September 30, 2005 is principally due to the recording of
deferred tax liabilities due to acquired identified intangibles,
utilization of net operating losses, expiring tax credits and
changes in state and foreign tax rates.
As of September 30, 2006, the Company had federal, state
and foreign net operating loss carryforwards from continuing and
discontinued operations of approximately $721.6 million and
federal and state research and development tax credit
carryforwards of approximately $14.7 million available to
reduce future tax liabilities, which expire at various dates
through 2026. Included in the net operating loss carryforwards
are stock option deductions of approximately $19.5 million.
The benefits of these tax deductions approximate
$7.0 million of which approximately $4.0 million will
be credited to additional paid-in capital upon being realized or
recognized.
We are subject to income taxes in various jurisdictions.
Significant judgment is required in determining the world-wide
provision for income taxes. While it is often difficult to
predict the final outcome or the timing of resolution of any
particular tax matter, we believe that the tax reserves reflect
the probable outcome of known contingencies. Tax reserves
established include, but are not limited to, business
combinations, transfer pricing, withholding taxes, and various
state and foreign audit matters, some of which may be resolved
in the near future resulting in an adjustment to the reserve.
69
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
10.
|
Common
Stock Offering
|
On December 16, 2003, the Company completed a public
offering of 6,900,000 shares of its common stock. The
Company received proceeds, net of $6.8 million of issuance
costs, of $124.3 million on the sale of the common stock.
|
|
11.
|
Financing
Arrangements
|
On May 23, 2001, the Company completed the private
placement of $175.0 million aggregate principal amount of
4.75% Convertible Subordinated Notes due in 2008. The
Company received net proceeds of $169.5 million from the
sale. Interest on the notes was paid on June 1 and
December 1 of each year. The notes were scheduled to mature
on June 1, 2008.
The Company did not file its quarterly report on
Form 10-Q
for the period ended March 31, 2006 by the prescribed due
date. As a result of this delay, the Company was not in
compliance with its obligation under Section 6.2 of the
indenture with respect to its 4.75% Convertible
Subordinated Notes due 2008 to file with the SEC all reports and
other information and documents which the Company is required to
file with the SEC pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934. On May 15, 2006, the
Company received a notice from holders of more than 25% in
aggregate principal amount of notes outstanding that the Company
was in default of Section 6.2 of the indenture based on its
failure to file its
Form 10-Q.
On Friday July 14, 2006, the Company received a further
notice from holders of more than 25% of the aggregate
outstanding principal amount of the notes accelerating the
Companys obligation to repay the unpaid principal on the
notes because its Report on
Form 10-Q
for the quarter ended March 31, 2006 had not yet been
filed. On Monday, July 17, 2006, the Company paid the
outstanding $175.0 million principal balance to the trustee
and subsequently paid all accrued interest. The notes are now
retired, having been paid in full.
At September 30, 2006, the Company had $0.7 million of
an uncommitted demand promissory note facility still in use, all
of it for letters of credit.
Debt consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Convertible subordinated notes at
4.75%, due on June 1, 2008
|
|
$
|
|
|
|
$
|
175,000
|
|
Other
|
|
|
13
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
175,014
|
|
Less current portion
|
|
|
11
|
|
|
|
175,012
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
2
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
The Companys debt repayments are due as follows (in
thousands):
|
|
|
|
|
Year ended September 30, 2007
|
|
$
|
11
|
|
2008
|
|
|
2
|
|
|
|
|
|
|
|
|
$
|
13
|
|
|
|
|
|
|
|
|
12.
|
Postretirement
Benefits
|
On October 26, 2005, the Company purchased Helix and
assumed responsibility for the liabilities and assets of the
Helix Employees Pension Plan (Plan). The Plan
is a final average pay pension plan. The Companys funding
policy is to contribute an amount equal to the minimum required
employer contribution under the Employee
70
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Retirement Income Security Act of 1974. In May 2006, the
Companys Board of Directors approved the freezing of
benefit accruals and future participation in the Plan effective
October 31, 2006.
The Company uses a September 30th measurement date in the
determination of net periodic benefit costs, benefit obligations
and the value of plan assets. The following tables set forth the
funded status and amounts recognized in the Companys
consolidated balance sheets at September 30, 2006 for the
Plan (in thousands):
|
|
|
|
|
|
|
Year Ended
|
|
|
|
September 30, 2006
|
|
|
Benefit obligation at
October 1, 2005
|
|
$
|
|
|
Benefit obligation assumed at date
of acquisition
|
|
|
13,777
|
|
Service cost
|
|
|
1,740
|
|
Interest cost
|
|
|
821
|
|
Actuarial gain
|
|
|
(567
|
)
|
Disbursements
|
|
|
(3,444
|
)
|
|
|
|
|
|
Benefit obligation at
September 30, 2006
|
|
$
|
12,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
September 30, 2006
|
|
|
Fair value of assets at
October 1, 2005
|
|
$
|
|
|
Fair value assumed at date of
acquisition
|
|
|
11,865
|
|
Actual return on plan assets
|
|
|
1,637
|
|
Company contributions
|
|
|
3,000
|
|
Disbursements
|
|
|
(3,444
|
)
|
|
|
|
|
|
Fair value of assets at
September 30, 2006
|
|
$
|
13,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
September 30, 2006
|
|
|
Funded status at
September 30, 2006
|
|
$
|
731
|
|
Unrecognized net actuarial gain
|
|
|
(915
|
)
|
|
|
|
|
|
Accrued benefit liability
|
|
$
|
(184
|
)
|
|
|
|
|
|
The Companys investment strategy with respect to Plan
assets is to maximize return while protecting principal. These
investments are primarily in equity and debt securities. The
expected long term rate of return on Plan assets was 8.25% for
the year ended September 30, 2006. The expected rate of
return was developed through analysis of historical market
returns, current market conditions and the Plans past
experience.
Net periodic benefit cost consisted of the following (in
thousands):
|
|
|
|
|
|
|
Year Ended
|
|
|
|
September 30, 2006
|
|
|
Service cost
|
|
$
|
1,740
|
|
Interest cost
|
|
|
821
|
|
Expected return on assets
|
|
|
(1,000
|
)
|
Settlement gain
|
|
|
(289
|
)
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
1,272
|
|
|
|
|
|
|
71
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The accumulated benefit obligation for the Plan was
$12.3 million at September 30, 2006. Certain
information for the Plan with accumulated benefit obligations
follows (in thousands):
|
|
|
|
|
|
|
September 30, 2006
|
|
|
Projected benefit obligation
|
|
$
|
12,327
|
|
Accumulated benefit obligation
|
|
|
12,327
|
|
Fair value of plan assets
|
|
|
13,058
|
|
Weighted-average assumptions used to determine net cost at
September 30, 2006 follows:
|
|
|
|
|
|
|
September 30, 2006
|
|
|
Discount rate
|
|
|
5.75
|
%
|
Expected return on plan assets
|
|
|
8.25
|
%
|
Rate of compensation increase
|
|
|
4.00
|
%
|
The Company does not expect to make a contribution to the Plan
in fiscal 2007.
Expected benefit payments are expected to be paid as follows (in
thousands):
|
|
|
|
|
2007
|
|
$
|
290
|
|
2008
|
|
|
1,175
|
|
2009
|
|
|
550
|
|
2010
|
|
|
1,153
|
|
2011
|
|
|
1,135
|
|
Thereafter
|
|
|
8,633
|
|
The Company sponsors defined contribution plans that meet the
requirements of Section 401(k) of the Internal Revenue
Code. All United States employees of the Company who meet
minimum age and service requirements are eligible to participate
in the plan. The plan allows employees to invest, on a pre-tax
basis, a percentage of their annual salary subject to statutory
limitations.
The Companys contribution expense for worldwide defined
contribution plans was $2.8 million, $1.9 million and
$0.9 million for the years ended September 30, 2006,
2005 and 2004, respectively.
The Company had an accrual of $9.9 million related to the
retirement benefit to be paid to its former Chief Executive
Officer under the terms of his employment agreement as of
September 30, 2004. The amount payable was earned over time
and due upon his retirement. In accordance with his employment
contract, the full retirement benefit as determined by the
employment agreement of $10.1 million was paid in January
2005.
The Company has a Supplemental Key Executive Retirement Plan
(acquired with Helix) which is designed to supplement benefits
paid to participants under Company-funded, tax-qualified
retirement plans. The Company recorded additional retirement
costs of $59,000 for the year ended September 30, 2006 in
connection with this plan. At September 30, 2006, the
Company had $641,000 accrued for benefits payable under the
Supplemental Key Executive Retirement Plan.
|
|
13.
|
Stockholders
Equity and Convertible Redeemable Preferred Stock
|
Preferred
Stock
At September 30, 2006 and 2005 there were one million
shares of preferred stock, $0.01 par value per share
authorized; no shares were issued and outstanding at
September 30, 2006 and 2005, respectively. Preferred stock
may be issued at the discretion of the Board of Directors
without stockholder approval with such designations, rights and
preferences as the Board of Directors may determine.
72
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Rights
Distribution
Brooks is a party to a rights agreement between itself and
EquiServe Trust Company, N.A. Pursuant to this agreement, Brooks
declared a dividend to its stockholders as of August 12,
1997 of the right to initially purchase Brooks common stock or
1/1,000 of a share of Series A Junior Participating
Preferred Stock. The preferred stock purchase rights are
attached to the shares of Brooks common stock until a triggering
event occurs. The preferred stock purchase rights are triggered
by the acquisition by a person or group, an acquiring
person as defined in the rights agreement, other than
Brooks or any of Brooks subsidiaries or employee benefit
plans, of 15% or more of the outstanding shares of Brooks common
stock. In such event, the holder of a preferred stock purchase
right paying the exercise price would be able to purchase,
instead of a fraction of a share of Series A Junior
Participating Preferred Stock, a number of shares of Brooks
common stock having a market value equal to twice the exercise
price. In the event of specified mergers and similar
transactions involving Brooks, shares of the other party to the
transaction or its parent could be purchased at half of the
market price of such shares by the holders of the preferred
stock purchase rights. The preferred stock purchase rights are
redeemable in whole, but not in part, by Brooks for
$0.001 per right and expire July 31, 2007. Subject to
restrictions, the preferred stock purchase rights may be
exchanged for one share of Brooks common stock upon election by
Brooks board of directors. An acquiring person
would not be permitted to exercise a preferred stock purchase
right. The intended effect of the rights agreement is to deter
any person or group from becoming an acquiring
person without negotiating the acquisition with
Brooks board of directors.
Amended
and Restated 2000 Equity Incentive Plan
The purposes of the Amended and Restated 2000 Equity Incentive
Plan (the 2000 Plan), are to attract and retain
employees and to provide an incentive for them to assist the
Company to achieve long-range performance goals and to enable
them to participate in the long-term growth of the Company.
Under the 2000 Plan the Company may grant (i) incentive
stock options intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended, and (ii) options
that are not qualified as incentive stock options
(nonqualified stock options) and (iii) stock
appreciation rights, performance awards and restricted stock.
All employees of the Company or any affiliate of the Company,
independent directors, consultants and advisors are eligible to
participate in the 2000 Plan. Options under the 2000 Plan
generally vest over four years and expire seven years from the
date of grant. At the Companys March 2006 Annual Meeting,
stockholders approved an amendment to the 2000 Plan to increase
the number of shares authorized for issuance under the plan by
3,000,000 shares, for a total of 9,000,000 shares. As
of September 30, 2006, options to purchase
2,436,029 shares are outstanding and 5,527,450 shares
remain available for grant.
During the year ended September 30, 2006, the Company
issued 699,500 shares of restricted stock or units under
the Amended and Restated 2000 Equity Incentive Plan, net of
cancellations. These restricted stock awards generally have the
following vesting schedules: three year vesting in which 25%
vest in Year 1, 25% vest in Year 2 and 50% vest in Year 3;
four year vesting in which 50% vest in Year 2, 25% vest in
Year 3 and 25% vest in Year 4: and four year cliff vesting.
Compensation expense related to these awards is being recognized
on a straight line basis over the vesting period, based on the
difference between the fair market value of the Companys
common stock on the date of grant and the amount received from
the employee.
1998
Employee Equity Incentive Plan
The purposes of the 1998 Employee Equity Incentive Plan (the
1998 Plan), adopted by the Board of Directors of the
Company in April 1998, are to attract and retain employees and
provide an incentive for them to assist the Company in achieving
long-range performance goals, and to enable them to participate
in the long-term growth of the Company. All employees of the
Company, other than its officers and directors, (including
contractors, consultants, service providers or others) who are
in a position to contribute to the long-term success and growth
of
73
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the Company, are eligible to participate in the 1998 Plan.
Options under the 1998 Plan generally vest over a period of four
years and generally expire seven years from the date of grant.
From February 26, 2003 through September 30, 2006,
1,780,405 options were forfeited due to employee terminations. A
total of 1,560,039 options are outstanding and
291,032 shares remain available for grant under the 1998
Plan as of September 30, 2006.
1993
Non-Employee Director Stock Option Plan
The purpose of the 1993 Non-Employee Director Stock Option Plan
(the Directors Plan) was to attract and retain the
services of experienced and knowledgeable independent directors
of the Company for the benefit of the Company and its
stockholders and to provide additional incentives for such
independent directors to continue to work for the best interests
of the Company and its stockholders through continuing ownership
of its common stock. The Directors Plan expired in 2003,
although some options issued under that plan remain outstanding.
Under its terms, each director who was not an employee of the
Company or any of its subsidiaries was eligible to receive
options under the Directors Plan. Under the Directors Plan, each
eligible director received an automatic grant of an option to
purchase 25,000 shares of common stock upon becoming a
director of the Company and an option to purchase
10,000 shares on July 1 each year thereafter. Options
granted under the Directors Plan generally vested over a period
of five years and generally expired ten years from the date of
grant. A total of 10,000 options are outstanding and no shares
remain available for grant under the Directors Plan as of
September 30, 2006.
1992
Combination Stock Option Plan
Under the Companys 1992 Stock Option Plan (the 1992
Plan), the Company may grant both incentive stock options
and nonqualified stock options. Incentive stock options may only
be granted to persons who are employees of the Company at the
time of grant, which may include officers and directors who are
also employees. Nonqualified stock options may be granted to
persons who are officers, directors or employees of or
consultants or advisors to the Company or persons who are in a
position to contribute to the long-term success and growth of
the Company at the time of grant. Options granted under the 1992
Plan generally vest over a period of four years and generally
expire ten years from the date of grant. A total of 115,596
options are outstanding and no shares remain available for grant
under the 1992 Plan as of September 30, 2006.
Stock
Options of Acquired Companies
In connection with the acquisition of PRI on May 14, 2002,
the Company assumed the outstanding options of multiple stock
option plans that were adopted by PRI. At acquisition, 6,382,329
options to purchase PRI common stock were outstanding and
converted into 3,319,103 options to purchase the Companys
Common Stock. There were options to purchase 120,554 shares
granted under this plan that were outstanding at
September 30, 2006. The Company does not intend to issue
any additional options under the PRI stock option plan.
In connection with the acquisition of Helix on October 26,
2005, the Company assumed the outstanding options of multiple
stock option plans that were adopted by Helix. At acquisition,
689,622 options to purchase Helix common stock were outstanding
and converted into 765,480 options to purchase the
Companys Common Stock. A total of 574,977 options are
outstanding and 153,595 shares remain available for grant
under the Helix plans as of September 30, 2006. The Company
does not intend to issue any additional options under the Helix
stock option plan.
74
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Stock
Option Activity
Aggregate stock option activity for all the above plans for the
years ended September 30, 2006, 2005 and 2004 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Options outstanding at beginning
of year
|
|
|
5,205,354
|
|
|
$
|
23.92
|
|
|
|
5,709,626
|
|
|
$
|
25.43
|
|
|
|
4,639,910
|
|
|
$
|
28.93
|
|
Granted
|
|
|
217,000
|
|
|
$
|
12.82
|
|
|
|
652,250
|
|
|
$
|
16.38
|
|
|
|
2,486,159
|
|
|
$
|
23.84
|
|
Assumed from Helix Technology
acquisition
|
|
|
765,480
|
|
|
$
|
16.42
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Exercised
|
|
|
(108,104
|
)
|
|
$
|
10.69
|
|
|
|
(179,694
|
)
|
|
$
|
12.77
|
|
|
|
(157,730
|
)
|
|
$
|
15.51
|
|
Forfeited/expired
|
|
|
(1,289,253
|
)
|
|
$
|
27.56
|
|
|
|
(976,828
|
)
|
|
$
|
29.77
|
|
|
|
(1,258,713
|
)
|
|
$
|
36.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at end of year
|
|
|
4,790,477
|
|
|
$
|
21.51
|
|
|
|
5,205,354
|
|
|
$
|
23.92
|
|
|
|
5,709,626
|
|
|
$
|
25.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at end of year
|
|
|
4,008,600
|
|
|
$
|
22.82
|
|
|
|
4,120,400
|
|
|
$
|
25.83
|
|
|
|
3,234,428
|
|
|
$
|
27.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value of
options granted at market value during the year
|
|
|
|
|
|
$
|
6.84
|
|
|
|
|
|
|
$
|
7.39
|
|
|
|
|
|
|
$
|
10.40
|
|
Weighted average fair value of
options granted below market value during the year
|
|
|
|
|
|
$
|
6.81
|
|
|
|
|
|
|
$
|
6.20
|
|
|
|
|
|
|
$
|
12.37
|
|
Options available for future grant
|
|
|
5,972,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information about stock options
outstanding at September 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Contractual
|
|
|
Weighted-
|
|
|
Intrinsic
|
|
|
|
|
|
Weighted-
|
|
|
Intrinsic
|
|
|
|
|
|
|
Life
|
|
|
Average
|
|
|
Value (In
|
|
|
|
|
|
Average
|
|
|
Value (In
|
|
Range of Exercise Prices
|
|
Shares
|
|
|
(Years)
|
|
|
Exercise Price
|
|
|
Thousands)
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Thousands)
|
|
|
$3.62 $13.05
|
|
|
1,028,780
|
|
|
|
4.44
|
|
|
$
|
11.07
|
|
|
$
|
2,038
|
|
|
|
708,468
|
|
|
$
|
10.74
|
|
|
$
|
1,635
|
|
$13.06 $24.02
|
|
|
1,218,225
|
|
|
|
4.69
|
|
|
$
|
17.95
|
|
|
$
|
|
|
|
|
766,103
|
|
|
$
|
18.62
|
|
|
$
|
|
|
$24.30 $24.30
|
|
|
1,328,279
|
|
|
|
3.13
|
|
|
$
|
24.30
|
|
|
$
|
|
|
|
|
1,318,836
|
|
|
$
|
24.30
|
|
|
$
|
|
|
$24.78 $59.44
|
|
|
1,215,193
|
|
|
|
1.86
|
|
|
$
|
30.89
|
|
|
$
|
|
|
|
|
1,215,193
|
|
|
$
|
30.89
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$3.62 $59.44
|
|
|
4,790,477
|
|
|
|
3.49
|
|
|
$
|
21.51
|
|
|
$
|
2,038
|
|
|
|
4,008,600
|
|
|
$
|
22.82
|
|
|
$
|
1,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average remaining contractual life of options
exercisable at September 30, 2006 was 3.1 years.
The aggregate intrinsic value in the table above represents the
total intrinsic value, based on the Companys closing stock
price of $13.05 as of September 30, 2006, which would have
been received by the option holders had all option holders
exercised their options as of that date. The total number of
in-the-money
options exercisable as of September 30, 2006 was 708,468.
75
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The weighted average grant date fair value of options, as
determined under SFAS No. 123R, granted during fiscal
2006, 2005 and 2004 was $6.82, $7.30, and $10.81 per share,
respectively. The total intrinsic value of options exercised
during fiscal 2006 and 2005 was $371,000 and $718,000,
respectively. The total cash received from employees as a result
of employee stock option exercises during fiscal 2006 and 2005
was $1,155,000 and $2,294,000, respectively.
As of September 30, 2006 future compensation cost related
to nonvested stock options is approximately $6.0 million
and will be recognized over an estimated weighted average period
of 2.3 years.
The Company settles employee stock option exercises with newly
issued common shares.
Based on information currently available, the Company believes
that, although certain options may have been granted in
violation of our applicable option plans, those options are
valid and enforceable obligations of the Company.
Restricted
Stock Activity
Restricted stock for the year ended September 30, 2006 was
determined using the fair value method. A summary of the status
of the Companys restricted stock as of September 30,
2006 and changes during the year ended September 30, 2006
is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
September 30, 2006
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Outstanding at beginning of year
|
|
|
288,000
|
|
|
$
|
16.40
|
|
Awards granted
|
|
|
828,000
|
|
|
|
13.15
|
|
Awards vested
|
|
|
(91,750
|
)
|
|
|
16.10
|
|
Awards canceled
|
|
|
(128,500
|
)
|
|
|
13.94
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
895,750
|
|
|
$
|
13.79
|
|
|
|
|
|
|
|
|
|
|
The fair value of restricted stock awards vested during fiscal
2006 was $1.5 million. No restricted stock awards vested
during fiscal 2005.
As of September 30, 2006, the unrecognized compensation
cost related to nonvested restricted stock is $8.9 million
and will be recognized over an estimated weighted average
amortization period of 3.0 years.
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
Companys common stock. Under the 1995 Plan, eligible
employees may purchase up to an aggregate of
2,250,000 shares during six-month offering periods
commencing on February 1 and August 1 of each year at a
price per share of 85% of the lower of the fair market value
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 their 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. At the
Companys March 2006 Annual Meeting, stockholders approved
an amendment to the 1995 Plan to increase the number of shares
authorized for issuance under the plan by 750,000 shares.
As of September 30, 2006, 1,551,762 shares of common
stock have been purchased under the 1995 Plan and
1,448,238 shares remain available for purchase.
76
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
15.
|
Acquisition-Related
and Restructuring Costs and Accruals
|
Fiscal
2006 Activities
The Company recorded a charge to continuing operations of
$5.3 million in the year ended September 30, 2006 for
restructuring costs.
Restructuring
Costs
Based on estimates of its near term future revenues and
operating costs, in fiscal 2006, the Company took additional
cost reduction actions. Accordingly, charges of
$5.3 million were recorded for these actions. Of this
amount, $3.3 million related to workforce reductions and
$2.0 million related to excess facilities primarily related
to a vacant facility in Billerica, Massachusetts due to a longer
period than initially estimated to sublease the facility. The
workforce reductions consisted of $2.4 million of severance
costs associated with the termination of approximately 40 legacy
Brooks employees worldwide in sales, service, operations and
administrative functions, whose positions were made redundant as
a result of the Helix acquisition and further downsizing in the
Companys software segment, and $1.8 million for
retention bonuses earned in the period by employees who have
been notified of their termination in the current and prior
periods, offset by the $0.9 million reversal of previously
accrued termination costs to employees who will no longer be
terminated or whose termination was settled at a reduced cost.
The accruals for workforce reductions are expected to be paid
over the next twelve months. The impact of these cost reductions
on the Companys liquidity is not expected to be
significant, as these cost savings yield actual cash savings
within twelve months.
The Company continues to review and align its cost structure to
attain profitable operations amid the changing semiconductor
cycles.
Fiscal
2005 Activities
The Company recorded a charge to continuing operations of
$16.5 million in the year ended September 30, 2005 for
restructuring costs. The Company also recorded a charge of
$1.0 million in the year ended September 30, 2005
related to the discontinued SELS division, which is included in
the loss from discontinued operations.
Restructuring
Costs
Based on estimates of its near term future revenues and
operating costs, the Company announced in fiscal 2005 plans to
take additional cost reduction actions. Accordingly, charges of
$17.5 million, of which $1.0 million related to, and
is classified within discontinued operations, were recorded for
these actions. Of this amount, $14.3 million related to
workforce reductions of approximately 270 employees world wide,
across all functions of the business and $3.2 million
related to excess facilities. Of the $3.2 million of
facilities charges, $1.5 million represents an additional
accrual on a previous vacated facility due to a longer period
than initially estimated to
sub-lease
the facility. Workforce reduction charges included
$4.3 million for headcount reduction of approximately 100
individuals associated with our software segment,
$3.6 million for reductions of approximately 65 employees
in our Jena, Germany facility and $6.4 million related to
various other actions undertaken in fiscal 2005. Excess facility
charges consist of the present value of remaining lease
obligations on facilities vacated in fiscal 2005. The impact of
these cost reductions on the Companys liquidity is not
expected to be significant, as these actions yield equivalent
actual cash savings within twelve months.
Fiscal
2004 Activities
The Company recorded a charge to operations of $5.4 million
in the year ended September 30, 2004 of which
$0.1 million related to acquisitions and $5.3 million
related to restructuring costs.
77
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Acquisition-Related
Costs
The $0.1 million related to acquisitions is comprised of
legal and consulting costs to integrate and consolidate acquired
entities into existing Brooks entities.
Restructuring
Costs
Based on estimates of its near term future revenues and
operating costs, the Company announced in fiscal 2004 several
plans to take additional cost reduction actions. Accordingly,
charges of $5.3 million were recorded for these actions. Of
this amount, $3.9 million related to workforce reductions
of approximately 60 employees world wide, across all functions
of the business and $1.4 million related to excess
facilities. Excess facilities charges of $1.4 million
consisted of $0.2 million for excess facilities identified
in fiscal 2004 that were recorded to recognize the amount of the
remaining lease obligations. These costs have been estimated
from the time when the space is vacant and there are no plans to
utilize the facility. Costs incurred prior to vacating the
facilities were charged to operations. Final exit costs for
facilities abandoned in previous restructurings amounted to
$0.7 million. The remaining $0.5 million represents a
reevaluation of the assumptions used in determining the fair
value of certain lease obligations related to facilities
abandoned in a previous restructuring. The revised assumptions,
including lower estimates of expected
sub-rental
income over the remainder of the lease terms, are based on
managements evaluation of the rental space available. The
Company believes that the cost reduction programs implemented
will align costs with revenues. In the event the Company is
unable to achieve this alignment, additional cost cutting
programs may be required in the future. The facilities charges
are expected to be paid over the remaining lease periods,
expiring in fiscal 2011. These charges helped better align the
Companys cost structure. The impact of these cost
reductions on the Companys liquidity is not expected to be
significant, as these actions yield equivalent actual cash
savings within twelve months.
The activity related to the Companys restructuring
accruals is below, which includes activity related to our
discontinued SELS division (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006 Activity
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2005
|
|
|
Expense
|
|
|
Helix Acquisition
|
|
|
Reversals
|
|
|
Utilization
|
|
|
2006
|
|
|
Facilities
|
|
$
|
15,045
|
|
|
$
|
1,966
|
|
|
$
|
580
|
|
|
$
|
|
|
|
$
|
(3,894
|
)
|
|
$
|
13,697
|
|
Workforce-related
|
|
|
8,429
|
|
|
|
4,321
|
|
|
|
2,756
|
|
|
|
(990
|
)
|
|
|
(11,670
|
)
|
|
|
2,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,474
|
|
|
$
|
6,287
|
|
|
$
|
3,336
|
|
|
$
|
(990
|
)
|
|
$
|
(15,564
|
)
|
|
$
|
16,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2005 Activity
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2004
|
|
|
Expense
|
|
|
Adjustments
|
|
|
Reversals
|
|
|
Utilization
|
|
|
2005
|
|
|
Facilities
|
|
$
|
17,730
|
|
|
$
|
1,680
|
|
|
$
|
1,542
|
|
|
$
|
|
|
|
$
|
(5,907
|
)
|
|
$
|
15,045
|
|
Workforce-related
|
|
|
2,460
|
|
|
|
14,451
|
|
|
|
|
|
|
|
(184
|
)
|
|
|
(8,298
|
)
|
|
|
8,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,190
|
|
|
$
|
16,131
|
|
|
$
|
1,542
|
|
|
$
|
(184
|
)
|
|
$
|
(14,205
|
)
|
|
$
|
23,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2004 Activity
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2003
|
|
|
Expense
|
|
|
Adjustments
|
|
|
Reversals
|
|
|
Utilization
|
|
|
2004
|
|
|
Facilities
|
|
$
|
24,312
|
|
|
$
|
192
|
|
|
$
|
1,216
|
|
|
$
|
|
|
|
$
|
(7,990
|
)
|
|
$
|
17,730
|
|
Workforce-related
|
|
|
4,955
|
|
|
|
3,922
|
|
|
|
|
|
|
|
|
|
|
|
(6,417
|
)
|
|
|
2,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,267
|
|
|
$
|
4,114
|
|
|
$
|
1,216
|
|
|
$
|
|
|
|
$
|
(14,407
|
)
|
|
$
|
20,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.
|
Segment
and Geographic Information
|
The Company has two reportable segments: hardware and software.
In the fourth quarter of fiscal year 2005, the Companys
equipment automation and factory automation segments were
combined into the hardware segment, which reflects how
management now evaluates its business.
The hardware segment provides wafer handling products and
components for use within semiconductor process equipment. These
systems automate the movement of wafers into and out of
semiconductor manufacturing process chambers and provide an
integration point between factory automation systems and process
tools. The products offered by the Company include vacuum and
atmospheric systems and robots, subsystems, and related
components. Also offered are assembly and manufacturing of
customer designed automation systems, or contract automation
systems. The primary customers for these solutions are
manufacturers of process tool equipment. Other hardware products
include Brooks automated material handling systems, or
AMHS, and equipment for lithography automation that manage the
storage, inspection and transport of photomasks, or reticles.
The software segment addresses the need for production
management systems driven by the extensive tracking and tracing
requirements of the semiconductor industry. At the core of these
production systems is the manufacturing execution system
(MES) that is primarily responsible for tracking the
movement of production wafers in a fab, and managing the data
and actions for every wafer, equipment, operator and other
resources in the fab. These mission-critical systems provide
real time information primarily to production operators,
supervisors and fab managers. Also provided is other important
software applications to meet the critical requirements of the
fab, such as real time dispatching and scheduling, equipment
communications, advanced process control, material control using
the AMHS, activity execution and control, automated maintenance
management of equipment, and other applications. Customers often
purchase more than one of these software products from Brooks
for a single fab, often driving the need for consulting and
integration services. These software products enable
semiconductor manufacturers to increase their return on
investment by maximizing production efficiency, and may be sold
as part of an integrated solution or on a stand-alone basis.
These software products and services are also used in many
similar manufacturing industries as semiconductor, including
flat panel display, data storage, and electronic assembly.
The Company evaluates performance and allocates resources based
on revenues and operating income (loss). Operating income (loss)
for each segment includes selling, general and administrative
expenses directly attributable to the segment. Amortization of
acquired intangible assets, including impairment of these assets
and of goodwill and acquisition-related and restructuring
charges are excluded from the segments operating income
(loss). The Companys non-allocable overhead costs, which
include corporate general and administrative expenses, are
allocated between the segments based upon segment revenues.
Segment assets exclude deferred tax assets, acquired intangible
assets, goodwill, marketable securities and cash equivalents.
79
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Financial information for the Companys business segments
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware
|
|
|
Software
|
|
|
Total
|
|
|
Year ended September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
488,827
|
|
|
$
|
25,467
|
|
|
$
|
514,294
|
|
Services
|
|
|
118,667
|
|
|
|
59,909
|
|
|
|
178,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
607,494
|
|
|
$
|
85,376
|
|
|
$
|
692,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
186,650
|
|
|
$
|
58,134
|
|
|
$
|
244,784
|
|
Segment operating income
|
|
$
|
34,921
|
|
|
$
|
3,054
|
|
|
$
|
37,975
|
|
Depreciation
|
|
$
|
15,362
|
|
|
$
|
1,742
|
|
|
$
|
17,104
|
|
Assets
|
|
$
|
418,296
|
|
|
$
|
36,707
|
|
|
$
|
455,003
|
|
Year ended September 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
310,025
|
|
|
$
|
28,047
|
|
|
$
|
338,072
|
|
Services
|
|
|
59,753
|
|
|
|
65,921
|
|
|
|
125,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
369,778
|
|
|
$
|
93,968
|
|
|
$
|
463,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
99,786
|
|
|
$
|
60,350
|
|
|
$
|
160,136
|
|
Segment operating income
|
|
$
|
12,481
|
|
|
$
|
547
|
|
|
$
|
13,028
|
|
Depreciation
|
|
$
|
9,899
|
|
|
$
|
3,352
|
|
|
$
|
13,251
|
|
Assets
|
|
$
|
237,676
|
|
|
$
|
54,675
|
|
|
$
|
292,351
|
|
Year ended September 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
357,280
|
|
|
$
|
44,972
|
|
|
$
|
402,252
|
|
Services
|
|
|
58,194
|
|
|
|
74,607
|
|
|
|
132,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
415,474
|
|
|
$
|
119,579
|
|
|
$
|
535,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
130,124
|
|
|
$
|
69,542
|
|
|
$
|
199,666
|
|
Segment operating income
|
|
$
|
35,231
|
|
|
$
|
8,995
|
|
|
$
|
44,226
|
|
Depreciation
|
|
$
|
8,817
|
|
|
$
|
4,940
|
|
|
$
|
13,757
|
|
Assets
|
|
$
|
296,115
|
|
|
$
|
79,647
|
|
|
$
|
375,762
|
|
80
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation of the Companys reportable segment
operating income (loss) and segment assets to the corresponding
consolidated amounts as of and for the year ended
September 30, 2006, 2005 and 2004 is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Year Ended
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Segment income (loss) from
continuing operations
|
|
$
|
37,975
|
|
|
$
|
13,028
|
|
|
$
|
44,226
|
|
Amortization of acquired
intangible assets
|
|
|
4,894
|
|
|
|
804
|
|
|
|
1,053
|
|
Restructuring and
acquisition-related charges
|
|
|
5,297
|
|
|
|
16,542
|
|
|
|
5,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss) from
continuing operations
|
|
$
|
27,784
|
|
|
$
|
(4,318
|
)
|
|
$
|
37,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets
|
|
$
|
455,003
|
|
|
$
|
292,351
|
|
|
$
|
375,762
|
|
Assets from discontinued operations
|
|
|
|
|
|
|
55
|
|
|
|
1,706
|
|
Goodwill
|
|
|
351,444
|
|
|
|
62,094
|
|
|
|
62,034
|
|
Intangible assets
|
|
|
94,067
|
|
|
|
3,828
|
|
|
|
6,929
|
|
Investments in marketable
securities and cash equivalents
|
|
|
92,063
|
|
|
|
265,752
|
|
|
|
224,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
992,577
|
|
|
$
|
624,080
|
|
|
$
|
671,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues based upon the source of the order by geographic
area are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
North America
|
|
$
|
412,941
|
|
|
$
|
241,681
|
|
|
$
|
272,694
|
|
Asia/Pacific
|
|
|
157,379
|
|
|
|
141,703
|
|
|
|
141,697
|
|
Europe
|
|
|
122,550
|
|
|
|
80,362
|
|
|
|
120,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
692,870
|
|
|
$
|
463,746
|
|
|
$
|
535,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets, including property, plant and equipment by
geographic area are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
North America
|
|
$
|
73,142
|
|
|
$
|
51,115
|
|
Asia/Pacific
|
|
|
5,076
|
|
|
|
2,357
|
|
Europe
|
|
|
615
|
|
|
|
693
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
78,833
|
|
|
$
|
54,165
|
|
|
|
|
|
|
|
|
|
|
|
|
17.
|
Significant
Customers and Related Party Information
|
On June 11, 2001, the Company appointed a new member to its
Board of Directors. This individual served as a director of one
of the Companys customers until May 3, 2006.
Accordingly, this customer is considered a related party for the
period from June 11, 2001 through May 3, 2006.
Revenues from this customer from October 1, 2005 to
March 31, 2006 were approximately $205,000 and for the
years ended September 30, 2005 and 2004 were approximately
$319,000 and $409,000, respectively. The amounts due from this
customer included in accounts receivable at March 31, 2006
and September 30, 2005 were $40,000 and $33,000,
respectively. Related party transactions and amounts included in
accounts receivable are on standard pricing and contractual
terms and manner of settlement for products and services of
similar types and at comparable volumes.
81
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company had no customer that accounted for more than 10% of
revenues in the years ended September 30, 2006, 2005 and
2004. The Company had two customers that accounted for more than
10% of its accounts receivable balance at September 30,
2006 and one customer that accounted for 10% of its accounts
receivable balance at September 30, 2005.
|
|
18.
|
Other
Balance Sheet Information
|
Components of other selected captions in the Consolidated
Balance Sheets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Accounts receivable
|
|
$
|
128,904
|
|
|
$
|
80,352
|
|
Less allowance for doubtful
accounts
|
|
|
1,709
|
|
|
|
2,797
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
127,195
|
|
|
$
|
77,555
|
|
|
|
|
|
|
|
|
|
|
The allowance for doubtful accounts activity for the years ended
September 30, 2006, 2005 and 2004 were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of
|
|
|
Acquisition
|
|
|
|
|
|
Reversals of
|
|
|
Write-offs and
|
|
|
Balance at
|
|
Description
|
|
Period
|
|
|
Reserves
|
|
|
Provisions
|
|
|
Bad Debt Expense
|
|
|
Adjustments
|
|
|
End of Period
|
|
|
2006 Allowance for doubtful
accounts
|
|
$
|
2,797
|
|
|
$
|
579
|
|
|
$
|
|
|
|
$
|
(842
|
)
|
|
$
|
(825
|
)
|
|
$
|
1,709
|
|
2005 Allowance for doubtful
accounts
|
|
|
3,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(433
|
)
|
|
|
2,797
|
|
2004 Allowance for doubtful
accounts
|
|
|
6,499
|
|
|
|
|
|
|
|
225
|
|
|
|
(2,050
|
)
|
|
|
(1,444
|
)
|
|
|
3,230
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Inventories
|
|
|
|
|
|
|
|
|
Raw materials and purchased parts
|
|
$
|
48,996
|
|
|
$
|
24,612
|
|
Work-in-process
|
|
|
25,064
|
|
|
|
12,043
|
|
Finished goods
|
|
|
25,794
|
|
|
|
11,779
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
99,854
|
|
|
$
|
48,434
|
|
|
|
|
|
|
|
|
|
|
Reserves for excess and obsolete inventory were $12,707,000,
$12,707,000 and $14,520,000 at September 30, 2006, 2005 and
2004, respectively. The Company recorded additions to reserves
for excess and obsolete inventory of $2,917,000 (including net
acquired reserves of $1,686,000), $8,902,000 and $9,259,000 in
fiscal 2006, 2005 and 2004, respectively, comprised of
$1,231,000, $8,752,000 and $7,340,000 charged to expense in
fiscal 2006, 2005 and 2004, respectively, and $8,000, $150,000
and $421,000 of foreign exchange differences charged to other
accounts in fiscal 2006, 2005 and 2004, respectively. The
Company reduced the reserves for excess and obsolete inventory
by $2,917,000, $10,715,000 and $10,244,000, in fiscal 2006, 2005
and 2004, respectively, for write-offs of inventory.
82
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company provides for the estimated cost of product
warranties, primarily from historical information, at the time
product revenue is recognized and retrofit accruals at the time
retrofit programs are established. While the Company engages in
extensive product quality programs and processes, including
actively monitoring and evaluating the quality of its component
suppliers, the Companys warranty obligation is affected by
product failure rates, utilization levels, material usage,
service delivery costs incurred in correcting a product failure,
and supplier warranties on parts delivered to the Company.
Product warranty and retrofit activity on a gross basis for the
years ended September 30, 2006, 2005, and 2004 is as
follows (in thousands):
|
|
|
|
|
Balance September 30, 2003
|
|
$
|
11,809
|
|
Accruals for warranties during the
year
|
|
|
3,980
|
|
Settlements made during the year
|
|
|
(3,843
|
)
|
|
|
|
|
|
Balance September 30, 2004
|
|
|
11,946
|
|
Accruals for warranties during the
year
|
|
|
3,786
|
|
Settlements made during the year
|
|
|
(5,950
|
)
|
|
|
|
|
|
Balance September 30, 2005
|
|
|
9,782
|
|
Acquisitions
|
|
|
1,586
|
|
Accruals for warranties during the
year
|
|
|
13,040
|
|
Settlements made during the year
|
|
|
(12,800
|
)
|
|
|
|
|
|
Balance September 30, 2006
|
|
$
|
11,608
|
|
|
|
|
|
|
|
|
19.
|
Commitments
and Contingencies
|
Lease
Commitments
The Company leases manufacturing and office facilities and
certain equipment under operating leases that expire through
2015. Rental expense under operating leases, excluding expense
recorded as a component of restructuring, for the years ended
September 30, 2006, 2005 and 2004 was $5.6 million,
$4.7 million and $6.5 million, respectively. Future
minimum lease commitments on non-cancelable operating leases,
lease income and sublease income are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease and
|
|
|
|
Operating
|
|
|
Sublease
|
|
|
|
Leases
|
|
|
Income
|
|
|
Year ended September 30, 2007
|
|
$
|
12,611
|
|
|
$
|
1,220
|
|
2008
|
|
|
10,787
|
|
|
|
1,230
|
|
2009
|
|
|
10,528
|
|
|
|
1,245
|
|
2010
|
|
|
10,158
|
|
|
|
1,261
|
|
2011
|
|
|
8,184
|
|
|
|
1,277
|
|
Thereafter
|
|
|
9,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
62,096
|
|
|
$
|
6,233
|
|
|
|
|
|
|
|
|
|
|
These future minimum lease commitments include approximately
$25.3 million related to facilities the Company has elected
to abandon in connection with its restructuring initiatives. In
addition, the Company is a guarantor on a 7 year lease in
Mexico for approximately $2.5 million.
Purchase
Commitments
The Company has non-cancelable contracts and purchase orders for
inventory of $99.4 million at September 30, 2006.
83
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Contingencies
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor and related
industries. 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. The Company
cannot guarantee that infringement claims by third parties or
other claims for indemnification by customers or end users of
its 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
Companys business, financial condition and results
of operations. If any such claims are asserted against the
Companys intellectual property rights, the Company may
seek to enter into a royalty or licensing arrangement. The
Company cannot guarantee, however, that a license will be
available on reasonable terms or at all. The Company could
decide in the alternative to resort to litigation to challenge
such claims or to attempt to design around the patented
technology. Litigation or an attempted design around could be
costly and would divert the Companys managements
attention and resources. In addition, if the Company does not
prevail in such litigation or succeed in an attempted design
around, the Company could be forced to pay significant damages
or amounts in settlement. Even if a design around is effective,
the functional value of the product in question could be greatly
diminished.
ITI
Lawsuit
On or about April 21, 2005, the Company was served with a
third-party complaint seeking to join the Company as a party to
a patent lawsuit brought by an entity named Information
Technology Innovation, LLC based in Northbrook, Illinois
(ITI) against Motorola, Inc. (Motorola)
and Freescale Semiconductor, Inc. (Freescale). In
the lawsuit (the ITI Lawsuit), ITI claimed that
Motorola and Freescale had infringed a U.S. patent that ITI
asserts covers processes used to model a semiconductor
manufacturing plant. ITI asserted that the Company has induced
and contributed to the infringement of the patent. Subsequently
Intel Corporation (Intel) filed a lawsuit against
ITI seeking a declaratory judgment that Intel has not infringed
and is not infringing the patent (the Intel Lawsuit)
and notified the Company that Intel believed that the Company
had an indemnification obligation to Intel, but that, at that
time, Intel was not seeking to have those obligations determined
and enforced in the Intel Lawsuit.
Freescale alleged that the Company had a duty to indemnify
Freescale and Motorola from any infringement claims asserted
against them based on their use of our AutoSched software
program by paying all costs and expenses and all or part of any
damages that either of them might incur as a result of the ITI
Lawsuit brought by ITI.
Pursuant to an agreement executed on April 28, 2006, the
Company settled and concluded with ITI and the other parties all
of the matters that were or might have been raised in this
litigation. In exchange for a cash payment, the settlement
affords a license, releases and covenants from ITI not to sue
the Company, the other parties named above, and all users of
certain of our factory modeling software products such as the
Autosched product. The Intel Lawsuit was also
dismissed as a result of this settlement. In addition, the
Company settled the claim for indemnification brought against
Brooks by Freescale by the payment to Freescale of $400,000 to
defray a portion of the legal expenses borne by Freescale in the
defense of the ITI litigation.
Other
Commercial Litigation Matters
In January 2006 a ruling was issued against the Company by a
Massachusetts state court in a commercial litigation matter
involving the Company and BlueShift Technologies, Inc. Awards of
damages and costs were assessed against Brooks in January and
April 2006 in the amount of approximately $1.6 million,
which had been accrued for at December 31, 2005. Brooks has
filed a notice of appeal in the case with the Massachusetts
Appeals Court and that appeal is now pending.
84
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Proceedings
Relating to Equity Incentive Practices and the
Restatement
On May 12, 2006, we announced that the Company had received
notice that the Boston Office of the United States Securities
and Exchange Commission (the SEC) was conducting an
informal inquiry concerning stock option grant practices to
determine whether violations of the securities laws had
occurred. On June 2, 2006, the SEC issued a voluntary
request for information to us in connection with an informal
inquiry by that office regarding a loan we previously reported
had been made to former Chairman and CEO Robert Therrien in
connection with the exercise by him of stock options in 1999. On
June 23, 2006, we were informed that the SEC had opened a
formal investigation into this matter and on the general topic
of the timing of stock option grants. On June 28, 2006, the
SEC issued subpoenas to the Company and to the Special
Committee, which had previously been formed on March 8,
2006, requesting documents related to the Companys stock
option grant practices and to the loan to Mr. Therrien.
On May 19, 2006, we received a grand jury subpoena from the
United States Attorney (the DOJ) for the Eastern
District of New York requesting documents relating to stock
option grants. Responsibility for the DOJs investigation
was subsequently assumed by the United States Attorney for the
District of Massachusetts. On June 22, 2006 the United
States Attorneys Office for the District of Massachusetts
issued a grand jury subpoena to us in connection with an
investigation by that office into the timing of stock option
grants by us and the loan to Mr. Therrien mentioned above.
The Company is cooperating fully with the investigations being
conducted by the SEC and the DOJ.
Private
Litigation
On May 22, 2006, a derivative action was filed nominally on
our behalf in the Superior Court for Middlesex County,
Massachusetts, captioned as Mollie Gedell, Derivatively on
Behalf of Nominal Defendant Brooks Automation, Inc. v. A.
Clinton Allen, et al. The Defendants named in the
complaint are: A. Clinton Allen, Director of the Company; Roger
D. Emerick, former Director of the Company; Edward C. Grady,
Director, President and CEO of the Company; Amin J. Khoury,
former Director of the Company; Joseph R. Martin, Director of
the Company; John K. McGillicuddy, Director of the Company; and
Robert J. Therrien, former Director, President and CEO of the
Company.
On May 26, 2006, a derivative action was filed in the
Superior Court for Middlesex County, Massachusetts nominally on
our behalf, captioned as Ralph Gorgone, Derivatively on Behalf
of Nominal Defendant Brooks Automation, Inc. v. Edward C.
Grady, et al. The Defendants named in the complaint
are: Mr. Grady; Mr. Allen; Mr. Emerick;
Mr. Khoury; Robert J. Lepofsky, Director of the Company;
Mr. Martin; Mr. McGillicuddy; Krishna G. Palepu,
Director of the Company; Alfred Woollacott, III, Director
of the Company; Mark S. Wrighton, Director of the Company; and
Marvin Schorr, Director Emeritus of the Company.
On August 4, 2006 the Superior Court for Middlesex County,
Massachusetts, entered an order consolidating the above state
derivative actions under docket number
06-1808 and
the caption In re Brooks Automation, Inc. Derivative
Litigation. On September 5, 2006, the Plaintiffs filed
a Consolidated Shareholder Derivative Complaint; the Defendants
named therein are: Mr. Allen, Mr. Martin,
Mr. Grady, Mr. McGillicuddy, Mr. Therrien,
Mr. Emerick, and Mr. Khoury; Robert W.
Woodbury, Jr., the Companys Chief Financial Officer;
Joseph Bellini, and Thomas S. Grilk, Secretary and General
Counsel of the Company, current Officers of the Company; Stanley
D. Piekos and Ellen B. Richstone, the Companys former
Chief Financial Officers; and David R. Beaulieu, Jeffrey A.
Cassis, Santo DiNaro, Peter Frasso, Robert A. McEachern,
Dr. Charles M. McKenna, James A. Pelusi, Michael W. Pippins
and Michael F. Werner, former Officers and employees of the
Company. The Consolidated Shareholder Derivative Complaint
alleges that certain current and former directors and officers
breached fiduciary duties owed to Brooks by backdating stock
option grants, issuing inaccurate financial results and false or
misleading public filings, and that Messrs. Therrien,
Emerick and Khoury breached their fiduciary duties, and
Mr. Therrien was unjustly enriched, as a result of the loan
to and stock option exercise by Mr. Therrien mentioned
above, and seeks, on our behalf,
85
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
damages for breaches of fiduciary duty and unjust enrichment,
disgorgement to the Company of all profits from allegedly
backdated stock option grants, equitable relief, and
Plaintiffs costs and disbursements, including
attorneys fees, accountants and experts fees,
costs, and expenses. The Defendants have served motions to
dismiss the Consolidated Shareholder Derivative Complaint.
On May 30, 2006, a derivative action was filed in the
United States District Court for the District of Massachusetts,
captioned as Mark Collins, Derivatively on Behalf of Nominal
Defendant Brooks Automation, Inc. v. Robert J. Therrien,
et al. The defendants in the action are:
Mr. Therrien; Mr. Allen; Mr. Emerick;
Mr. Grady; Mr. Khoury; Mr. Martin; and
Mr. McGillicuddy.
On June 7, 2006, a derivative action was filed in the
United States District Court for the District of Massachusetts,
captioned as City of Pontiac General Employees Retirement
System, Derivatively on Behalf of Brooks Automation,
Inc. v. Robert J. Therrien, et al. The
Defendants in this action are: Mr. Therrien;
Mr. Emerick; Mr. Khoury; Mr. Allen;
Mr. Grady; Mr. Lepofsky; Mr. Martin;
Mr. McGillicuddy; Mr. Palepu;
Mr. Woollacott, III; Mr. Wrighton; and
Mr. Schorr.
The District Court issued an Order consolidating the above
federal derivative actions on August 15, 2006, and a
Consolidated Verified Shareholder Derivative Complaint was filed
on October 6, 2006; the Defendants named therein are:
Mr. Allen, Mr. Grady, Mr. Lepofsky,
Mr. Martin, Mr. McGillicuddy, Mr. Palepu,
Mr. Schorr, Mr. Woollacott, Mr. Wrighton,
Mr. Woodbury, Mr. Therrien, Mr. Emerick,
Mr. Khoury, and Mr. Werner. The Consolidated Verified
Shareholder Derivative Complaint alleges violations of
Section 10(b) and
Rule 10b-5
of the Exchange act; Section 14(a) of the Exchange Act;
Section 20(a) of the Exchange Act; breach of fiduciary
duty; corporate waste; and unjust enrichment, and seeks, on
behalf of Brooks, damages, extraordinary equitable relief
including disgorgement and a constructive trust for
improvidently granted stock options or proceeds from alleged
insider trading by certain defendants, Plaintiffs costs
and disbursements including attorneys fees,
accountants and experts fees, costs and expenses.
The Defendants have filed motions to dismiss the Consolidated
Verified Shareholder Derivative Complaint and to Stay this
action pending the outcome of motions to dismiss in the state
derivative action described above.
On June 19, 2006, a putative class action was filed in the
United States District Court, District of Massachusetts,
captioned as Charles E. G. Leech Sr. v. Brooks Automation,
Inc., et al. The defendants in this action are: the
Company; Mr. Therrien; Ellen Richstone, the Companys
former Chief Financial Officer; Mr. Emerick;
Mr. Khoury; Robert W. Woodbury, Jr., the
Companys Chief Financial Officer; and Mr. Grady. The
complaint alleges violations of Section 10(b) of the
Exchange Act and
Rule 10b-5
against us and the individual defendants; Section 20(a) of
the Exchange Act against the individual defendants;
Section 11 of the Securities Act against us and
Messrs. Grady, Woodbury, Emerick, Khoury and Therrien;
Section 12 of the Securities Act against us and
Messrs. Grady, Woodbury, Emerick, Khoury and Therrien; and
Section 15 of the Securities Act against
Messrs. Grady, Woodbury, Emerick, Khoury and Therrien. The
complaint seeks, inter alia, damages, including interest,
and plaintiffs costs. The Defendants have filed motions to
dismiss the Leech complaint.
On July 19, 2006, a putative class action was filed in the
United States District Court for the District of Massachusetts,
captioned as James R. Shaw v. Brooks Automation,
Inc. et al.,
No. 06-11239-RWZ.
The Defendants in the case are the Company, Mr. Therrien,
Ms Richstone, Mr. Emerick, Mr. Khoury,
Mr. Woodbury, and Mr. Grady. As of this date, the
Company has not been served with the complaint. The complaint
alleges violations of Section 10(b) of the Exchange Act and
Rule 10b-5
against all defendants and violations of Section 20(a) of
the Exchange Act against all individual defendants. The
complaint seeks, inter alia, damages, including interest,
and plaintiffs costs. Competing plaintiffs and their
counsel have moved for consolidation with the Leech
action described above, and for appointment as lead counsel.
On August 22, 2006, an action captioned as Mark
Levy v. Robert J. Therrien and Brooks Automation, Inc.,
was filed in the United States District Court for the District
of Delaware, seeking recovery, on behalf of the Company, from
Mr. Therrien under Section 16(b) of the Securities
Exchange Act of 1934 for alleged short-swing profits
86
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
earned by Mr. Therrien due the loan and stock option
exercise in November 1999 referenced above, and a sale by
Mr. Therrien of Brooks stock in March 2000. The Complaint
seeks disgorgement of all profits earned by Mr. Therrien on
the transactions, attorneys fees and other expenses.
Defendants have filed motions to dismiss.
The Company is aware of additional proposed class actions,
posted on the websites of various law firms. The Company is not
yet aware of the filing of any such actions and have not been
served with a complaint or any other process in any of these
matters.
|
|
20.
|
Discontinued
Operations
|
In June 2005, the Company signed definitive purchase and sale
agreements to sell substantially all the assets of the
Companys Specialty Equipment and Life Sciences division
(SELS), formerly known as IAS, which provided
standard and custom automation technology and products for the
semiconductor, photonics, life sciences and certain other
industries. This sale was completed and all activities of SELS
have ceased during the fourth quarter of fiscal 2005. Effective
June 2005, the Companys consolidated financial statements
and notes have been reclassified to reflect this business as a
discontinued operation in accordance with Financial Accounting
Standards Board Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets.
The summary of operating results from discontinued operations is
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
$
|
90
|
|
|
$
|
626
|
|
|
$
|
4,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
89
|
|
|
$
|
(691
|
)
|
|
$
|
1,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from discontinued
operations, net of tax
|
|
$
|
89
|
|
|
$
|
(3,516
|
)
|
|
$
|
(9,475
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The loss from discontinued operations, net of tax of
$3.5 million for the year ended September 30, 2005
includes a loss on disposal, net of tax of $24,000.
Due to the losses incurred since acquisition, no tax benefit is
reflected for the losses incurred. The Company recorded
impairment charges related to SELS of $7.4 million in 2004.
Assets and liabilities from discontinued operations are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Current assets
|
|
$
|
0
|
|
|
$
|
55
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets from discontinued operations
|
|
$
|
0
|
|
|
$
|
55
|
|
|
|
|
|
|
|
|
|
|
Current liabilities from
discontinued operations
|
|
$
|
0
|
|
|
$
|
399
|
|
|
|
|
|
|
|
|
|
|
Current assets include accounts receivable and inventory.
Non-current assets include property, plant and equipment.
Current liabilities include accounts payable and other current
liabilities.
87
BROOKS
AUTOMATION, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On November 3, 2006, the Companys Board of Directors
committed to a formal plan of disposal of its software division,
Brooks Software and entered into an Asset Purchase Agreement
(the Purchase Agreement) with Applied Materials,
Inc. (Applied), a Delaware corporation. Under the
terms of the Purchase Agreement, the Company will divest and
sell its software division, Brooks Software, to Applied for
$125 million in cash consideration. The Company will
transfer to Applied substantially all of its assets primarily
related to Brooks Software, including the stock of several
subsidiaries engaged only in the business of Brooks Software,
and Applied will assume certain liabilities related to Brooks
Software. The Company is selling its software division in order
to focus on its core semiconductor-related hardware businesses.
The Company expects to recognize a gain on disposal of the
software division and to reclassify this division as
discontinued operations in fiscal 2007.
Completion of the transaction is subject to several conditions,
including expiration or termination of applicable waiting
periods under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and clearance under any
applicable foreign antitrust laws, and other customary closing
conditions. The Company expects to close the transaction during
the second fiscal quarter of 2007.
Applied Materials purchases significant amounts of manufacturing
equipment from the Company and is among Brooks largest
customers for such products.
88
|
|
Item 9.
|
Changes
In and Disagreements With Accountants on Financial Accounting
and Financial Disclosure
|
Not applicable.
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
Under the supervision and with the participation of our
management, including our chief executive officer and chief
financial officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under
Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act). Disclosure controls and procedures
are designed to ensure that information required to be disclosed
by us in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported on a timely basis
and that such information is accumulated and communicated to
management, including the chief executive officer and chief
financial officer, as appropriate, to allow timely decisions
regarding required disclosure. Based upon this evaluation, our
chief executive officer and our chief financial officer
concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this annual
report.
Managements
Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal
control over financial reporting is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Securities Exchange Act of 1934, as amended, as a
process designed by, or under the supervision of our chief
executive and chief financial officers and effected by our board
of directors, management and other personnel to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
|
|
|
|
|
pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and disposition
of our assets;
|
|
|
|
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that our receipts and expenditures are being made only in
accordance with authorization of our management and
directors; and
|
|
|
|
provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on the financial
statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risks that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our
management, including our chief executive officer and chief
financial officer, we conducted an assessment of the
effectiveness of our internal control over financial reporting
as of September 30, 2006. In making this assessment, we
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) an Internal
Control-Integrated Framework. Based on our
assessment, we concluded that, as of September 30, 2006,
our internal control over financial reporting was effective.
Management has excluded the operations of Helix Technology
Corporation (Helix) and Synetics Solutions Inc.
(Synetics) from its assessment of internal control
over financial reporting as of September 30, 2006 because
those entities were acquired by the Company in purchase business
combinations during fiscal 2006. The total assets and total
revenues of the acquired businesses of Helix and Synetics
represent 18% and 30%, respectively, of the related consolidated
financial statement amounts as of and for the year ended
September 30, 2006.
89
Our managements assessment of the effectiveness of our
internal control over financial reporting as of
September 30, 2006, has been audited by
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which is included in
Item 8 of this report.
Changes
in Internal Control Over Financial Reporting
There were no changes in internal control over financial
reporting during the fiscal fourth quarter ended
September 30, 2006, that have materially affected, or are
reasonably likely to materially affect, our internal control
over financial reporting.
|
|
Item 9B.
|
Other
Information
|
On December 8, 2006, we entered into an employment
agreement with Robert W. Woodbury, Jr., our Senior Vice
President and Chief Financial Officer, that replaces
Mr. Woodburys former employment agreement. The
agreement provides for, among other things, an annual base
salary of $305,000 and an annual management bonus of 0% to 150%
of 70% of base salary. The agreement also provides that
Mr. Woodbury will be entitled to severance, including one
years base salary and continued participation in benefit
plans, if he is terminated without cause or if he
resigns for good reason. Cause is defined to include
willful failure or refusal to perform the duties pertaining to
his job, engagement in conduct that is fraudulent, dishonest,
unlawful or otherwise in violation of our standards of conduct
or a material breach of the employment agreement or related
agreements. Good reason is defined to include diminution of
Mr. Woodburys responsibility or position, our breach
of the agreement or relocation of Mr. Woodbury. Payment of
base salary and continued participation in benefit plans may be
extended for up to one additional year if Mr. Woodbury is
engaged in an ongoing search for replacement employment.
PART III
|
|
Item 10.
|
Directors
and Executive Officers of the Registrant
|
The information required by this Item 10 is hereby
incorporated by reference to the Companys 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 Companys 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 and
Related Stockholder Matters
|
The information required by this Item 12 is hereby
incorporated by reference to the Companys 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 Companys definitive proxy
statement to be filed by the Company within 120 days after
the close of its fiscal year.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by this Item 14 is hereby
incorporated by reference to the Companys definitive proxy
statement to be filed by the Company within 120 days after
the close of its fiscal year.
90
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a) Financial Statements and Financial Statement Schedule
The consolidated financial statements of the Company are listed
in the index under Part II, Item 8, in this
Form 10-K.
Other financial statement schedules are omitted because of the
absence of conditions under which they are required or because
the required information is given in the supplementary
consolidated financial statements or notes thereto.
(b) Exhibits
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
3
|
.01
|
|
Certificate of Incorporation of
the Company (incorporated herein by reference to
Exhibit 3.1 of the Companys registration statement on
Form S-4
(Reg.
No. 333-127945),
filed on August 30, 2005, as amended on September 26,
2005 (the Helix
S-4).
|
|
3
|
.02
|
|
Certificate of Designations of the
Companys Series A Junior Participating Preferred
Stock (incorporated herein by reference to Exhibit 3.03 of
the Companys registration statement on
Form S-3
(Registration No. 333-34487),
filed on August 27, 1997).
|
|
3
|
.03
|
|
Certificate of Amendment of the
Companys Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.3 of the Helix
S-4).
|
|
3
|
.04
|
|
Certificate of Amendment of the
Companys Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.4 of the Helix
S-4).
|
|
3
|
.05
|
|
Certificate of Increase of
Shares Designated as the Companys Series A
Junior Participating Preferred Stock (incorporated herein by
reference to Exhibit 3.5 of the Helix
S-4).
|
|
3
|
.06
|
|
Certificate of Ownership and
Merger of PRI Automation, Inc. into the Company (incorporated
herein by reference to Exhibit 3.6 of the Helix
S-4).
|
|
3
|
.07
|
|
Certificate of Designations,
Preferences, Rights and Limitations of the Companys
Special Voting Preferred Stock (incorporated herein by reference
to Exhibit 4.13 of the Companys registration
statement on
Form S-3
(Registration
No. 333-87194),
filed on April 29, 2002, as amended May 13, 2002).
|
|
3
|
.08
|
|
Certificate of Change of
Registered Agent and Registered Office of the Company
(incorporated herein by reference to Exhibit 3.8 of the
Helix S-4).
|
|
3
|
.09
|
|
Certificate of Amendment of
Certificate of Incorporation of the Company (incorporated herein
by reference to Exhibit 3.01 of the Companys
quarterly report for the fiscal quarter ended March 31,
2003, filed on May 13, 2003).
|
|
3
|
.10
|
|
Certificate of Amendment of
Certificate of Incorporation of the Company (incorporated herein
by reference to Exhibit 3.1 of the Companys current
report on
Form 8-K,
filed on October 26, 2005).
|
|
3
|
.11
|
|
Certificate of Elimination of
Special Voting Preferred Stock (incorporated herein by reference
to Exhibit 3.2 of the Companys current report on
Form 8-K,
filed on October 26, 2005).
|
|
3
|
.12
|
|
Certificate of Increase of
Shares Designated as Series A Junior Participating
Preferred Stock (incorporated herein by reference to
Exhibit 3.3 of the Companys current report on
Form 8-K,
filed on October 26, 2005).
|
|
3
|
.13
|
|
Amended and Restated Bylaws
(incorporated herein by reference to Exhibit 3.4 of the
Companys current report on
Form 8-K,
filed on October 26, 2005).
|
|
4
|
.01
|
|
Specimen Certificate for shares of
the Companys common stock (incorporated herein by
reference to the Companys registration statement on
Form S-3
(Registration
No. 333-88320),
filed on May 15, 2002).
|
|
4
|
.02
|
|
Rights Agreement dated
July 23, 1997 (incorporated by incorporated by reference to
Exhibit No. 1 to the Companys Registration
Statement on
Form 8-A,
filed on August 7, 1997).
|
|
4
|
.03
|
|
Amendment No. 1 to Rights
Agreement between the Company and the Rights Agent.
|
|
4
|
.04
|
|
Amendment No. 2 to Rights
Agreement between the Company and the Rights Agent (incorporated
herein by reference to the Companys registration statement
on
Form 8-A/A
filed on June 4, 2002).
|
91
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
4
|
.05
|
|
Amendment No. 3 to Rights
Agreement between the Company and the Rights Agent (incorporated
herein by reference to the Companys registration statement
on
Form 8-A/A,
filed on July 11, 2005).
|
|
10
|
.01
|
|
Shareholders Agreement,
dated as of June 30, 2006, among Yaskawa Electric
Corporation, Brooks Automation, Inc. and Yaskawa Brooks
Automation, Inc. (incorporated herein by reference to
Exhibit 10.2 to the Companys quarterly report on
Form 10-Q
for the fiscal quarter ended June 30, 2006, filed on
August 9, 2006 (the 2006 Q3
10-Q).
|
|
10
|
.02
|
|
Agreement and Plan of Merger,
dated May 8, 2006, by and among Brooks Automation, Inc.,
Bravo Acquisition Subsidiary, Inc. and Synetics Solutions, Inc.
(incorporated herein by reference to Exhibit 10.3 of the
2006 Q3
10-Q).
|
|
10
|
.03
|
|
U.S. Robot Supply Agreement,
made as of June 30, 2006, by and between Brooks Automation,
Inc. and Yaskawa Electric Corporation. (incorporated herein by
reference to Exhibit 10.4 of the 2006 Q3
10-Q).
|
|
10
|
.04
|
|
Brooks Japan Robot Supply
Agreement, made as of June 30, 2006, by and between Yaskawa
Brooks Automation, Inc. and Brooks Automation, Inc.
(incorporated herein by reference to Exhibit 10.5 of the
2006 Q3
10-Q).
|
|
10
|
.05
|
|
Basic agreement between the
Company and Ulvac Corporation dated August 17, 1981
(incorporated by reference to Exhibit 10.13 of the
registration statement on
Form S-2
(Registration
No. 2-
84880) filed by Helix Technology Corporation).
|
|
10
|
.06
|
|
Form of Indemnification Agreement
for directors and officers of the Company (incorporated herein
by reference to the Companys registration statement on
Form S-1
(Registration
No. 333-87296),
filed on December 13, 1994 (the Brooks
S-1)).
|
|
10
|
.07
|
|
Second Amended and Restated
Employment Agreement, dated as of October 18, 2006, by and
between the Company and Edward C. Grady (incorporated herein by
reference to Exhibit 10.1 to the Companys current
report on
Form 8-K,
filed on October 20, 2006).
|
|
10
|
.08
|
|
Employment Agreement, dated as of
December 8, 2006, by and between the Company and Robert
Woodbury.
|
|
10
|
.09
|
|
Employment Agreement, dated as of
October 24, 2005, by and between the Company and Thomas S.
Grilk.
|
|
10
|
.10
|
|
Employment Agreement, dated as of
October 26, 2005, by and between the Company and James
Gentilcore.
|
|
10
|
.11
|
|
Employment Agreement, dated as of
October 24, 2005, by and between the Company and Joseph
Bellini.
|
|
10
|
.12
|
|
Employment Agreement, dated as of
October 26, 2005, by and between the Company and Robert
Anastasi.
|
|
10
|
.13
|
|
1993 Nonemployee Director Stock
Option Plan (incorporated herein by reference to
Exhibit 99.1 to the Companys registration statement
on
Form S-8
(Registration
No. 333-22717),
filed on March 4, 1997).
|
|
10
|
.14
|
|
1992 Combination Stock Option Plan
(incorporated herein by reference to Exhibit 99.2 to the
Companys registration statement on
Form S-8
(Registration
No. 333-07313),
filed on July 1, 1996.
|
|
10
|
.15
|
|
1995 Employee Stock Purchase Plan,
as amended.
|
|
10
|
.16
|
|
Amended and Restated 2000 Equity
Incentive Plan (incorporated herein by reference to
Exhibit 10.1 of the Companys current report on
Form 8-K,
filed on March 7, 2006).
|
|
10
|
.17
|
|
Helix Technology Corporation 1996
Equity Incentive Plan (incorporated herein by reference to
Exhibit 4.1 of the Companys registration statement on
Form S-8
(Registration
No. 333-129724),
filed on November 16. 2005).
|
|
10
|
.18
|
|
Helix Technology Corporation
Amended and Restated Stock Option Plan for Non-Employee
Directors (incorporated herein by reference to Exhibit 4.2
of the Companys registration statement on
Form S-8
(Registration
No. 333-129724),
filed on November 16. 2005).
|
|
10
|
.19
|
|
Helix Technology Corporation 1981
Employee Stock Option Plan (incorporated herein by reference to
Exhibit 4.3. of the Companys registration statement
on
Form S-8
(Registration
No. 333-129724),
filed on November 16. 2005).
|
|
10
|
.20
|
|
Form of 2000 Equity Incentive Plan
New Employee Nonqualified Stock Option Agreement (incorporated
herein by reference to Exhibit 10.44 to the 2004
10-K).
|
92
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.21
|
|
Form of 2000 Equity Incentive Plan
Existing Employee Nonqualified Stock Option Agreement
(incorporated herein by reference to Exhibit 10.45 to the
2004 10-K).
|
|
10
|
.22
|
|
Form of 2000 Equity Incentive Plan
Director Stock Option Agreement (incorporated herein by
reference to Exhibit 10.46 to the 2004
10-K).
|
|
10
|
.23
|
|
Form of Restricted Stock Grant
Agreement.
|
|
10
|
.24
|
|
Deferred Compensation Plan, as
amended (incorporated herein by reference to Exhibit 10.1
to the Q3 2006
10-Q).
|
|
10
|
.25
|
|
Lease between the Company and
BerCar II, LLC for 12 Elizabeth Drive, Chelmsford,
Massachusetts dated October 23, 2002 (incorporated herein
by reference to the Companys annual report on
Form 10-K
for the fiscal year ended September 30, 2002, filed on
December 30, 2002).
|
|
10
|
.26
|
|
First Amendment to Lease between
the Company and BerCar II, LLC for 12 Elizabeth Drive,
Chelmsford, Massachusetts dated November 1, 2002
(incorporated herein by reference to the Companys annual
report on
Form 10-K
for the fiscal year ended September 30, 2002, filed on
December 30, 2002).
|
|
10
|
.27
|
|
Lease Agreement dated as of
May 5, 1994 between the Company and The Prudential
Insurance Company of America for 805 Middlesex Turnpike,
Billerica, MA (incorporated herein by reference to the Brooks
S-1).
|
|
10
|
.28
|
|
Amendment to Lease dated as of
July 24, 2000 between the Company and BCIA New England
Holdings LLC (successor in interest to The Prudential Insurance
Company of America) for 805 Middlesex Turnpike, Billerica, MA.
|
|
10
|
.29
|
|
Lease Agreement dated as of
October 12, 2000 between the Company and Progress Road LLC
for 17 Progress Road, Billerica, MA.
|
|
10
|
.30
|
|
First Amendment to Lease dated as
of March 21, 2001 between the Company and Progress Road LLC
for 17 Progress Road, Billerica, MA.
|
|
10
|
.31
|
|
Lease, dated May 14, 1999,
between MUM IV, LLC as Lessor and the Company as Lessee.
|
|
10
|
.32
|
|
Multi-Tenant Industrial Triple Net
Lease, effective December 15, 2000, between Catellus
Development Corporation and Synetics Solutions, Inc., including
amendments thereto.
|
|
10
|
.33
|
|
Factory Lease Advanced Agreement
among Sang Chul Park, Young Ja Kim, Joon Ho Park, Brooks
Automation Asia, Ltd. and Brooks Automation Korea, Inc.
|
|
12
|
.01
|
|
Calculation of Ratio of Earnings
to Fixed Charges.
|
|
21
|
.01
|
|
Subsidiaries of the Company.
|
|
23
|
.01
|
|
Consent of PricewaterhouseCoopers
LLP (Independent registered public accounting firm for the
Company).
|
|
31
|
.01
|
|
Rule 13a-14(a),15d-14(a)
Certification.
|
|
31
|
.02
|
|
Rule 13a-14(a),15d-14(a)
Certification.
|
|
32
|
|
|
Section 1350 Certifications.
|
93
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.
Edward C. Grady,
Chief Executive Officer
Date: December 13, 2006
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
/s/ Edward
C. Grady
Edward
C. Grady
|
|
Director and Chief Executive
Officer (Principal Executive Officer)
|
|
December 13, 2006
|
|
|
|
|
|
/s/ Robert
W. Woodbury,
Jr.
Robert
W. Woodbury, Jr.
|
|
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
|
|
December 13, 2006
|
|
|
|
|
|
/s/ A.
Clinton
Allen
A.
Clinton Allen
|
|
Director
|
|
December 13, 2006
|
|
|
|
|
|
/s/ Robert
J. Lepofsky
Robert
J. Lepofsky
|
|
Director
|
|
December 13, 2006
|
|
|
|
|
|
/s/ Joseph
R. Martin
Joseph
R. Martin
|
|
Director
|
|
December 13, 2006
|
|
|
|
|
|
/s/ John
K.
McGillicuddy
John
K. McGillicuddy
|
|
Director
|
|
December 13, 2006
|
|
|
|
|
|
/s/ Krishna
G. Palepu
Krishna
G. Palepu
|
|
Director
|
|
December 13, 2006
|
|
|
|
|
|
/s/ Alfred
Woollacott III
Alfred
Woollacott III
|
|
Director
|
|
December 13, 2006
|
|
|
|
|
|
/s/ Mark
S. Wrighton
Mark
S. Wrighton
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Director
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December 13, 2006
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94