REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of Brooks Automation, Inc.:
We have completed an integrated auditaudits of Brooks Automation, Inc.’s 2006 and 2005 consolidated financial statements and of its internal control over financial reporting as of September 30, 20052006 and auditsan audit of its 2004 and 2003 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, 20052006 and 2004,2005, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 20052006 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with 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 describeddiscussed in Note 32 to the consolidated financial statements, the Company has restated its 2005, 2004 and 2003 consolidated financial statements.changed the manner in which it accounts for share-based compensation in fiscal 2006.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in Management’s 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, 20052006 based on criteria established inInternal Control — Integrated Frameworkissued 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, 2005,2006, based on criteria established inInternal Control — Integrated Frameworkissued by the COSO. The Company’s 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 management’s assessment and on the effectiveness of the Company’s 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 management’s 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 company’s 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 company’s 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
50
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s 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 Management’s 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/ s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 12, 2005, except with respect to our opinion on the consolidated financial statements insofar as it relates to Note 3, as to which the date is July 31,13, 2006
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48
BROOKS AUTOMATION, INC.
| | | | | | | | | |
| | September 30, | | September 30, | | | | | | | | | |
| | 2005 | | 2004 | | | September 30,
| | September 30,
| |
| | (as restated) | | (as restated) | | | 2006 | | 2005 | |
| | (In thousands, except share and | | | (In thousands, except share and per share data) | |
| | per share data) | |
ASSETS | | ASSETS |
Current assets | | | | | | | | | |
Cash and cash equivalents | | $ | 202,462 | | $ | 193,281 | | | $ | 115,773 | | | $ | 202,462 | |
Marketable securities | | 121,561 | | 62,086 | | | | 68,280 | | | | 121,561 | |
Accounts receivable, net | | 77,555 | | 122,889 | | | | 127,195 | | | | 77,555 | |
Inventories | | 48,434 | | 71,614 | | |
Inventories, net | | | | 99,854 | | | | 48,434 | |
Current assets from discontinued operations | | 55 | | 1,403 | | | | — | | | | 55 | |
Prepaid expenses and other current assets | | 18,259 | | 9,862 | | | | 21,710 | | | | 18,259 | |
| | | | | | | | | | |
Total current assets | | 468,326 | | 461,135 | | | | 432,812 | | | | 468,326 | |
Property, plant and equipment, net | | 54,165 | | 58,507 | | | | 78,833 | | | | 54,165 | |
Long-term marketable securities | | 32,935 | | 73,743 | | | | 7,307 | | | | 32,935 | |
Goodwill | | 62,094 | | 62,034 | | | | 351,444 | | | | 62,094 | |
Intangible assets, net | | 3,828 | | 6,929 | | | | 94,067 | | | | 3,828 | |
Non-current assets from discontinued operations | | — | | 303 | | |
Equity investment in Ulvac Cryogenics, Inc. | | | | 21,489 | | | | — | |
Other assets | | 2,732 | | 8,388 | | | | 6,625 | | | | 2,732 | |
| | | | | | | | | | |
Total assets | | $ | 624,080 | | $ | 671,039 | | | $ | 992,577 | | | $ | 624,080 | |
| | | | | | | | | | |
| | |
LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS’ EQUITY | | LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS’ EQUITY |
Current liabilities | | | | | | | | | |
Current portion of long-term debt | | $ | 12 | | $ | 11 | | | $ | 11 | | | $ | 12 | |
Short-term debt | | 175,000 | | — | | | | — | | | | 175,000 | |
Accounts payable | | 30,820 | | 44,771 | | | | 69,392 | | | | 30,820 | |
Deferred revenue | | 22,143 | | 34,476 | | | | 26,119 | | | | 22,143 | |
Accrued warranty and retrofit costs | | 9,782 | | 11,946 | | | | 11,608 | | | | 9,782 | |
Accrued compensation and benefits | | 15,886 | | 25,523 | | | | 27,712 | | | | 15,886 | |
Accrued retirement benefit | | — | | 9,899 | | |
Accrued restructuring costs | | 12,171 | | 6,654 | | | | 7,254 | | | | 12,171 | |
Accrued income taxes payable | | 17,331 | | 16,015 | | | | 17,773 | | | | 17,331 | |
Current liabilities from discontinued operations | | 399 | | 674 | | | | — | | | | 399 | |
Accrued expenses and other current liabilities | | 16,551 | | 17,029 | | | | 20,310 | | | | 16,551 | |
| | | | | | | | | | |
Total current liabilities | | 300,095 | | 166,998 | | | | 180,179 | | | | 300,095 | |
Long-term debt | | 2 | | 175,014 | | | | 2 | | | | 2 | |
Accrued long-term restructuring | | 10,959 | | 13,536 | | | | 9,289 | | | | 10,959 | |
Other long-term liabilities | | 2,129 | | 1,678 | | | | 3,579 | | | | 2,129 | |
| | | | | | | | | | |
Total liabilities | | 313,185 | | 357,226 | | | | 193,049 | | | | 313,185 | |
| | | | | | | | | | |
Commitments and contingencies (Note 20) | | |
Commitments and contingencies (Note 19) | | | | | | | | | |
Minority interests | | 1,060 | | 918 | | | | 394 | | | | 1,060 | |
| | | | | | | | | | |
Stockholders’ equity | | | | | | | | | |
Preferred stock, $0.01 par value, 1,000,000 shares authorized, 0 and one share issued and outstanding at September 30, 2005 and 2004, respectively | | — | | — | | |
Common stock, $0.01 par value, 125,000,000 shares authorized, 45,434,709 and 44,691,844 shares issued and outstanding at September 30, 2005 and 2004, respectively | | 454 | | 447 | | |
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 | | 1,307,145 | | 1,296,550 | | | | 1,763,247 | | | | 1,307,145 | |
Deferred compensation | | | (3,493 | ) | | | (1,844 | ) | | | — | | | | (3,493 | ) |
Accumulated other comprehensive income | | 11,958 | | 12,359 | | | | 15,432 | | | | 11,958 | |
Accumulated deficit | | | (1,006,229 | ) | | | (994,617 | ) | | | (980,299 | ) | | | (1,006,229 | ) |
| | | | | | | | | | |
Total stockholders’ equity | | 309,835 | | 312,895 | | | | 799,134 | | | | 309,835 | |
| | | | | | | | | | |
Total liabilities, minority interests and stockholders’ equity | | $ | 624,080 | | $ | 671,039 | | | $ | 992,577 | | | $ | 624,080 | |
| | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
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49
BROOKS AUTOMATION, INC.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended September 30, | | | Year Ended September 30, | |
| | 2005 | | 2004 | | 2003 | | | 2006 | | 2005 | | 2004 | |
| | (as restated) | | (as restated) | | (as restated) | | | (In thousands, except per share data) | |
| | (In thousands, except per share data) | |
Revenues | | | | | | | | | | | | | |
Product | | $ | 338,072 | | $ | 402,252 | | $ | 225,442 | | | $ | 514,294 | | | $ | 338,072 | | | $ | 402,252 | |
Services | | 125,674 | | 132,801 | | 114,650 | | | | 178,576 | | | | 125,674 | | | | 132,801 | |
| | | | | | | | | | | | | | |
Total revenues | | 463,746 | | 535,053 | | 340,092 | | | | 692,870 | | | | 463,746 | | | | 535,053 | |
| | | | | | | | | | | | | | |
Cost of revenues | | | | | | | | | | | | | |
Product | | 236,534 | | 241,790 | | 165,932 | | | | 345,592 | | | | 239,024 | | | | 244,894 | |
Services | | 64,410 | | 90,233 | | 69,541 | | | | 102,494 | | | | 64,586 | | | | 90,493 | |
Stock-based compensation | | |
Product | | 195 | | 494 | | 3,121 | | |
Services | | 176 | | 260 | | 2,982 | | |
| | | | | | | | | | | | | | |
Total cost of revenues | | 301,315 | | 332,777 | | 241,576 | | | | 448,086 | | | | 303,610 | | | | 335,387 | |
| | | | | | | | | | | | | | |
Gross profit | | 162,431 | | 202,276 | | 98,516 | | | | 244,784 | | | | 160,136 | | | | 199,666 | |
| | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | |
Research and development | | 62,748 | | 65,613 | | 69,224 | | | | 70,671 | | | | 63,115 | | | | 66,266 | |
Selling, general and administrative | | 81,718 | | 86,572 | | 91,322 | | | | 141,032 | | | | 84,797 | | | | 90,227 | |
Stock-based compensation | | |
Research and development | | 367 | | 653 | | 6,540 | | |
Selling, general and administrative | | 2,274 | | 2,602 | | 13,132 | | |
Amortization of acquired intangible assets | | 3,100 | | 3,663 | | 4,654 | | |
Goodwill impairment charge | | — | | — | | 39,951 | | |
Restructuring charges | | 16,542 | | 5,356 | | 46,257 | | | | 5,297 | | | | 16,542 | | | | 5,356 | |
| | | | | | | | | | | | | | |
Total operating expenses | | 166,749 | | 164,459 | | 271,080 | | | | 217,000 | | | | 164,454 | | | | 161,849 | |
| | | | | | | | | | | | | | |
Income (loss) from continuing operations | | | (4,318 | ) | | 37,817 | | | (172,564 | ) | | | 27,784 | | | | (4,318 | ) | | | 37,817 | |
Interest income | | 9,284 | | 4,984 | | 4,067 | | | | 13,715 | | | | 9,284 | | | | 4,984 | |
Interest expense | | 9,469 | | 9,492 | | 10,042 | | | | 9,384 | | | | 9,469 | | | | 9,492 | |
Equity in earnings of Ulvac Cryogenics, Inc. | | | | 985 | | | | — | | | | — | |
Other (income) expense, net | | | (1,752 | ) | | 911 | | 16,267 | | | | 3,193 | | | | (1,752 | ) | | | 911 | |
| | | | | | | | | | | | | | |
Income (loss) from continuing operations before income taxes and minority interests | | | (2,751 | ) | | 32,398 | | | (194,806 | ) | | | 29,907 | | | | (2,751 | ) | | | 32,398 | |
Income tax provision | | 5,204 | | 8,053 | | 4,906 | | | | 4,732 | | | | 5,204 | | | | 8,053 | |
| | | | | | | | | | | | | | |
Income (loss) from continuing operations before minority interests | | | (7,955 | ) | | 24,345 | | | (199,712 | ) | | | 25,175 | | | | (7,955 | ) | | | 24,345 | |
Minority interests in income of consolidated subsidiary | | 141 | | 211 | | 214 | | |
Minority interests in income (loss) of consolidated subsidiary | | | | (666 | ) | | | 141 | | | | 211 | |
| | | | | | | | | | | | | | |
Income (loss) from continuing operations | | | (8,096 | ) | | 24,134 | | | (199,926 | ) | | | 25,841 | | | | (8,096 | ) | | | 24,134 | |
Discontinued operations: | | | | | | | | | | | | | |
Loss from operations | | | (3,492 | ) | | | (9,475 | ) | | | (3,098 | ) | |
Income (loss) from operations | | | | 89 | | | | (3,492 | ) | | | (9,475 | ) |
Loss on disposal | | | (24 | ) | | — | | — | | | | — | | | | (24 | ) | | | — | |
| | | | | | | | | | | | | | |
Loss from discontinued operations, net of income taxes | | | (3,516 | ) | | | (9,475 | ) | | | (3,098 | ) | |
Income (loss) from discontinued operations, net of income taxes | | | | 89 | | | | (3,516 | ) | | | (9,475 | ) |
| | | | | | | | | | | | | | |
Net income (loss) | | $ | (11,612 | ) | | $ | 14,659 | | $ | (203,024 | ) | | $ | 25,930 | | | $ | (11,612 | ) | | $ | 14,659 | |
| | | | | | | | | | | | | | |
Basic income (loss) per share from continuing operations | | $ | (0.18 | ) | | $ | 0.56 | | $ | (5.44 | ) | | $ | 0.36 | | | $ | (0.18 | ) | | $ | 0.56 | |
Basic income (loss) per share from discontinued operations | | | (0.08 | ) | | | (0.22 | ) | | | (0.08 | ) | | | 0.00 | | | | (0.08 | ) | | | (0.22 | ) |
| | | | | | | | | | | | | | |
Basic net income (loss) per share | | $ | (0.26 | ) | | $ | 0.34 | | $ | (5.52 | ) | | $ | 0.36 | | | $ | (0.26 | ) | | $ | 0.34 | |
| | | | | | | | | | | | | | |
Diluted income (loss) per share from continuing operations | | $ | (0.18 | ) | | $ | 0.55 | | $ | (5.44 | ) | | $ | 0.36 | | | $ | (0.18 | ) | | $ | 0.55 | |
Diluted income (loss) per share from discontinued operations | | | (0.08 | ) | | | (0.22 | ) | | | (0.08 | ) | | | 0.00 | | | | (0.08 | ) | | | (0.22 | ) |
| | | | | | | | | | | | | | |
Diluted net income (loss) per share | | $ | (0.26 | ) | | $ | 0.34 | | $ | (5.52 | ) | | $ | 0.36 | | | $ | (0.26 | ) | | $ | 0.34 | |
| | | | | | | | | | | | | | |
Shares used in computing earnings (loss) per share | | | | | | | | | | | | | |
Basic | | 44,919 | | 43,006 | | 36,774 | | | | 72,323 | | | | 44,919 | | | | 43,006 | |
Diluted | | 44,919 | | 43,573 | | 36,774 | | | | 72,533 | | | | 44,919 | | | | 43,573 | |
The accompanying notes are an integral part of these consolidated financial statements.
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50
BROOKS AUTOMATION, INC.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | 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 | |
| | | | | | | | | | (as restated) | | | (as restated) | | | (as restated) | | | | | | | (as restated) | | | (as restated) | |
| | | | | | | | | | | | | | (In thousands, except share data) | | | | | | | | | | | | | |
Balance September 30, 2002 | | | 36,199,333 | | | $ | 362 | | | $ | 1,164,751 | | | $ | (42,568 | ) | | | | | | $ | (8,058 | ) | | $ | (806,252 | ) | | $ | 308,235 | |
Shares issued under stock option and purchase plans | | | 545,172 | | | | 6 | | | | 6,128 | | | | | | | | | | | | | | | | | | | | 6,134 | |
Common stock issued in acquisitions | | | 521,676 | | | | 5 | | | | 5,257 | | | | | | | | | | | | | | | | | | | | 5,262 | |
Deferred compensation, net of forfeitures | | | | | | | | | | | (10,709 | ) | | | 10,709 | | | | | | | | | | | | | | | | — | |
Amortization of deferred compensation | | | | | | | | | | | | | | | 25,775 | | | | | | | | | | | | | | | | 25,775 | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | | | | | | | | | | | | | | | | | $ | (203,024 | ) | | | | | | | (203,024 | ) | | | (203,024 | ) |
Currency translation adjustments | | | | | | | | | | | | | | | | | | | 10,625 | | | | 10,625 | | | | | | | | 10,625 | |
Unrealized gain on marketable securities | | | | | | | | | | | | | | | | | | | 544 | | | | 544 | | | | | | | | 544 | |
Unrealized gain on investment in Shinsung | | | | | | | | | | | | | | | | | | | 9,279 | | | | 9,279 | | | | | | | | 9,279 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Comprehensive loss | | | | | | | | | | | | | | | | | | $ | (182,576 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | 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.
54
51
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWSCHANGES IN STOCKHOLDERS’ EQUITY
| | | | | | | | | | | | |
| | Year ended September 30, | |
| | 2005 | | | 2004 | | | 2003 | |
| | (as restated) | | | (as restated) | | | (as restated) | |
| | | | | | (In thousands) | | | | | |
Cash flows from operating activities | | | | | | | | | | | | |
Net income (loss) | | $ | (11,612 | ) | | $ | 14,659 | | | $ | (203,024 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | | | | | | | | | |
Depreciation and amortization | | | 16,351 | | | | 17,541 | | | | 30,972 | |
Impairment of assets | | | — | | | | 7,421 | | | | 46,012 | |
Stock-based compensation | | | 3,640 | | | | 4,824 | | | | 26,629 | |
Premium (discount) on marketable securities | | | (1,936 | ) | | | — | | | | — | |
Impairment/loss on disposal of Shinsung | | | — | | | | — | | | | 14,568 | |
Amortization of debt issuance costs | | | 839 | | | | 839 | | | | 839 | |
Minority interests | | | 141 | | | | 211 | | | | 214 | |
Loss on disposal of long-lived assets | | | 178 | | | | 505 | | | | 4,870 | |
Changes in operating assets and liabilities, net of acquired assets and liabilities: | | | | | | | | | | | | |
Accounts receivable | | | 47,922 | | | | (53,960 | ) | | | 20,191 | |
Inventories | | | 23,933 | | | | (17,744 | ) | | | 25,468 | |
Prepaid expenses and other assets | | | (3,048 | ) | | | 8,376 | | | | (2,035 | ) |
Accounts payable | | | (14,202 | ) | | | 17,967 | | | | (3,960 | ) |
Deferred revenue | | | (12,718 | ) | | | (91 | ) | | | 7,383 | |
Accrued warranty and retrofit costs | | | (2,104 | ) | | | 231 | | | | (6,813 | ) |
Accrued compensation and benefits | | | (9,847 | ) | | | 10,621 | | | | (3,961 | ) |
Accrued restructuring costs | | | 3,300 | | | | (9,123 | ) | | | (4,454 | ) |
Accrued expenses and other liabilities | | | (9,723 | ) | | | 6,578 | | | | (1,229 | ) |
| | | | | | | | | |
Net cash provided by (used in) operating activities | | | 31,114 | | | | 8,855 | | | | (48,330 | ) |
| | | | | | | | | |
Cash flows from investing activities | | | | | | | | | | | | |
Purchases of property, plant and equipment | | | (11,704 | ) | | | (8,203 | ) | | | (13,810 | ) |
Acquisition of businesses, net of cash acquired | | | — | | | | — | | | | 400 | |
Proceeds from sale of business line | | | — | | | | — | | | | 550 | |
Purchases of marketable securities | | | (635,683 | ) | | | (231,687 | ) | | | (74,878 | ) |
Sale/maturity of marketable securities | | | 618,453 | | | | 169,141 | | | | 121,729 | |
Proceeds from sale of long-lived assets | | | 1,294 | | | | — | | | | 8,420 | |
Decrease in other assets | | | — | | | | — | | | | 1,182 | |
| | | | | | | | | |
Net cash provided by (used in) investing activities | | | (27,640 | ) | | | (70,749 | ) | | | 43,593 | |
| | | | | | | | | |
Cash flows from financing activities | | | | | | | | | | | | |
Proceeds from issuance of long-term debt | | | — | | | | — | | | | 153 | |
Payments of short- and long-term debt | | | (11 | ) | | | (98 | ) | | | (119 | ) |
Proceeds from issuance of common stock, net of issuance costs | | | 5,313 | | | | 130,203 | | | | 6,134 | |
| | | | | | | | | |
Net cash provided by financing activities | | | 5,302 | | | | 130,105 | | | | 6,168 | |
| | | | | | | | | |
Effects of exchange rate changes on cash and cash equivalents | | | 405 | | | | 71 | | | | (1,729 | ) |
| | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 9,181 | | | | 68,282 | | | | (298 | ) |
Cash and cash equivalents, beginning of year | | | 193,281 | | | | 124,999 | | | | 125,297 | |
| | | | | | | | | |
Cash and cash equivalents, end of year | | $ | 202,462 | | | $ | 193,281 | | | $ | 124,999 | |
| | | | | | | | | |
Supplemental disclosure of cash flow information | | | | | | | | | | | | |
Cash paid during the year for interest | | $ | 8,603 | | | $ | 8,653 | | | $ | 9,200 | |
Cash paid during the year for income taxes, net of refunds | | $ | 3,696 | | | $ | 2,237 | | | $ | 6,100 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | 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.
55
52
BROOKS AUTOMATION, INC.
1. Nature of the Business
| |
1. | Nature of the Business |
Brooks Automation, Inc. (“Brooks” or the “Company”) is a leading supplier of automationtechnology 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 for making semiconductor devices.equipment. Brooks has offerings ranging from individual hardware and software modules to fully integrated systems and system integrationas well as services to deploy itsinstall and support our products on a world-wide basis.world-wide. Although Brooks’ core business addresses the increasingly complex automation and integrated subsystems requirements of the global semiconductor industry, Brooks is also focused on providing automationprovides solutions for a number of related industries, including the flat panel display manufacturing, data storage and certain other industries which have complex manufacturing.manufacturing environments.
| |
2. | Summary of Significant Accounting Policies |
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.
In June 2005, the Company signed definitive purchase and sale agreements to sell substantially all the assets of the Company’s 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 Company’s 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,” (see Note 21).
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 include bad debts,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 $(0.4) million and $(1.6)$(0.4) million for the years ended September 30, 2006, 2005 2004 and 2003,2004, respectively. Fornon-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 (loss)”income”. Foreign currency translation adjustments are one of the components added to the Company’s 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, 20052006 and 2004,2005, cash equivalents were $111.3$16.5 million and $88.8$111.3 million, respectively. Cash equivalents are held at fair value.
56
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 certificates of deposit 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 Company’s customers are concentrated in the semiconductor industry, and relatively few customers account for a significant portion of the Company’s revenues. The Company’s top twenty largest customers account for slightly more than 50%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 Company’s 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 industry.customer. The Company reviews its allowance for doubtful accounts monthly.quarterly. Past due balances over 12090 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 thefirst-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).
57
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, 20052006 and 2004,2005, the net book value of the Company’s patents was $0.2$3.1 million and $0.3$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 – 5- 8 years | |
Completed technology | | | 2 –- 10 years | |
License agreements | | | 5 years | |
Trademarks and trade names | | | 3 – 5- 6 years | |
Non-competition agreements | | | 3 –- 5 years | |
Customer relationships | | | 4 – 7- 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 FOBFCA shipping point. Amounts charged to customers for costs incurred for shipping and handling and reimbursable expenses are included in revenues with the corresponding cost recorded incredited to cost of revenues.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 ofoff-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 customer’s environment. If we are able to reasonably estimate the level of effort and related costs to complete the contract, we recognize revenue using thepercentage-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 thepercentage-of-completion method and contracts awaiting final customer acceptance.
58
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In transactions that include multiple productsand/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 management’s 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 aproduct-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 2004 or 2003.2004.
Stock-Based Compensation
The
Effect of Adoption of SFAS 123R, Share-Based Payment
Prior to October 1, 2005, the Company’s employee stock compensation plans arewere 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 iswas recognized as long as the exercise price equalsequaled or exceedsexceeded the market price of the underlying stock on the measurement date of the grant. The Company elected the disclosure-only alternative permitted under Statement of Financial Accounting StandardsSFAS No. 123, “Accounting for Stock-Based Compensation” (“FASSFAS 123”), as amended by FASSFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (SFAS 148”), for fixed stock-based awards to employees. All non-employee stock-based awards are accounted for at fair value and recorded as compensation expense over the period of service in accordance with FAS 123 and related interpretations.
Under APB No. 25, compensation expense is measured as of the date the number of shares and exercise price become fixed. Generally, this occurs on the grant date, in which case the stock option is accounted for as a fixed award as of the date of grant. The grant date cannot precede the date on which the grant is approved through either the execution of written consents (i.e. unanimously by the Compensation Committee or, for certain awards, individually by the Chief Executive Officer in his delegated capacity as Sole Member of a Special Committee of the Board of Directors) or through a valid meeting of the Compensation Committee. Compensation expense associated with fixed awards is measured as the difference between the fair market value of our stock on the date of grant and the grant recipient’s exercise price, which is the intrinsic value of the award on that date. Stock compensation expense is recognized over the vesting period using the ratable method, whereby an equal amount of expense is recognized for each year of vesting.
The Company accounts for modifications to stock options under FIN No. 44. Modifications include, but are not limited to acceleration of vesting and continued vesting while not providing substantive services. Compensation expense is recorded in the period of modification for the intrinsic value of the vested portion of the award, including vesting that occurs while not providing substantive services, on the date of modification. The intrinsic value of the award is the difference between the fair market value of our common stock on the date of modification and the optionee’s exercise price.
The Company values stock options assumed in conjunction with business combinations accounted for using the purchase method at fair value on the date of acquisition using the Black-Scholes option-pricing model, in accordance with FIN No. 44. The fair value of assumed options is included as a component of the purchase price. The intrinsic value of unvested stock options is recorded as unearned stock-based compensation and amortized to expense over the remaining vesting period of the stock options using the straight-line method. On December 23, 2004, the Company accelerated the vesting of certain unvested stock options awarded to employees, officers and other eligible participants under the Company’s various stock option plans, other than its 1993 Non-Employee Director Stock Option Plan. As such, the Company fully vested options to purchase
59
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
1,229,239 shares of the Company’s 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. For pro forma disclosure requirements under FAS 123, the Company recognized approximately $25.0 million of stock-based compensation for all options whose vesting was accelerated. The Company took this action because it may produceproduced a more favorable impact on the Company’s results from operations in light of the effective date of FAS 123(R),SFAS 123R, which will taketook place in the Company’s first fiscal quarter of 2006.
As discussed in Note 3, the restated pro forma footnote shows a decrease in the FAS 123 compensation expense of approximately $8.3 million and $8.3 million for the years ended September 30,October 1, 2005, and 2004, respectively, and an increase in the FAS 123 compensation expense of approximately $42.9 million for the year ended September 30, 2003 as a result of the restatement in connection with measurement dates of certain identified stock option grants. This error related to this pro forma information does not have any impact on the Company’s consolidated statements of operations, consolidated balance sheets or consolidated statements of cash flows for any period.
The following pro forma information regarding net income (loss) has been calculated as if the Company had accountedadopted SFAS 123R using the modified prospective method, which requires measurement of compensation cost for its employeeall stock options and stock purchase plan under theawards at fair value method under FAS 123.on date of grant and recognition of
60
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 Company’s 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 grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
| | | | | | | | | | | | |
| | | | | | | | | | | | | | Year Ended September 30, | |
| | Year Ended September 30, | | 2006 | | 2005 | | 2004 | |
| | 2005 | | 2004 | | 2003 |
Risk-free interest rate | | | 3.3% - 4.0 | % | | | 2.6% - 3.3 | % | | | 2.2% - 2.7 | % | | | 4.4 | % | | | 3.3% - 4.0% | | | | 2.6% - 3.3% | |
Volatility | | | 65 | % | | | 60 | % | | | 82 | % | | | 55 | % | | | 65 | % | | | 60 | % |
Expected life (years) | | 4.0 | | 4.0 | | 4.0 | | | | 4.9 | | | | 4.0 | | | | 4.0 | |
Dividend yield | | | 0 | % | | | 0 | % | | | 0 | % | | | 0 | % | | | 0 | % | | | 0 | % |
The fair value of eachshares issued under the employee stock purchase rightplan 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, | |
| | Year Ended September 30, | | | 2006 | | 2005 | | 2004 | |
| | 2005 | | 2004 | | 2003 | |
Risk-free interest rate | | | 3.2 | % | | | 1.6 | % | | | 1.3 | % | | | 4.5 | % | | | 3.2 | % | | | 1.6 | % |
Volatility | | | 39 | % | | | 55 | % | | | 75 | % | | | 39 | % | | | 39 | % | | | 55 | % |
Expected life | | 6 months | | 6 months | | 6 months | | | 6 months | | | | 6 months | | | | 6 months | |
Dividend yield | | | 0 | % | | | 0 | % | | | 0 | % | | | 0 | % | | | 0 | % | | | 0 | % |
For purposes
Expected volatilities are based on historical volatilities of pro forma disclosures,our common stock; the estimated fair valueexpected 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 options is amortizedoption.
57
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fair Value Disclosures — Prior to expense overSFAS 123R Adoption
The following table provides supplemental information for the options’ vesting period. The Company’s pro forma information followsyears ended September 30, 2005 and 2004 as if stock-based compensation had been computed under SFAS 123 (in thousands, except per share information)data):
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended September 30, | | | Year Ended September 30, | |
| | 2005 | | 2004 | | 2003 | | | 2005 | | 2004 | |
| | (as restated) | | (as restated) | | (as restated) | |
Net income (loss), as reported | | $ | (11,612 | ) | | $ | 14,659 | | $ | (203,024 | ) | | $ | (11,612 | ) | | $ | 14,659 | |
Add stock-based employee compensation expense included in reported net income (loss) | | 3,012 | | 4,052 | | 25,775 | | | | 3,012 | | | | 4,052 | |
Deduct pro forma stock-based compensation expense | | 24,319 | | 21,889 | | 66,339 | | | | 24,319 | | | | 21,889 | |
| | | | | | | | | | | | |
Pro forma net loss | | $ | (32,919 | ) | | $ | (3,178 | ) | | $ | (243,588 | ) | | $ | (32,919 | ) | | $ | (3,178 | ) |
| | | | | | | | | | | | |
Earnings (loss) per share | | | | | | | | | |
Basic earnings (loss) per share, as reported | | $ | (0.26 | ) | | $ | 0.34 | | $ | (5.52 | ) | | $ | (0.26 | ) | | $ | 0.34 | |
| | | | | | | | | | | | |
Diluted earnings (loss) per share, as reported | | $ | (0.26 | ) | | $ | 0.34 | | $ | (5.52 | ) | | $ | (0.26 | ) | | $ | 0.34 | |
| | | | | | | | | | | | |
Basic loss per share, pro forma | | $ | (0.73 | ) | | $ | (0.07 | ) | | $ | (6.62 | ) | | $ | (0.73 | ) | | $ | (0.07 | ) |
| | | | | | | | | | | | |
Diluted loss per share, pro forma | | $ | (0.73 | ) | | $ | (0.07 | ) | | $ | (6.62 | ) | | $ | (0.73 | ) | | $ | (0.07 | ) |
| | | | | | | | | | | | |
Equity Incentive Plans
The Company’s 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 Company’s 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 Company’s 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 Company’s provision for income taxes, the Company’s 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.
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BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fair Value of Financial Instruments
The Company’s 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, 20052006 and 2004.2005. The Company’s financial instruments at September 30, 2005 also includeincluded its convertible notes.notes, which were paid in full in July 2006. At September 30, 2005, the estimated fair value of the Company’s 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 20042005 and 20032004 Consolidated Financial Statements to conform to the 20052006 presentation.
Recent Accounting Pronouncements
In November 2004,May 2005, the FASB issued FASB Statement No. 151, “Inventory Costs — an Amendment of ARB No. 43, Chapter 4”Financial Accounting Standards Board (“FAS 151”FASB”). FAS 151 amends ARB 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this Statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of the provisions of FAS 151 is not expected to have a material impact on the Company’s financial position or results of operations.
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS 123R”SFAS”). SFAS 123R replaces SFAS 123 and supersedes APB 25. SFAS 123R focuses primarily on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R requires companies to recognize in the statement of operations the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions). SFAS 123R was originally expected to be effective for the Company beginning in its third quarter of fiscal year 2005. In April 2005, the effective date was amended by the Securities and Exchange Commission. As a result, SFAS 123R is now effective for the Company as of October 1, 2005. Accordingly, the Company will adopt SFAS 123R in its first quarter of fiscal year 2006. The Company expects to use the modified-prospective transition method and will not restate prior periods for the adoption of SFAS 123R. Although the Company is currently evaluating the provisions of SFAS 123R and its implications on its employee benefit plans, the Company believes that the adoption of this standard, based on the terms of the options outstanding at September 30, 2005, will have a material effect on its net income in fiscal year 2006. The Company is also evaluating the form of any stock based incentive compensation it may offer in the future.
In December 2004, the FASB issued FASB Statement No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions” (“FAS 153”). FAS 153 requires that exchanges of nonmonetary assets be measured based on the fair value of the assets exchanged. Further, it expands the exception for nonmonetary exchanges of similar productive assets to nonmonetary assets that do not have commercial substance. The provisions of this Statement are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of the provisions of FAS 153 is not expected to have a material impact on the Company’s financial position or results of operations.
In May 2005, the FASB issued FASB Statement 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” (“FASSFAS 154”). FASSFAS 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. FASSFAS 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 enterprise’s 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 adoptionamount of the provisionsbenefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of FAS 154 is not expected to have a material impact onbeing realized upon ultimate settlement. The guidance will become effective as of the beginning of the Company’s fiscal year beginning after December 15, 2006. The Company is currently evaluating the potential impact of FIN No. 48 on its financial position orand 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 Staff’s 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.
62
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BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. RestatementSAB 108 establishes an approach that requires quantification of Previously Issued Financial Statementsfinancial statement errors based on the effects of the error on each of the Company’s 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.
On May 10,
In September 2006, the Company’s Board of Directors concluded that the Company’s consolidated financial statementsFASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for the years ended September 30, 2005, 2004 and 2003 as well as the selected financial data for the years ended September 30, 2002 and 2001 should be restated to record additional non-cash stock-based compensation expense resulting from stock options granted during fiscal years 1996 to 2005 that were incorrectly accounted for undermeasuring 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 Company’s decision to restate its financial statements was based on the facts obtained by management and an independent investigation into our stock option accounting that was conducted under the directionprovisions of a special committee (“Special Committee”)SFAS 157 should be applied prospectively as of the Boardbeginning of Directors. The Board created the Special Committee,fiscal year in which was composed solely of independent directors, to conduct a review of matters related to past stock option grants (including the timing of such grants and associated documentation) after receiving inquiries regarding the timing of certain stock option grants. Separately, the Company’s management also reviewed stock option grants from 1995 through the second quarter of fiscal 2006 to determine whether any material accounting errors had occurredit is initially applied, with respect to stock option grants.
limited exceptions. The Company has concludedis 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 there were material accounting errors with respect tois a number of stock option grants. In general, these stock options were granted with an exercise price equal to the Nasdaq closing market price for the Company’s common stock on the date set forth on written consents signed bybusiness entity and sponsors one or more directors. The Company usedsingle-employer defined benefit plans to:
a. Recognize the stated datefunded status of these consentsa benefit plan, measured as the “measurement date”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 the purpose of accounting for them under GAAP, andany other postretirement benefit plan, such as a result recorded no compensation expenseretiree 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 connection withaccumulated other comprehensive income, including the grants.
The Company has concluded that a numbergains or losses, prior service costs or credits, and the transition asset or obligation remaining from the initial application of written consents were not fully executed or effective on the date set forth on the consentsSFAS No. 87 and thus that using the stated dateSFAS No. 106, are adjusted as the measurement date was incorrect. The Company has determined a revised measurement date for each stock option grant based on the information now availablethey are subsequently recognized as components of net periodic benefit cost pursuant to the Company. Generally, the changes in measurement dates are due to two kindsrecognition and amortization provisions of errors: (1) the Company treated unanimous written consents of directors approving stock option grantsthose Statements.
c. Measure defined benefit plan assets and obligations as effective on the date stated on the consent, instead of the date upon whichof the Company receivedemployer’s fiscal year-end statement of financial position (with limited exceptions).
d. Disclose in the consent form containingnotes to financial statements additional information about certain effects on net periodic benefit cost for the last signaturenext 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 for unanimity;to initially recognize the funded status of a defined benefit postretirement plan and (2)to provide the Company treated option grants to multiple employeesrequired disclosures as effective prior toof the date upon whichend of the Company had determined the exact number of options that would be granted to each individual employee. In cases where the closing market price on the revised measurement date exceeded the Nasdaq closing market price on the original measurement date, the Company has recognized compensation expense equal to this excess over the vesting term of each option.
fiscal year ending after December 15, 2006. Retrospective application is not permitted. The Company has determined thatis currently evaluating the cumulative, pre-tax, non-cash, stock-based compensation expense resulting from revised measurement dates was approximately $58.7 million during the period from the Company’s initial public offering in 1996 through September 30, 2005. The corrections made in the restatement relate to options covering approximately 6.0 million shares. In the restatement, the Company recorded stock-based compensation expenseprovisions of $1.6 million, $3.1 million and $17.3 million for the years ended September 30, 2005, 2004 and 2003, respectively, and $36.7 million prior to fiscal 2003. In addition, the Company recorded an income tax benefit of $1.8 million prior to fiscal 2003. The cumulative effect of the restatement adjustments on the Company’s consolidated balance sheet at September 30, 2005 was an increase in additional paid-in capital offset by a corresponding increase in the accumulated deficit and deferred compensation which results in no net effect on stockholders’ equity. The adjustments increased previously reported diluted loss from continuing operations per common share by $0.03 and $0.47 for the years ended September 30, 2005 and 2003, respectively, and decreased diluted earnings from continuing operations per common share by $0.07 for the year ended September 30, 2004. Approximately 99% of the charges relating to revised measurement dates arose from incorrect measurement dates for stock options granted during fiscal years 1996 through 2002. Subsequent to fiscal 2002 and prior to the inception of the investigation, the Company had revised its stock option and restricted stock grant practices. Neither the Company nor the Special Committee concluded that anyone now affiliated with the Company was complicit in any intentional wrongdoing. The Company and the Special Committee were unable to conclude that the accounting errors relating to revised measurement dates for stock option grants were the result of intentional misconduct of any company personnel. There was no impact on revenue or net cash provided by operating activities as a result of this compensation expense.SFAS 158.
In addition to the compensation expenses described above, the Company also recorded approximately $5.8 million of non-cash, stock-based compensation expense in connection with a stock option held by former CEO Robert J. Therrien that the Company has concluded he was permitted to exercise in November 1999 despite its expiration in August of 1999. This
63
60
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Helix Technology Corporation
transaction was previously accounted
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 disclosed as a loan byflat 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 Mr. Therrienenhance 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 purposeperiod beginning two trading days before and ending two trading days after the merger agreement was announced. The actual number of permitting himshares of Brooks common stock issued was determined based on the actual number of shares of Helix common stock outstanding immediately prior to exercise the option. Specifically, in November 1999, three directorscompletion of the Company (including Mr. Therrien) signed a ratification document pursuant to which Mr. Therrien was deemed to have been granted a loan asmerger, based on an exchange ratio of August 1999. According to the document,1.11 shares of Brooks common stock for each outstanding share of Helix common stock. The Helix business operates in June 1999 the Company’s directors (Messrs. Khoury, Emerick and Therrien) discussed extendinghardware segment. This transaction qualified as a loan to Mr. Therrien for the purpose of permitting him to exercise an option to purchase 225,000 sharestax-free reorganization under Section 368(a) of the Company’s stock prior to its expiration in August 1999. Based onInternal Revenue Code of 1986, as amended.
The consolidated financial statements include the document,results of Helix from the Company in November 1999 deemed Mr. Therrien to have timely exerciseddate of acquisition.
The following table summarizes the options, and accounted for the exercise without recognizing compensation expense. As a result of facts obtained by the Special Committee, the Company determined that Mr. Therrien misrepresented the facts of the loan and the ratification document described above was false as there were no discussions concerning a loan in June 1999. As a result, the Company has determined that the option expired in August 1999 and that compensation expense should have been recorded in connection with Mr. Therrien’s purchase of stock in November 1999. At that time, Mr. Therrien paid approximately $560,000 (the exercise price of $2.43 per share, plus interest deemed due on the loan) for 225,000 shares then worth approximately $6,314,000 (or $28.06 per share). In the restatement, the Company has recognized compensation expense in November 1999 equal to the difference between the price paid by Mr. Therrien and the marketestimated fair value of the stock onassets acquired and liabilities assumed at the date of sale. The three directors including Mr. Therrien are no longer affiliated withacquisition 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 Company.$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):
As a result,
| | | | | | |
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 recorded inentered 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 restatement cumulative, non-cash pre-tax stock-based compensation expenselaws of approximately $64.5 million andJapan, through a tax benefit of $1.8 million. Principally as a result of losses incurred, the Company recorded a full valuation allowance against all deferred tax assets beginning in 2002 and consequently, there is no tax effect of the additional stock-based compensation expense recorded in the years ended September 30, 2005, 2004 and 2003.merger that
The following tables set forth the effects of the restatement on certain line items within the Company’s consolidated statements of operations for the years ended September 30, 2005, 2004 and 2003 and consolidated balance sheets as of September 30, 2005 and 2004:
| | | | | | | | | | | | |
| | Year ended September 30, |
| | 2005 | | 2004 | | 2003 |
| | In thousands |
Cost of revenues stock-based compensation expense product | | | | | | | | | | | | |
As previously reported | | $ | — | | | $ | 237 | | | $ | 1,821 | |
As restated | | $ | 195 | | | $ | 494 | | | $ | 3,121 | |
| | | | | | | | | | | | |
Cost of revenues stock-based compensation expense services | | | | | | | | | | | | |
As previously reported | | $ | — | | | $ | — | | | $ | — | |
As restated | | $ | 176 | | | $ | 260 | | | $ | 2,982 | |
| | | | | | | | | | | | |
Gross profit | | | | | | | | | | | | |
As previously reported | | $ | 162,802 | | | $ | 202,793 | | | $ | 102,798 | |
As restated | | $ | 162,431 | | | $ | 202,276 | | | $ | 98,516 | |
| | | | | | | | | | | | |
Stock-based compensation expense research and development | | | | | | | | | | | | |
As previously reported | | $ | 23 | | | $ | 208 | | | $ | 2,414 | |
As restated | | $ | 367 | | | $ | 653 | | | $ | 6,540 | |
| | | | | | | | | | | | |
Stock-based compensation expense selling, general and administrative | | | | | | | | | | | | |
As previously reported | | $ | 1,434 | | | $ | 502 | | | $ | 4,276 | |
As restated | | $ | 2,274 | | | $ | 2,602 | | | $ | 13,132 | |
| | | | | | | | | | | | |
Income (loss) from continuing operations | | | | | | | | | | | | |
As previously reported | | $ | (6,541 | ) | | $ | 27,196 | | | $ | (182,662 | ) |
As restated | | $ | (8,096 | ) | | $ | 24,134 | | | $ | (199,926 | ) |
64
61
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | |
| | Year ended September 30, |
| | 2005 | | 2004 | | 2003 |
| | In thousands |
Net income (loss) | | | | | | | | | | | | |
As previously reported | | $ | (10,057 | ) | | $ | 17,721 | | | $ | (185,760 | ) |
As restated | | $ | (11,612 | ) | | $ | 14,659 | | | $ | (203,024 | ) |
| | | | | | | | | | | | |
Basic net income (loss) per share | | | | | | | | | | | | |
As previously reported | | $ | (0.22 | ) | | $ | 0.41 | | | $ | (5.05 | ) |
As restated | | $ | (0.26 | ) | | $ | 0.34 | | | $ | (5.52 | ) |
| | | | | | | | | | | | |
Diluted net income (loss) per share | | | | | | | | | | | | |
As previously reported | | $ | (0.22 | ) | | $ | 0.41 | | | $ | (5.05 | ) |
As restated | | $ | (0.26 | ) | | $ | 0.34 | | | $ | (5.52 | ) |
| | | | | | | | |
| | As of September 30, |
| | 2005 | | 2004 |
| | In thousands |
Additional paid-in capital | | | | | | | | |
As previously reported | | $ | 1,244,184 | | | $ | 1,233,526 | |
As restated | | $ | 1,307,145 | | | $ | 1,296,550 | |
| | | | | | | | |
Accumulated deficit | | | | | | | | |
As previously reported | | $ | (943,470 | ) | | $ | (933,413 | ) |
As restated | | $ | (1,006,229 | ) | | $ | (994,617 | ) |
| | | | | | | | |
Deferred compensation | | | | | | | | |
As previously reported | | $ | (3,291 | ) | | $ | (24 | ) |
As restated | | $ | (3,493 | ) | | $ | (1,844 | ) |
| | | | |
| | As of |
| | September 30, |
| | 2005 |
| | In thousands |
Short-term debt | | | | |
As previously reported | | $ | — | |
As restated | | $ | 175,000 | |
Long-term debt | | | | |
As previously reported | | $ | 175,002 | |
As restated | | $ | 2 | |
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 Company’s hardware segment. As
Also on May 8, 2006, the Company agreed to enter into a resultJoint Venture Agreement (the “Agreement”) with Yaskawa to form a 50/50 joint venture called Yaskawa Brooks Automation, Inc. (“YBA”) to exclusively market and sell Yaskawa’s 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 restatement,assets acquired and liabilities assumed at the Company, as discussed in footnote 22, has reclassified $175date 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 debt principalacquired intangible assets, the following table reflects the allocation of the acquired intangible assets and $2.2 millionrelated estimates of associated deferred financing costs from long-term to short-term at September 30, 2005.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 is a summaryunaudited proforma information gives effect to the acquisition of Helix and Synetics as if the acquisitions occurred at the beginning of the effect of these corrections on the Company’s pro forma calculation of its net income (loss)years presented (in thousands, except per share for the years ended September 30, 2005, 2004 and 2003:data):
| | | | | | | | |
| | 2005 | | | 2005 | |
| | (as previously | | | | |
| | reported) | | | (as restated) | |
Net loss: | | | | | | | | |
As reported | | $ | (10,057 | ) | | $ | (11,612 | ) |
Add stock-based employee compensation expense included in reported net loss | | | 1,457 | | | | 3,012 | |
Deduct pro forma stock-based compensation expense | | | 32,636 | | | | 24,319 | |
| | | | | | |
Pro forma net loss | | $ | (41,236 | ) | | $ | (32,919 | ) |
| | | | | | |
| | | | | | | | |
| | 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 | ) |
| | | | | | | | |
65
62
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | | | | | | | |
| | 2005 | | | 2005 | |
| | (as previously | | | | |
| | reported) | | | (as restated) | |
Basic and diluted net loss per share: | | | | | | | | |
As reported | | $ | (0.22 | ) | | $ | (0.26 | ) |
Pro forma | | $ | (0.92 | ) | | $ | (0.73 | ) |
| | | | | | | | |
| | 2004 | | | 2004 | |
| | (as previously | | | | |
| | reported) | | | (as restated) | |
Net income: | | | | | | | | |
As reported | | $ | 17,721 | | | $ | 14,659 | |
Add stock-based employee compensation expense included in reported net income | | | 990 | | | | 4,052 | |
Deduct pro forma stock-based compensation expense | | | 30,148 | | | | 21,889 | |
| | | | | | |
Pro forma net loss | | $ | (11,437 | ) | | $ | (3,178 | ) |
| | | | | | |
Basic net income (loss) per share: | | | | | | | | |
As reported | | $ | 0.41 | | | $ | 0.34 | |
Pro forma | | $ | (0.27 | ) | | $ | (0.07 | ) |
| | | | | | | | |
Diluted net income (loss) per share: | | | | | | | | |
As reported | | $ | 0.41 | | | $ | 0.34 | |
Pro forma | | $ | (0.27 | ) | | $ | (0.07 | ) |
| | | | | | | | |
| | 2003 | | | 2003 | |
| | (as previously | | | | |
| | reported) | | | (as restated) | |
Net loss: | | | | | | | | |
As reported | | $ | (185,760 | ) | | $ | (203,024 | ) |
Add stock-based employee compensation expense included in reported net loss | | | 8,511 | | | | 25,775 | |
Deduct pro forma stock-based compensation expense | | | 23,432 | | | | 66,339 | |
| | | | | | |
Pro forma net loss | | $ | (200,681 | ) | | $ | (243,588 | ) |
| | | | | | |
Basic and diluted net loss per share: | | | | | | | | |
As reported | | $ | (5.05 | ) | | $ | (5.52 | ) |
Pro forma | | $ | (5.46 | ) | | $ | (6.62 | ) |
| | | | | | | | |
Certain other footnotes appearing in these financial statements were impacted by these corrections. ReferProforma information above includes adjustments to footnotes 2, 8, 10, 12, 15, 17 and 22.
4. Business Acquisitions
Purchase Transaction
The following transaction was accounted for as purchase transaction under FAS 141. Common stock issued as consideration for this transaction was valued atreflect increased amortization expense, the average closing pricewrite-off of the Company’s common stockentire fair valuestep-up in inventory, and a full valuation allowance for two days before and the day of the acquisition, which coincided with the announcement date of this acquisition. The excess of purchase price over fair value of net assets acquired is allocated to goodwill. Pro forma results of operations are not presented as the amounts are not material compared to the Company’s historical results.
66
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)deferred tax assets.
Microtool, Inc.
On October 9, 2002, the Company acquired Microtool, Inc. (“Microtool”), a Colorado Springs, Colorado company that provides service diagnostics for the 200mm and 300mm equipment markets. The acquisition of Microtool provides the Company with additional software and services offerings. In consideration, the Company paid $0.5 million cash and issued 170,001 shares of its common stock with a value of $1.7 million, or $9.74 per share. The Company had reserved an additional 19,999 shares to be issued conditionally upon adjustments for finalization of the net tangible assets acquired from the selling stockholders; these shares, valued at $0.2 million, or $9.99 per share, were issued on February 6, 2003. The following table summarizes this transaction (in thousands):
| | | | |
| | Microtool | |
Consideration: | | | | |
Cash | | $ | 500 | |
Common stock | | | 1,856 | |
Transactions costs | | | 202 | |
| | | |
Total consideration | | | 2,558 | |
Fair value of net tangible assets acquired | | | 545 | |
| | | |
Excess of consideration over fair value of net assets acquired allocated to goodwill | | $ | 2,013 | |
| | | |
5. Marketable Securities
The Company invests its cash in marketable debt securities and classifies them asavailable-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 and 2004:
| | | | | | | | | | | | | | | | |
| | | | | | Gross | | | Gross | | | | |
| | Amortized | | | Unrealized | | | Unrealized | | | | |
| | Cost | | | Gains | | | Losses | | | Fair Value | |
| | | | | | (Amounts in thousands) | | | | | |
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 | |
| | | | | | | | | | | | |
September 30, 2004: | | | | | | | | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government agencies | | $ | 62,243 | | | $ | — | | | $ | 169 | | | $ | 62,074 | |
U.S. corporate securities | | | 44,097 | | | | 102 | | | | 158 | | | | 44,041 | |
Mortgage-backed securities | | | 7,957 | | | | — | | | | 53 | | | | 7,904 | |
Other debt securities | | | 21,937 | | | | 4 | | | | 131 | | | | 21,810 | |
| | | | | | | | | | | | |
| | $ | 136,234 | | | $ | 106 | | | $ | 511 | | | $ | 135,829 | |
| | | | | | | | | | | | |
(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 ofavailable-for-sale marketable securities included in “Other (income) expense” in the Consolidated Statements of Operations for the years ended September 30, 2006, 2005 2004 and 20032004 are as follows:follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | | Year Ended September 30, | |
| | September 30, | | | 2006 | | 2005 | | 2004 | |
| | 2005 | | 2004 | | 2003 | |
Gross realized gains | | $ | — | | $ | 148 | | $ | 877 | | | $ | 226 | | | $ | — | | | $ | 148 | |
Gross realized losses | | — | | 111 | | 67 | | | | — | | | | — | | | | (111 | ) |
| | | | | | | | | | | | | | |
Net realized gains | | $ | — | | $ | 37 | | $ | 810 | | | $ | 226 | | | $ | — | | | $ | 37 | |
| | | | | | | | | | | | | | |
67
63
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
SinceFrom April 2004 through September 2005, the Company has held itsavailable-for-sale marketable securities until maturity and, as such, hasdid not incurredincur any realized gains or losses for the year ended September 30, 2005.losses.
The fair value of the marketable securities at September 30, 2005,2006, 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.
| | | | |
| | Fair Value | |
| | (In thousands) | |
Due in one year or less | | $ | 121,561 | |
Due after one year through five years | | | 22,574 | |
Due after five years through ten years | | | 3,358 | |
Due after ten years | | | 7,003 | |
| | | |
| | $ | 154,496 | |
| | | |
6. Property, Plant and Equipmentpenalties (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, 20052006 and 20042005 were as follows:
| | | | | | | | |
| | September 30, | |
| | 2005 | | | 2004 | |
| | (In thousands) | |
Buildings and land | | $ | 40,019 | | | $ | 39,874 | |
Computer equipment and software | | | 62,190 | | | | 62,824 | |
Machinery and equipment | | | 27,572 | | | | 27,145 | |
Furniture and fixtures | | | 12,471 | | | | 14,633 | |
Leasehold improvements | | | 16,093 | | | | 26,147 | |
Construction in progress | | | 2,682 | | | | 3,005 | |
| | | | | | |
| | | 161,027 | | | | 173,628 | |
Less accumulated depreciation and amortization | | | (106,862 | ) | | | (115,121 | ) |
| | | | | | |
Property, plant and equipment, net | | $ | 54,165 | | | $ | 58,507 | |
| | | | | | |
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 $13.8 million and $25.5$13.8 million for the years ended September 30, 2006, 2005 2004 and 2003,2004, respectively.
In the fourth quarter of fiscal 2005, the Company accelerated the depreciation on its existing Customer Relations Management system which will bewas phased out byin December 31, 2005. The impact of this accelerated depreciation was $1.3 million during the fourth quarter of fiscal 2005.
In fiscal 2003, the Company identified certain facilities that it would be exiting early as a part of its restructuring plan and therefore no longer expected to utilize these assets, including certain equipment and leasehold improvements, to their full estimated life. As such, the Company accelerated the depreciation of these assets to conform to the new estimated life in accordance with the Company’s plan of vacating these facilities and in accordance with Accounting Principles Board Opinion No. 20, “Accounting Changes.” The impact of the accelerated depreciation on the fiscal year resulted in the recognition of an incremental $9.4 million of depreciation expense. In addition, in fiscal 2003, the Company recorded an impairment charge of $6.1 million related to capitalized costs of an abandoned internal systems application infrastructure program.
| |
6. | Goodwill and Intangible Assets |
7. 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 management’s best estimate of revenue growth and gross profit by each reporting unit. In the fourth quarter of fiscal year 2005, the Company’s equipment automation and factory
68
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
automation segments were combined into the hardware segment, which reflects how management now evaluates its business (see Note 16).
In fiscal 2003, the semiconductor industry downturn continued, although prior to the fourth quarter of fiscal 2003, there were no interim indicators of impairment as the market indicated the recovery of the semiconductor industry. The Company performed its annual impairment test under FAS 142 as of September 30, 2003 using the present value of expected future cash flows. During this process detailed estimates of revenue and expense were developed for each of the Company’s segments and as a whole based on internal as well as external market forecasts. Based on this analysis, the Company determined that the implied fair value of the former factory automation hardware segment’s goodwill was less than its book value and therefore recorded a charge of $40.0 million to write-down the value of this goodwill.
In fiscal 2004, in connection with a third party letter of intent to purchase the assets of the SELS, which made up the Company’s “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” segment’s goodwill was $7.4
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 Company’s 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. During this process detailed estimates of revenue and expense were developed for the segments based on internal as well as external market forecasts. The Company’s 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, 20052006 and 20042005 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Hardware | | Software | | Total | | | Hardware | | Software | | Total | |
Balance at September 30, 2003 | | $ | 25,419 | | $ | 36,954 | | $ | 62,373 | | |
Adjustments to goodwill: | | |
Purchase accounting adjustments on prior period acquisitions | | | (400 | ) | | | (26 | ) | | | (426 | ) | |
Foreign currency translation | | 1 | | 86 | | 87 | | |
| | | | | | | |
Balance at September 30, 2004 | | 25,020 | | 37,014 | | 62,034 | | | $ | 25,020 | | | $ | 37,014 | | | $ | 62,034 | |
Adjustments to goodwill: | | | | | | | | | | | | | |
Foreign currency translation | | — | | 60 | | 60 | | | | — | | | | 60 | | | | 60 | |
| | | | | | | | | | | | | | |
Balance at September 30, 2005 | | $ | 25,020 | | $ | 37,074 | | $ | 62,094 | | | | 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 | |
| | | | | | | | |
Purchase accounting adjustments of $0.4 million for fiscal 2004 represents adjustments resulting from the finalization of purchase price for a historical acquisition.
Components of the Company’s identifiable intangible assets are as follows (in thousands):
| | | | | | | | | | | | | | | | | | �� | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | September 30, 2006 | | September 30, 2005 | |
| | September 30, 2005 | | September 30, 2004 | | | | | Accumulated
| | Net Book
| | | | Accumulated
| | Net Book
| |
| | Accumulated | | Net book | | Accumulated | | Net book | | | Cost | | Amortization | | Value | | Cost | | Amortization | | Value | |
| | Cost | | Amortization | | value | | Cost | | Amortization | | Value | |
Patents | | $ | 7,179 | | $ | 6,934 | | $ | 245 | | $ | 7,179 | | $ | 6,839 | | $ | 340 | | | $ | 10,024 | | | $ | 6,899 | | | $ | 3,125 | | | $ | 7,179 | | | $ | 6,934 | | | $ | 245 | |
Completed technology | | 30,385 | | 29,120 | | 1,265 | | 30,385 | | 26,824 | | 3,561 | | | | 90,585 | | | | 38,386 | | | | 52,199 | | | | 30,385 | | | | 29,120 | | | | 1,265 | |
License agreements | | 305 | | 305 | | — | | 305 | | 305 | | — | | | | 305 | | | | 305 | | | | — | | | | 305 | | | | 305 | | | | — | |
Trademark and trade names | | 2,532 | | 2,336 | | 196 | | 2,532 | | 2,193 | | 339 | | | | 7,232 | | | | 3,120 | | | | 4,112 | | | | 2,532 | | | | 2,336 | | | | 196 | |
Non-competition agreements | | 1,726 | | 1,716 | | 10 | | 1,726 | | 1,688 | | 38 | | | | 1,726 | | | | 1,721 | | | | 5 | | | | 1,726 | | | | 1,716 | | | | 10 | |
Customer relationships | | 6,517 | | 4,405 | | 2,112 | | 6,517 | | 3,866 | | 2,651 | | | | 43,017 | | | | 8,391 | | | | 34,626 | | | | 6,517 | | | | 4,405 | | | | 2,112 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | 48,644 | | $ | 44,816 | | $ | 3,828 | | $ | 48,644 | | $ | 41,715 | | $ | 6,929 | | | $ | 152,889 | | | $ | 58,822 | | | $ | 94,067 | | | $ | 48,644 | | | $ | 44,816 | | | $ | 3,828 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Ratable amortization
Amortization expense for intangible assets was $14.6 million, $3.1 million $3.7 million and $4.7$3.7 million for the years ended September 30, 2006, 2005 and 2004, and 2003, respectively.
69
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, 20052006 is as follows (in thousands)millions):
| | | | | | | | |
Year ended September 30, | | | | | |
2006 | | $ | 1,818 | | |
2007 | | $ | 770 | | | $ | 16.0 | |
2008 | | $ | 659 | | | | 17.0 | |
2009 | | $ | 581 | | | | 18.1 | |
2010 | | | | 14.9 | |
2011 | | | | 9.9 | |
Thereafter | | $ | — | | | | 18.2 | |
| |
7. | Investment in Affiliates |
8. Earnings (Loss) Per ShareJoint 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 OEM’s 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 Yaskawa’s 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, | | | Year Ended September 30, | |
| | 2005 | | 2004 | | 2003 | | | 2006 | | 2005 | | 2004 | |
| | (as restated) | | (as restated) | | (as restated) | |
Net income (loss) | | $ | (11,612 | ) | | $ | 14,659 | | $ | (203,024 | ) | | $ | 25,930 | | | $ | (11,612 | ) | | $ | 14,659 | |
| | | | | | | | | | | | | | |
Weighted average common shares outstanding used in computing basic earnings (loss) per share | | 44,919 | | 43,006 | | 36,774 | | | | 72,323 | | | | 44,919 | | | | 43,006 | |
Dilutive common stock options | | — | | 567 | | — | | | | 210 | | | | — | | | | 567 | |
| | | | | | | | | | | | | | |
Weighted average common shares outstanding for purposes of computing diluted earnings (loss) per share | | 44,919 | | 43,573 | | 36,774 | | | | 72,533 | | | | 44,919 | | | | 43,573 | |
| | | | | | | | | | | | | | |
Basic earnings (loss) per share | | $ | (0.26 | ) | | $ | 0.34 | | $ | (5.52 | ) | | $ | 0.36 | | | $ | (0.26 | ) | | $ | 0.34 | |
| | | | | | | | | | | | | | |
Diluted earnings (loss) per share | | $ | (0.26 | ) | | $ | 0.34 | | $ | (5.52 | ) | | $ | 0.36 | | | $ | (0.26 | ) | | $ | 0.34 | |
| | | | | | | | | | | | | | |
Approximately 4,796,000, 5,374,000 4,985,000 and 6,598,0004,985,000 options to purchase common stock and 1,000, 21,000 0 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 2004 and 2003,2004, respectively, as their effect would be anti-dilutive. The 4,796,000 and 4,985,000 options for the yearyears 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 Company’s convertible debt were excluded from this calculation for allthe years presentedended September 30, 2006, 2005 and 2004, respectively, as the effect of conversion would be anti-dilutive. These options, restricted stock awards and conversions could, however, become dilutive in future periods.
9. Investment in Shinsung
As a result of the acquisition of PRI Automation, Inc. (“PRI”),On July 17, 2006, the Company acquired PRI’s minority investmentpaid the convertible debt in Shinsung Engineering Co., Ltd. (“Shinsung”), a South Korean manufacturer of semiconductor clean room equipment and other industrial systems. At the time of the Company’s acquisition of PRI on May 14, 2002, the fair market values of the Shinsung common shares and warrants were $10.7 million and $12.0 million, respectively. In December 2002, the Company received an offer from Shinsung, and on January 27, 2003, concluded the sale to Shinsung of the warrants for $0.5 million. As a result, the Company recorded an impairment charge of $11.6 million. In March 2003, the Company sold the Shinsung common shares for $7.7 million, net of transaction costs, incurring a $3.0 million net loss on the sale of the common shares. Both the impairment charge and the net loss on the sale of the common shares have been included in “Other (income) expense” in the Company’s Consolidated Statements of Operations for the year ended September 30, 2003.
10. Income Taxesfull.
The components of the income tax provision are as follows (in thousands):
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | Year Ended September 30, | |
| | Year Ended September 30, | | | 2006 | | 2005 | | 2004 | |
| | 2005 | | 2004 | | 2003 | |
Current: | | | | | | | | | | | | | |
Federal | | | $ | 680 | | | $ | — | | | $ | — | |
State | | $ | 6 | | $ | 6 | | $ | 6 | | | | 6 | | | | 6 | | | | 6 | |
Foreign | | 5,198 | | 8,047 | | 4,900 | | | | 4,046 | | | | 5,198 | | | | 8,047 | |
| | | | | | | | | | | | | | |
| | 5,204 | | 8,053 | | 4,906 | | | | 4,732 | | | | 5,204 | | | | 8,053 | |
| | | | | | | | | | | | | | |
70
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 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Year Ended September 30, | |
| | 2005 | | | 2004 | | | 2003 | |
Deferred: | | | | | | | | | | | | |
Federal | | | — | | | | — | | | | — | |
State | | | — | | | | — | | | | — | |
Foreign | | | — | | | | — | | | | — | |
| | | | | | | | | |
| | $ | 5,204 | | | $ | 8,053 | | | $ | 4,906 | |
| | | | | | | | | |
The components of income (loss) from continuing operations before income taxes and minority interests, are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended September 30, | | | Year Ended September 30, | |
| | 2005 | | 2004 | | 2003 | | | 2006 | | 2005 | | 2004 | |
| | (as restated) | | (as restated) | | (as restated) | |
Domestic | | $ | (7,015 | ) | | $ | 10,820 | | $ | (162,124 | ) | | $ | 19,562 | | | $ | (7,015 | ) | | $ | 10,820 | |
Foreign | | 4,264 | | 21,578 | | | (32,682 | ) | | | 10,345 | | | | 4,264 | | | | 21,578 | |
| | | | | | | | | | | | | | |
| | $ | (2,751 | ) | | $ | 32,398 | | $ | (194,806 | ) | | $ | 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, | | | Year Ended September 30, | |
| | 2005 | | 2004 | | 2003 | | | 2006 | | 2005 | | 2004 | |
| | (as restated) | | (as restated) | | (as restated) | |
Income tax provision (benefit) computed at federal statutory rate | | $ | (963 | ) | | $ | 11,339 | | $ | (68,182 | ) | | $ | 10,467 | | | $ | (963 | ) | | $ | 11,339 | |
State income taxes, net of federal benefit | | | (643 | ) | | 286 | | | (3,266 | ) | | | 4 | | | | (643 | ) | | | 286 | |
Research and development tax credits | | — | | | (1,079 | ) | | | (1,007 | ) | | | — | | | | — | | | | (1,079 | ) |
Foreign sales corporation/ETI tax benefit | | | (357 | ) | | | (621 | ) | | — | | |
ETI tax benefit/Sec. 199 manufacturing deduction | | | | (1,009 | ) | | | (357 | ) | | | (621 | ) |
Foreign income taxed at different rates | | 2,035 | | | (3,090 | ) | | 4,419 | | | | 1,661 | | | | 2,035 | | | | (3,090 | ) |
Dividends | | 3,531 | | 223 | | 359 | | | | 1,148 | | | | 3,531 | | | | 223 | |
Change in deferred tax asset valuation allowance | | | (1,164 | ) | | | (4,618 | ) | | 46,219 | | | | (9,289 | ) | | | (1,164 | ) | | | (4,618 | ) |
Permanent differences | | 276 | | 299 | | | (818 | ) | |
Other permanent differences | | | | 135 | | | | 56 | | | | 45 | |
Deferred compensation | | 636 | | 1,124 | | 9,715 | | | | 117 | | | | 636 | | | | 1,124 | |
Nondeductible amortization of goodwill | | — | | — | | 10,337 | | |
Nondeductible meals and entertainment | | | | 259 | | | | 220 | | | | 254 | |
Withholding taxes | | 3,328 | | 3,895 | | 3,099 | | | | 1,540 | | | | 3,328 | | | | 3,895 | |
Foreign taxes deducted | | | (1,475 | ) | | — | | — | | | | (539 | ) | | | (1,475 | ) | | | — | |
Other | | — | | 295 | | 4,031 | | | | 238 | | | | — | | | | 295 | |
| | | | | | | | | | | | | | |
Income tax provision | | $ | 5,204 | | $ | 8,053 | | $ | 4,906 | | | $ | 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.
7168
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, | | | Year Ended September 30, | |
| | 2005 | | 2004 | | | 2006 | | 2005 | |
| | (as restated) | | (as restated) | |
Reserves not currently deductible | | $ | 25,630 | | $ | 37,874 | | | $ | 30,151 | | | $ | 25,630 | |
Federal, state and foreign tax credits | | 13,546 | | 29,334 | | | | 14,700 | | | | 13,546 | |
Capitalized research and development | | — | | — | | |
Depreciation and amortization | | 35,769 | | 40,215 | | |
Amortization | | | | — | | | | 27,370 | |
Depreciation | | | | 8,505 | | | | 8,399 | |
Stock-based compensation | | 6,749 | | 7,351 | | | | 4,866 | | | | 6,749 | |
Net operating loss carryforwards | | 166,079 | | 165,410 | | | | 157,721 | | | | 166,079 | |
| | | | | | | | | | |
Deferred tax assets | | 247,773 | | 280,184 | | | | 215,943 | | | | 247,773 | |
| | | | | | | | | | |
Amortization | | | | 7,706 | | | | — | |
Other liabilities | | 2,054 | | 2,927 | | | | 2,877 | | | | 2,054 | |
| | | | | | | | | | |
Deferred tax liability | | 2,054 | | 2,927 | | |
Deferred tax liabilities | | | | 10,583 | | | | 2,054 | |
| | | | | | | | | | |
Valuation allowance | | 245,719 | | 277,257 | | | | 205,360 | | | | 245,719 | |
| | | | | | | | | | |
Net deferred tax assets | | $ | — | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | |
As a result of recognizing ansubstantial operating loss duringlosses in prior years, including the yearsyear ended September 30, 2003 and 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, 20052006 and 2004.2005. 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. IfHowever, it is possible that the Company generates“more likely than not” criterion could be met in fiscal 2007 or a future taxable income againstperiod, which these tax attributes may be applied, somecould result in the reversal of a significant portion or all of the valuation allowance, which, at that time, would be reversed andrecorded as a corresponding increasetax benefit in net income would be reported in future periods.the consolidated statements of operations.
The approximate $32.0$40.4 million decrease in the valuation allowance at September 30, 20052006 compared to September 30, 20042005 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, 2005,2006, the Company had federal, state and foreign net operating loss carryforwards from continuing and discontinued operations of approximately $687.7$721.6 million and federal and state research and development tax credit carryforwards of approximately $13.5$14.7 million available to reduce future tax liabilities, which expire at various dates through 2025.2026. Included in the net operating loss carryforwards are stock option deductions of approximately $19.5 million. The benefits of these tax deductions approximate $7$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
11. Common Stock OfferingBROOKS 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.
12. Financing Arrangements
| |
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 iswas paid on June 1 and December 1 of each year. The notes willwere scheduled to mature on June 1, 2008.
The Company may redeemdid not file its quarterly report onForm 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 itsForm 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 at stated premiums after June 6, 2004. Holders may requireaccelerating the Company’s obligation to repay the unpaid principal on the notes because its Report onForm 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 repurchase the notes upon a change in control of the Company in certain circumstances.trustee and subsequently paid all accrued interest. The notes are convertible at any time prior to maturity, at the option of the holders, into shares of the Company’s common stock, at a conversion price of $70.23 per share, subject to certain adjustments. The notes are subordinated to the Company’s senior indebtedness and structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries. Refer to footnote 22 for subsequent information.now retired, having been paid in full.
At September 30, 2005,2006, the Company had $0.7 million of an uncommitted demand promissory note facility still in use, all of it for letters of credit.
72
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Debt consists of the following (in thousands):
| | | | | | | | |
| | | | | | | | | | September 30, | |
| | September 30, | | | 2006 | | 2005 | |
| | 2005 | | 2004 | |
Convertible subordinated notes at 4.75%, due on June 1, 2008 | | $ | 175,000 | | $ | 175,000 | | | $ | — | | | $ | 175,000 | |
Other | | 14 | | 25 | | | | 13 | | | | 14 | |
| | | | | | | | | | |
| | 175,014 | | 175,025 | | | | 13 | | | | 175,014 | |
Less current portion | | 175,012 | | 11 | | | | 11 | | | | 175,012 | |
| | | | | | | | | | |
Long-term debt | | $ | 2 | | $ | 175,014 | | | $ | 2 | | | $ | 2 | |
| | | | | | | | | | |
The Company’s debt repayments are due as follows (in thousands):
| | | | |
Year ended September 30, | | | | |
2006 | | $ | 175,012 | |
2007 | | | 2 | |
| | | |
| | $ | 175,014 | |
| | | |
| | | | |
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 Company’s funding policy is to contribute an amount equal to the minimum required employer contribution under the Employee
70
13. Postretirement BenefitsBROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Retirement Income Security Act of 1974. In May 2006, the Company’s 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 Company’s 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 Company’s 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.
As part of its cost reduction initiatives, the Company discontinued its matching contribution to the employee defined contribution plans during fiscal 2001. Accordingly, the Company did not record any expense for worldwide defined contribution plans for the years ended September 30, 2003. This matching contribution was reinstated in April 2004.
The Company’s 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.
14. Stockholders’ Equity and Convertible Redeemable Preferred Stock
Preferred Stock
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, 20052006, 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 20042005 there were one million shares of preferred stock, $0.01 par value per share authorized; no shares and one share waswere issued and outstanding at September 30, 2006 and 2005, and 2004, respectively. The outstanding share of preferred stock was issued in connection with the Company’s acquisition of PRI and relates to PRI’s former Canadian exchangeable shareholders and was redeemed in 2005. The right for the holder of the preferred share was the same in all material respects to those of a holder of common stock. 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
73
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
15. Stock Plans
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 validAmended and enforceable obligations of the Company.
Restated 2000 Equity Incentive Stock Option Plan
The purposes of the Amended and Restated 2000 Equity Incentive Stock Option 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) the issuance of stock appreciation rights, performance sharesawards 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. A totalAt the Company’s March 2006 Annual Meeting, stockholders approved an amendment to the 2000 Plan to increase the number of 6,000,000 shares of common stock were reservedauthorized for issuance under the 2000 Plan. Of theseplan by 3,000,000 shares, for a total of 9,000,000 shares. As of September 30, 2006, options to purchase 2,578,4882,436,029 shares are outstanding and 3,053,6865,527,450 shares remain available for grant as of September 30, 2005.grant.
In connection with the grant of certain stock options to employees in the three years ended September 30, 2005, the Company recorded deferred stock compensation equal to the difference between the deemed fair market value of the common stock on the date of grant and the options’ exercise price. Deferred compensation related to stock awards which vest over time is recorded as a component of stockholders’ equity and is amortized over the vesting period of the related award. The Company has calculated the amortization of deferred compensation expense of all stock options granted in the years ended September 30, 2005, 2004 and 2003 to be $1.5 million, $4.0 million and $25.8 million, respectively. During the years ended September 30, 2005, 2004 and 2003, the Company reversed deferred stock compensation of $0.1 million, $0.7 million and $7.1 million, respectively, relating to former employees that had terminated prior to vesting.
During the year ended September 30, 2005,2006, the Company issued 288,000699,500 shares of restricted stock or units under the Amended and Restated 2000 Equity Incentive Stock Option Plan, net of cancellations. These restricted stock awards generally have gradedthe following vesting over periods ranging from two toschedules: three years.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 Company’s common stock on the date of grant and the amount received from the employee. The Company has calculated the amortization of deferred compensation expense of all restricted stock awards granted in fiscal 2005 to be $4.7 million and has recorded compensation expense of $1.5 million related to the vesting of these awards for the year ended September 30, 2005. The weighted average fair value of restricted awards outstanding at September 30, 2005 was $16.48 per share.
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, 2005, 1,379,4002006, 1,780,405 options were forfeited due to employee terminations. A
74
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
total of 1,989,1491,560,039 options are outstanding and 313,032291,032 shares remain available for grant under the 1998 Plan as of September 30, 2005.2006.
1993 Non-Employee Director Stock Option Plan
The purpose of the 1993 Non-Employee Director Stock Option Plan (the “Directors Plan”) iswas 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. EachThe Directors Plan expired in 2003, although some options issued under that plan remain outstanding. Under its terms, each director who iswas not an employee of the Company or any of its subsidiaries iswas eligible to receive options under the Directors Plan. Under the Directors Plan, each eligible director receivesreceived 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 vestvested over a period of five years and generally expireexpired ten years from the date of grant. A total of 225,00010,000 options are outstanding and no shares remain available for grant under the Directors Plan as of September 30, 2005.2006.
1992 Combination Stock Option Plan
Under the Company’s 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 222,152of 115,596 options are outstanding and no shares remain available for grant under the 1992 Plan as of September 30, 2005.2006.
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 Company’s Common Stock. There were options to purchase 188,533120,554 shares granted under this plan that were outstanding at September 30, 2005.2006. The Company does not intend to issue any additional options under the PRI stock option plan.
In connection with other acquisitions,the acquisition of Helix on October 26, 2005, the Company assumed the outstanding options of multiple stock option plans. Thereplans that were adopted by Helix. At acquisition, 689,622 options to purchase 2,032Helix common stock were outstanding and converted into 765,480 options to purchase the Company’s Common Stock. A total of 574,977 options are outstanding and 153,595 shares outstanding atremain available for grant under the Helix plans as of September 30, 2005.2006. The Company does not intend to issue any additional options under thesethe Helix stock option plans.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 2004 and 20032004 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended September 30, |
| | 2005 | | 2004 | | 2003 |
| | | | | | Weighted | | | | | | Weighted | | | | | | Weighted |
| | | | | | Average | | | | | | Average | | | | | | Average |
| | Shares | | Price | | Shares | | Price | | Shares | | Price |
Options outstanding at beginning of year | | | 5,709,626 | | | $ | 25.43 | | | | 4,639,910 | | | $ | 28.93 | | | | 9,019,022 | | | $ | 34.62 | |
Granted | | | 652,250 | | | $ | 16.38 | | | | 2,486,159 | | | $ | 23.84 | | | | 980,800 | | | $ | 12.14 | |
Exercised | | | (179,694 | ) | | $ | 12.77 | | | | (157,730 | ) | | $ | 15.51 | | | | (185,167 | ) | | $ | 14.09 | |
Canceled | | | (976,828 | ) | | $ | 29.77 | | | | (1,258,713 | ) | | $ | 36.95 | | | | (5,174,745 | ) | | $ | 35.83 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Options outstanding at end of year | | | 5,205,354 | | | $ | 23.92 | | | | 5,709,626 | | | $ | 25.43 | | | | 4,639,910 | | | $ | 28.93 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Options exercisable at end of year | | | 4,120,400 | | | $ | 25.83 | | | | 3,234,428 | | | $ | 27.75 | | | | 2,522,030 | | | $ | 34.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average fair value of options granted at market value during the year (restated) | | | | | | $ | 7.39 | | | | | | | $ | 10.40 | | | | | | | $ | 7.30 | |
Weighted average fair value of options granted below market value during the year (restated) | | | | | | $ | 6.20 | | | | | | | $ | 12.37 | | | | | | | $ | 11.33 | |
Options available for future grant | | | 3,366,718 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
75
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes information about stock options outstanding at September 30, 2005:
| | | | | | | | | | | | | | | | | | | | |
| | Options Outstanding | | | | |
| | | | | | Weighted- | | | | | | | | |
| | | | | | Average | | | | | | | | |
| | | | | | Remaining | | | | | | | Options Exercisable | |
| | | | | | Contractual | | | Weighted- | | | | | | | Weighted- | |
Range of | | | | | | Life | | | Average | | | | | | | Average | |
Exercise Prices | | Shares | | | (Years) | | | Exercise Price | | | Shares | | | Exercise Price | |
$ 3.62 - $ 12.50 | | | 559,264 | | | | 4.31 | | | $ | 10.37 | | | | 363,064 | | | $ | 10.28 | |
$ 12.69 - $ 16.60 | | | 538,577 | | | | 5.15 | | | $ | 14.19 | | | | 208,479 | | | $ | 13.74 | |
$ 16.99 - $ 20.33 | | | 583,056 | | | | 5.29 | | | $ | 18.05 | | | | 214,568 | | | $ | 18.75 | |
$ 20.42 - $ 24.02 | | | 288,409 | | | | 5.46 | | | $ | 22.84 | | | | 141,636 | | | $ | 22.99 | |
$ 24.30 - $ 24.30 | | | 1,607,157 | | | | 4.08 | | | $ | 24.30 | | | | 1,589,246 | | | $ | 24.30 | |
$ 24.91 - $ 25.22 | | | 557,350 | | | | 3.08 | | | $ | 25.21 | | | | 557,350 | | | $ | 25.21 | |
$ 25.48 - $ 34.13 | | | 530,422 | | | | 3.06 | | | $ | 28.96 | | | | 527,938 | | | $ | 28.94 | |
$ 34.29 - $ 54.00 | | | 486,308 | | | | 3.06 | | | $ | 40.45 | | | | 463,308 | | | $ | 40.58 | |
$ 54.56 - $123.56 | | | 28,291 | | | | 2.22 | | | $ | 78.43 | | | | 28,291 | | | $ | 78.43 | |
$134.74 - $155.77 | | | 26,520 | | | | 0.45 | | | $ | 135.15 | | | | 26,520 | | | $ | 135.15 | |
| | | | | | | | | | | | | | | |
$ 3.62 - $155.77 | | | 5,205,354 | | | | 4.09 | | | $ | 23.92 | | | | 4,120,400 | | | $ | 25.83 | |
| | | | | | | | | | | | | | | | | | |
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 Company’s 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 ofin-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 Company’s 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 Company’s 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 Company’s 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, 2005, 1,341,5412006, 1,551,762 shares of common stock have been purchased under the 1995 Plan and 908,4591,448,238 shares remain available for purchase.
76
16. Acquisition-Related and Restructuring Costs and AccrualsBROOKS 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 Company’s 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 Company’s 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 tosub-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 accruals for workforce reductions are expected to be paid over the fiscal year 2006 and the facilities accruals over the respective lease terms extending through 2011. The Company estimates that salary and benefit savings in principally the selling, general and administrative functions as a result of these actions will be approximately $23.0 million annually. The impact of these cost
76
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
reductions on the Company’s liquidity is not expected to be significant, as these actions yield equivalent 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 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 expectedsub-rental income over the remainder of the lease terms, are based on management’s 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 Company’s cost structure. The Company estimates that salary and benefit savings in principally the selling, general and administrative functions as a result of these actions will be approximately $5.6 million annually. The impact of these cost reductions on the Company’s liquidity is not expected to be significant, as these actions yield equivalent actual cash savings within twelve months.
Fiscal 2003 Activities
The Company recorded a charge to operations of $46.3 million in the year ended September 30, 2003 of which $6.2 million related to acquisitions, $6.1 million related to the write-off of capitalized costs related to cancelled internal application infrastructure programs, $39.8 million of restructuring costs and $5.8 million of restructuring reversals.
Acquisition-Related Costs
The $6.2 million related to acquisitions is comprised of the $3.2 million loss on the disposition of the Brooks Switzerland subsidiary, associated legal costs of $0.5 million and $2.5 million of legal, relocation 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 2003 several plans to take additional and significant cost reduction actions. Accordingly, charges of $45.9 million were recorded for these actions. Of this amount, $27.0 million related to workforce reductions of approximately 1,000 employees world wide, across all functions of the business, $12.8 million related to excess facilities and $6.1 million related to the write-off of capitalized costs of cancelled internal systems application infrastructure programs. Excess facilities charges of $12.8 million consisted of $2.7 million for excess facilities identified in fiscal 2003 that were recorded to recognize the lower of the amount of the remaining
77
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
lease obligations, net of any sublease rentals. These costs have been estimated from the time when the space is expected to be vacated and there are no plans to utilize the facility. Costs incurred prior to vacating the facilities were charged to operations. The remaining $10.1 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 management’s evaluation of the rental space available. These charges helped better align the Company’s cost structure. The Company estimates that salary and benefit savings across all expense categories as a result of these actions were approximately $42.0 million annually. The impact of these cost reduction activities on the Company’s liquidity was not significant, as these actions yield equivalent actual cash savings within twelve months. The Company estimates annual facilities savings of approximately $3.0 million principally within the Company’s cost of sales as a result of these actions.
Periodically, the accruals related to restructuring charges are reviewed and compared to their respective cash requirements. As a result of these reviews, the accruals are adjusted for changes in cost and timing assumptions of previously accrued and recorded initiatives. During fiscal 2003, the Company identified $4.7 million of excess accruals associated with headcount reduction plans previously announced and implemented and $1.2 million of excess accruals for other restructuring costs. The final costs associated with these actions were lower than originally estimated and accrued. As a result, the excess accruals for these actions were reversed, with a corresponding reduction to restructuring expense in the Consolidated Statement of Operations for the year ended September 30, 2003.
The activity related to the Company’s restructuring accruals is below, which includes activity related to our discontinued SELS division (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal 2006 Activity | |
| | Fiscal 2005 Activity | | | Balance
| | | | | | | | | | Balance
| |
| | Balance | | Balance | | | September 30,
| | | | | | | | | | September 30,
| |
| | September 30, | | September 30, | | | 2005 | | Expense | | Helix Acquisition | | Reversals | | Utilization | | 2006 | |
| | 2004 | | Expense | | Adjustments | | Reversals | | Utilization | | 2005 | |
Facilities | | $ | 17,730 | | $ | 1,680 | | $ | 1,542 | | $ | — | | $ | (5,907 | ) | | $ | 15,045 | | | $ | 15,045 | | | $ | 1,966 | | | $ | 580 | | | $ | — | | | $ | (3,894 | ) | | $ | 13,697 | |
Workforce-related | | 2,460 | | 14,451 | | — | | | (184 | ) | | | (8,298 | ) | | 8,429 | | | | 8,429 | | | | 4,321 | | | | 2,756 | | | | (990 | ) | | | (11,670 | ) | | | 2,846 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | 20,190 | | $ | 16,131 | | $ | 1,542 | | $ | (184 | ) | | $ | (14,205 | ) | | $ | 23,474 | | | $ | 23,474 | | | $ | 6,287 | | | $ | 3,336 | | | $ | (990 | ) | | $ | (15,564 | ) | | $ | 16,543 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal 2005 Activity | |
| | Fiscal 2004 Activity | | | Balance
| | | | | | | | | | Balance
| |
| | Balance | | Balance | | | September 30,
| | | | | | | | | | September 30,
| |
| | September 30, | | September 30, | | | 2004 | | Expense | | Adjustments | | Reversals | | Utilization | | 2005 | |
| | 2003 | | Expense | | Adjustments | | Reversals | | Utilization | | 2004 | |
Facilities | | $ | 24,312 | | $ | 192 | | $ | 1,216 | | $ | — | | $ | (7,990 | ) | | $ | 17,730 | | | $ | 17,730 | | | $ | 1,680 | | | $ | 1,542 | | | $ | — | | | $ | (5,907 | ) | | $ | 15,045 | |
Workforce-related | | 4,955 | | 3,922 | | — | | — | | | (6,417 | ) | | 2,460 | | | | 2,460 | | | | 14,451 | | | | — | | | | (184 | ) | | | (8,298 | ) | | | 8,429 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | 29,267 | | $ | 4,114 | | $ | 1,216 | | $ | — | | $ | (14,407 | ) | | $ | 20,190 | | | $ | 20,190 | | | $ | 16,131 | | | $ | 1,542 | | | $ | (184 | ) | | $ | (14,205 | ) | | $ | 23,474 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Fiscal 2003 Activity | |
| | Balance | | | | | | | | | | | | | | | | | | | Balance | |
| | September 30, | | | | | | | | | | | | | | | | | | | September 30, | |
| | 2002 | | | Expense | | | Adjustments | | | Reversals | | | Utilization | | | 2003 | |
Facilities | | $ | 18,977 | | | $ | 2,754 | | | $ | 10,054 | | | $ | — | | | $ | (7,473 | ) | | $ | 24,312 | |
Workforce-related | | | 13,480 | | | | 27,029 | | | | — | | | | (4,658 | ) | | | (30,896 | ) | | | 4,955 | |
Other | | | 1,329 | | | | — | | | | — | | | | (1,170 | ) | | | (159 | ) | | | — | |
| | | | | | | | | | | | | | | | | | |
| | $ | 33,786 | | | $ | 29,783 | | | $ | 10,054 | | | $ | (5,828 | ) | | $ | (38,528 | ) | | $ | 29,267 | |
| | | | | | | | | | | | | | | | | | |
78
17. Segment and Geographic InformationBROOKS 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 Company’s equipment automation and factory automation segments were combined into the hardware segment, which reflects how management now evaluates its business. Prior year amounts have been reclassified to conform to the current year presentation.
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. Additionally,Other hardware is also provided directly to fabs includingproducts include Brooks’ automated material handling systems,
78
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
or AMHS, that use overhead monorail systems and overhead hoist vehicles to store, transport and manage the movement of material throughout the fab. Other hardware products include 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 Company’s 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 Company’s business segments is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Hardware | | Software | | Total | | | Hardware | | Software | | Total | |
| | (as restated) | | (as restated) | | (as restated) | |
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 | | | $ | 310,025 | | | $ | 28,047 | | | $ | 338,072 | |
Services | | 59,753 | | 65,921 | | 125,674 | | | | 59,753 | | | | 65,921 | | | | 125,674 | |
| | | | | | | | | | | | | | |
| | $ | 369,778 | | $ | 93,968 | | $ | 463,746 | | | $ | 369,778 | | | $ | 93,968 | | | $ | 463,746 | |
| | | | | | | | | | | | | | |
Gross profit | | $ | 99,785 | | $ | 62,646 | | $ | 162,431 | | | $ | 99,786 | | | $ | 60,350 | | | $ | 160,136 | |
Segment operating income | | $ | 12,481 | | $ | 2,843 | | $ | 15,324 | | | $ | 12,481 | | | $ | 547 | | | $ | 13,028 | |
Depreciation | | $ | 9,899 | | $ | 3,352 | | $ | 13,251 | | | $ | 9,899 | | | $ | 3,352 | | | $ | 13,251 | |
Assets | | $ | 237,676 | | $ | 54,675 | | $ | 292,351 | | | $ | 237,676 | | | $ | 54,675 | | | $ | 292,351 | |
| | |
Year ended September 30, 2004 | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | |
Product | | $ | 357,280 | | $ | 44,972 | | $ | 402,252 | | | $ | 357,280 | | | $ | 44,972 | | | $ | 402,252 | |
Services | | 58,194 | | 74,607 | | 132,801 | | | | 58,194 | | | | 74,607 | | | | 132,801 | |
| | | | | | | | | | | | | | |
| | $ | 415,474 | | $ | 119,579 | | $ | 535,053 | | | $ | 415,474 | | | $ | 119,579 | | | $ | 535,053 | |
| | | | | | | | | | | | | | |
Gross profit | | $ | 130,124 | | $ | 72,152 | | $ | 202,276 | | | $ | 130,124 | | | $ | 69,542 | | | $ | 199,666 | |
Segment operating income | | $ | 35,231 | | $ | 11,605 | | $ | 46,836 | | | $ | 35,231 | | | $ | 8,995 | | | $ | 44,226 | |
Depreciation | | $ | 8,817 | | $ | 4,940 | | $ | 13,757 | | | $ | 8,817 | | | $ | 4,940 | | | $ | 13,757 | |
Assets | | $ | 296,115 | | $ | 79,647 | | $ | 375,762 | | | $ | 296,115 | | | $ | 79,647 | | | $ | 375,762 | |
| | |
Year ended September 30, 2003 | | |
Revenues | | |
Product | | $ | 200,712 | | $ | 24,730 | | $ | 225,442 | | |
Services | | 54,694 | | 59,956 | | 114,650 | | |
| | | | | | | | |
| | $ | 255,406 | | $ | 84,686 | | $ | 340,092 | | |
| | | | | | | | |
Gross profit | | $ | 52,674 | | $ | 45,842 | | $ | 98,516 | | |
Segment operating loss | | $ | (54,849 | ) | | $ | (26,853 | ) | | $ | (81,702 | ) | |
Depreciation | | $ | 22,808 | | $ | 2,664 | | $ | 25,472 | | |
Assets | | $ | 211,642 | | $ | 54,512 | | $ | 266,154 | | |
80
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A reconciliation of the Company’s reportable segment operating income (loss) and segment assets to the corresponding consolidated amounts as of and for the year ended September 30, 2006, 2005 2004 and 20032004 is as follows (in thousands):
79
| | | | | | | | | | | | |
| | 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 | |
| | | | | | | | | | | | |
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | |
| | As of and For the Year Ended | |
| | September 30, | |
| | 2005 | | | 2004 | | | 2003 | |
| | (as restated) | | | (as restated) | | | (as restated) | |
Segment income (loss) from continuing operations | | $ | 15,324 | | | $ | 46,836 | | | $ | (81,702 | ) |
Amortization of acquired intangible assets | | | 3,100 | | | | 3,663 | | | | 4,654 | |
Asset impairment charges | | | — | | | | — | | | | 39,951 | |
Restructuring and acquisition-related charges | | | 16,542 | | | | 5,356 | | | | 46,257 | |
| | | | | | | | | |
Total income (loss) from continuing operations | | $ | (4,318 | ) | | $ | 37,817 | | | $ | (172,564 | ) |
| | | | | | | | | |
Segment assets | | $ | 292,351 | | | $ | 375,762 | | | $ | 266,154 | |
Assets from discontinued operations | | | 55 | | | | 1,706 | | | | 7,673 | |
Goodwill | | | 62,094 | | | | 62,034 | | | | 62,373 | |
Intangible assets | | | 3,828 | | | | 6,929 | | | | 10,569 | |
Investments in marketable securities and cash equivalents | | | 265,752 | | | | 224,608 | | | | 146,476 | |
| | | | | | | | | |
Total assets | | $ | 624,080 | | | $ | 671,039 | | | $ | 493,245 | |
| | | | | | | | | |
Net revenues based upon the source of the order by geographic area are as follows (in thousands):
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | Year Ended September 30, | |
| | Year Ended September 30, | | | 2006 | | 2005 | | 2004 | |
| | 2005 | | 2004 | | 2003 | |
North America | | $ | 241,681 | | $ | 272,694 | | $ | 168,979 | | | $ | 412,941 | | | $ | 241,681 | | | $ | 272,694 | |
Asia/Pacific | | 141,703 | | 141,697 | | 105,427 | | | | 157,379 | | | | 141,703 | | | | 141,697 | |
Europe | | 80,362 | | 120,662 | | 65,686 | | | | 122,550 | | | | 80,362 | | | | 120,662 | |
| | | | | | | | | | | | | | |
| | $ | 463,746 | | $ | 535,053 | | $ | 340,092 | | | $ | 692,870 | | | $ | 463,746 | | | $ | 535,053 | |
| | | | | | | | | | | | | | |
Long-lived assets, including property, plant and equipment by geographic area are as follows (in thousands):
| | | | | | | | | |
| | | | | | | | | | September 30, | |
| | September 30, | | | 2006 | | 2005 | |
| | 2005 | | 2004 | |
North America | | $ | 51,115 | | $ | 55,330 | | | $ | 73,142 | | | $ | 51,115 | |
Asia/Pacific | | 2,357 | | 1,807 | | | | 5,076 | | | | 2,357 | |
Europe | | 693 | | 1,370 | | | | 615 | | | | 693 | |
| | | | | | | | | | |
| | $ | 54,165 | | $ | 58,507 | | | $ | 78,833 | | | $ | 54,165 | |
| | | | | | | | | | |
18. Significant Customers and Related Party Information
| |
17. | Significant Customers and Related Party Information |
On June 11, 2001, the Company appointed a new member to its Board of Directors. This individual isserved as a director of one of the Company’s customers.customers until May 3, 2006. Accordingly, this customer is considered a related party for the period subsequent tofrom June 11, 2001.2001 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 2004, and 20032004 were approximately $319,000 $409,000 and $250,000,$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 2004 were $33,000, and $13,000, 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 2004 and 2003.2004. The Company had one customertwo customers that accounted for more than 10% of its accounts receivable balance at September 30, 20052006 and no customersone customer that accounted for 10% of its accounts receivable balance at September 30, 2004.
19. Other Balance Sheet Information2005.
| |
18. | Other Balance Sheet Information |
Components of other selected captions in the Consolidated Balance Sheets are as follows (in thousands):
| | | | | | | | | |
| | | | | | | | | | September 30, | |
| | September 30, | | | 2006 | | 2005 | |
| | 2005 | | 2004 | |
Accounts receivable | | $ | 80,352 | | $ | 126,119 | | | $ | 128,904 | | | $ | 80,352 | |
Less allowance for doubtful accounts | | 2,797 | | 3,230 | | | | 1,709 | | | | 2,797 | |
| | | | | | | | | | |
| | $ | 77,555 | | $ | 122,889 | | | $ | 127,195 | | | $ | 77,555 | |
| | | | | | | | | | |
The allowance for doubtful accounts was $6,499,000 and $5,977,000 atactivity for the years ended September 30, 20032006, 2005 and 2002, respectively. The Company recorded additions (reductions) to the allowance for doubtful accounts of $0, $225,000 and $2,217,000 in fiscal 2005, 2004 and 2003, respectively, comprised of $(20,000), $187,000 and $533,000 charged to expense in fiscal 2005, 2004 and 2003, respectively, and $20,000, $38,000 and $1,684,000 of foreign exchange differences charged to other accounts in fiscal 2005, 2004 and 2003, respectively. The Company reduced the allowance for doubtful accounts by $433,000, $3,494,000 and $1,695,000, in fiscal 2005, 2004 and 2003, respectively, for write-offs and other adjustments.
80
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | | | | | | | |
| | September 30, | |
| | 2005 | | | 2004 | |
Inventories | | | | | | | | |
Raw materials and purchased parts | | $ | 24,612 | | | $ | 27,030 | |
Work-in-process | | | 12,043 | | | | 12,227 | |
Finished goods | | | 11,779 | | | | 32,357 | |
| | | | | | |
| | $ | 48,434 | | | $ | 71,614 | |
| | | | | | |
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, $14,520,000, $15,505,000$12,707,000 and $25,915,000$14,520,000 at September 30, 2006, 2005 September 30,and 2004, September 30, 2003 and September 30, 2002, 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 $9,259,000 and $8,350,000$9,259,000 in fiscal 2006, 2005 2004 and 2003,2004, respectively, comprised of $1,231,000, $8,752,000 $7,340,000 and $7,517,000$7,340,000 charged to expense in fiscal 2006, 2005 2004 and 2003,2004, respectively, and $8,000, $150,000 $421,000 and $833,000$421,000 of foreign exchange differences charged to other accounts in fiscal 2006, 2005 2004 and 2003,2004, respectively. The Company reduced the reserves for excess and obsolete inventory by $2,917,000, $10,715,000 $10,244,000 and $18,760,000,$10,244,000, in fiscal 2006, 2005 2004 and 2003,2004, 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 Company’s 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, 2004, and 20032004 is as follows (in thousands):
| | | | | |
Balance September 30, 2002 | | $ | 19,011 | | |
Accruals for warranties during the year | | 1,710 | | |
Settlements made during the year | | | (8,912 | ) | |
| | | | | | | |
Balance September 30, 2003 | | 11,809 | | | $ | 11,809 | |
Accruals for warranties during the year | | 3,980 | | | | 3,980 | |
Settlements made during the year | | | (3,843 | ) | | | (3,843 | ) |
| | | | | | |
Balance September 30, 2004 | | 11,946 | | | | 11,946 | |
Accruals for warranties during the year | | 3,786 | | | | 3,786 | |
Settlements made during the year | | | (5,950 | ) | | | (5,950 | ) |
| | | | | | |
Balance September 30, 2005 | | $ | 9,782 | | | | 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 |
20. Commitments and Contingencies
Lease Commitments
The Company leases manufacturing and office facilities and certain equipment under operating leases that expire through 2013.2015. Rental expense under operating leases, excluding expense recorded as a component of restructuring, for the years ended September 30, 2006, 2005 and 2004 and 2003 was $5.6 million, $4.7 million $6.5 million and $9.4$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 | | | | | Lease and
| |
| | Operating | | Sublease | | | Operating
| | Sublease
| |
| | Leases | | Income | | | Leases | | Income | |
Year ended September 30, | | |
2006 | | $ | 10,117 | | $ | 1,633 | | |
2007 | | 7,836 | | 1,370 | | |
| |
Year ended September 30, 2007 | | | $ | 12,611 | | | $ | 1,220 | |
2008 | | 7,636 | | 1,379 | | | | 10,787 | | | | 1,230 | |
2009 | | 7,607 | | 1,395 | | | | 10,528 | | | | 1,245 | |
2010 | | 7,211 | | 1,410 | | | | 10,158 | | | | 1,261 | |
2011 | | | | 8,184 | | | | 1,277 | |
Thereafter | | 12,458 | | 1,426 | | | | 9,828 | | | | — | |
| | | | | | | | | | |
| | $ | 52,865 | | $ | 8,613 | | | $ | 62,096 | | | $ | 6,233 | |
| | | | | | | | | | |
These future minimum lease commitments include approximately $32.0$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 $32.3$99.4 million at September 30, 2005.2006.
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Contingencies
There has been substantial litigation regarding patent and other intellectual property rights in the semiconductor and related industries. BrooksThe 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. BrooksThe 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 Brooks’the Company’s’ business, financial condition and results of operations. If any such claims are asserted against Brooks’the Company’s intellectual property rights, the Company may seek to enter into a royalty or licensing arrangement. BrooksThe Company cannot guarantee, however, that a license will be available on reasonable terms or at all. BrooksThe 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 ourthe Company’s management’s attention and resources. In addition, if Brooksthe Company does not prevail in such litigation or succeed in an attempted design around, Brooksthe 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, Brooksthe Company was served with a third-party complaint seeking to join Brooksthe 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”). TheIn the lawsuit (the “ITI Lawsuit”) also involves two individuals: Robert W. Atherton (“Atherton”), the named inventor on the patent, and Willis E. Higgins (“Higgins”), an attorney who worked with Atherton to obtain the patent. ITI began the ITI Lawsuit against Motorola in the United States District Court for the Northern District of Illinois (Eastern Division) in November 2004, and ITI added Freescale to the ITI Lawsuit in March 2005. ITI claimsclaimed that Motorola and Freescale havehad infringed a U.S. patent that ITI asserts covers processes used to model a semiconductor manufacturing plant. ITI assertsasserted that Brooksthe 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 allegesalleged that Brooks hasthe Company had a duty to indemnify Freescale and Motorola from any infringement claims asserted against them based on their use of Brooks’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. AutoSched is
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 program sold by Brooks and by one or more companies that formerly ownedproducts such as the AutoSched product prior to the acquisition of AutoSched by Brooks in 1999 from Daifuku U.S.A, Inc.
On July 7, 2005, 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”). In letters dated May 26, 2005 and September 23, 2005, Intel notified Brooks that Intel believes that Brooks has an indemnification obligation to Intel, but that, at present, Intel is not seeking to have those obligations determined and enforced in the Intel Lawsuit. Thus, Brooks has not been made a party to the Intel Lawsuit.“Autosched” product. The Intel Lawsuit is pending beforewas also dismissed as a result of this settlement. In addition, the same judge asCompany settled the ITI Lawsuit, but hasclaim for indemnification brought against Brooks by Freescale by the payment to Freescale of $400,000 to defray a separate schedule.
Brooks believes that ITI is not a company that is engaged in the business of manufacturing hardware or software products. It is a limited liability company that apparently acquired an exclusive license to the patent at issue in the litigation and is now in the business of seeking to license the patent to others. Brooks also believes that in or after December 2004, ITI’s parent, Global Patent Holdings,LLC, was acquired by Acacia Research Corporation. Brooks believes that Acacia Research Corporation is a publicly-traded company that is in the business of acquiring patents and then seeking to license the patents to others.
On September 7, 2005, the parties presented arguments to the court in the ITI Lawsuit about how the claimsportion of the patent should be construed or interpreted. On October 4, 2005, the court issued its claim construction ruling. The fact discovery period in the ITI Lawsuit ends on November 30, 2005, and expert discovery is scheduled to end on February 3, 2006. No trial date has been set for the ITI Lawsuit.
Brooks believes that it has meritorious defenses to any claim that Brooks’ AutoSched product infringes the patent identified in the ITI Lawsuit against Motorola andlegal expenses borne by Freescale as well as the Intel Lawsuit. Brooks plans to contest any such patent infringement claims in those lawsuits. Brooks also believes that meritorious defenses exist to the claims asserted by ITI against Motorola and Freescale, in the ITI Lawsuit and to the counterclaims asserted by ITI against Intel in the Intel Lawsuit. Brooks intends to cooperate fully with Motorola, and Freescale, and Intel in the defense of those claims. the ITI litigation.
Other Commercial Litigation Matters
In any suchJanuary 2006 a ruling was issued against the Company by a Massachusetts state court in a commercial litigation matter there can be no assurance as toinvolving the outcome,Company and for the reasons describedBlueShift Technologies, Inc. Awards of damages and costs were assessed against Brooks in January and April 2006 in the first paragraphamount of approximately $1.6 million, which had been accrued for at December 31, 2005. Brooks has filed a notice of appeal in the “Contingency” section of this Note 19,case with the ITI litigations could have a material adverse effect on Brooks.Massachusetts Appeals Court and that appeal is now pending.
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Proceedings Relating to Equity Incentive Practices and the Restatement
In any patent litigation
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 there can be no assurances asand on the general topic of the timing of stock option grants. On June 28, 2006, the SEC issued subpoenas to the final outcomeCompany and this litigation could haveto the Special Committee, which had previously been formed on March 8, 2006, requesting documents related to the Company’s stock option grant practices and to the loan to Mr. Therrien.
On May 19, 2006, we received a material adverse effectgrand 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 DOJ’s investigation was subsequently assumed by the United States Attorney for the District of Massachusetts. On June 22, 2006 the United States Attorney’s 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 us. Ifour 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 judgmentderivative action was filed in the Superior Court for Middlesex County, Massachusetts nominally on our behalf, captioned as Ralph Gorgone, Derivatively on Behalf of infringement were obtained against us, we could be required to pay substantial damagesNominal 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 a court could issueMarvin Schorr, Director Emeritus of the Company.
On August 4, 2006 the Superior Court for Middlesex County, Massachusetts, entered an order preventing us from continuingconsolidating the above state derivative actions under docket number06-1808 and the captionIn 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 Company’s 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 Company’s 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 sell our AutoSched product. We cannot predict the extent to which we might be required to seek licensesBrooks by backdating stock option grants, issuing inaccurate financial results and false or alter our productsmisleading public filings, and that Messrs. Therrien, Emerick and Khoury breached their fiduciary duties, and Mr. Therrien was unjustly enriched, as a result of the ITI litigation so that they no longer infringe uponloan to and stock option exercise by Mr. Therrien mentioned above, and seeks, on our behalf,
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damages for breaches of fiduciary duty and unjust enrichment, disgorgement to the rightsCompany of others. We also cannot guarantee thatall 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 termsConsolidated 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) andRule 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 Company’s former Chief Financial Officer; Mr. Emerick; Mr. Khoury; Robert W. Woodbury, Jr., the Company’s Chief Financial Officer; and Mr. Grady. The complaint alleges violations of Section 10(b) of the Exchange Act andRule 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 plaintiff’s costs. The Defendants have filed motions to dismiss theLeechcomplaint.
On July 19, 2006, a putative class action was filed in the United States District Court for the District of Massachusetts, captioned asJames 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 andRule 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 plaintiff’s costs. Competing plaintiffs and their counsel have moved for consolidation with theLeechaction described above, and for appointment as lead counsel.
On August 22, 2006, an action captioned asMark 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
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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 licenses we may be required to seek will be reasonable. Similarly, changing our productssuch actions and have not been served with a complaint or processes to avoid infringing the rightsany other process in any of others may be costly or impractical and could detract from the value of our products. Further, the cost of defending this litigation and the diversion of management attention brought about by such litigation could be substantial, even if we ultimately prevail.
21. Discontinued Operationsthese matters.
| |
20. | Discontinued Operations |
In June 2005, the Company signed definitive purchase and sale agreements to sell substantially all the assets of the Company’s 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 Company’s 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, | |
| | Year Ended September 30, | | | 2006 | | 2005 | | 2004 | |
| | 2005 | | 2004 | | 2003 | |
Revenues | | $ | 626 | | $ | 4,716 | | $ | 3,518 | | | $ | 90 | | | $ | 626 | | | $ | 4,716 | |
| | | | | | | | | | | | | | |
Gross profit | | $ | (691 | ) | | $ | 1,531 | | $ | 868 | | | $ | 89 | | | $ | (691 | ) | | $ | 1,531 | |
| | | | | | | | | | | | | | |
Loss from discontinued operations, net of tax | | $ | (3,516 | ) | | $ | (9,475 | ) | | $ | (3,098 | ) | |
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, | |
| | September 30, | | | 2006 | | 2005 | |
| | 2005 | | 2004 | |
Current assets | | $ | 55 | | $ | 1,403 | | | $ | 0 | | | $ | 55 | |
Non-current assets | | — | | 303 | | | | — | | | | — | |
| | | | | | | | | | |
Assets from discontinued operations | | $ | 55 | | $ | 1,706 | | | $ | 0 | | | $ | 55 | |
| | | | | | | | | | |
Current liabilities from discontinued operations | | $ | 399 | | $ | 674 | | | $ | 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.
22. Subsequent Events
Acquisitions
On July 11, 2005, the Company 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
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BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Ratio”) shares of
On November 3, 2006, the Company’s common stock. In addition, the Company assumed all options then outstanding under Helix’s existing equity incentive plans, eachBoard of which is now exercisableDirectors 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 number of shares of the Company’s common stock (and at an exercise price) adjusted to reflect the Exchange Ratio. The Helix acquisition is preliminarily valued at approximately $459 million, consisting of 28.8 million shares of common stock valued at $444.4 million, the fair value of assumed Helix options of $6.0 million, and cash of $8.4 million, and will operate in the Company’s hardware segment. This transaction qualifies as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended, and the Company is in the process of evaluating the impact that the Merger may have on the Company’s net operating loss carryforwards and other tax attributes. 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 following table summarizes the preliminary unaudited estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. The Company is in the process of finalizing the purchase price allocation and, accordingly, the allocation of the purchase price is subject to adjustment (in millions):
| | | | |
Current assets | | $ | 80.0 | |
Property, plants and equipment | | | 19.7 | |
Intangible assets | | | 81.6 | |
Goodwill | | | 283.7 | |
Other assets | | | 14.7 | |
| | | |
Total assets acquired | | $ | 479.7 | |
| | | |
Current liabilities | | $ | 15.6 | |
Other liabilities | | | 5.1 | |
| | | |
Total liabilities assumed | | | 20.7 | |
| | | |
Total purchase price including acquisition costs | | $ | 459.0 | |
| | | |
Of the $81.6 million of acquired intangible assets, the following table reflects the preliminary allocation of the acquired intangible assets and related estimates of useful lives (in millions):
| | | | | | | | |
Completed and core technology | | $ | 58.3 | | | 5-10-year estimated useful life |
Customer and contract relationships | | | 18.6 | | | 4-11-year estimated economic consumption life |
Trade names and trademarks | | | 4.7 | | | 6-9-year estimated useful life |
| | | | | | | |
| | $ | 81.6 | | | | | |
| | | | | | | |
Bond Acceleration (Unaudited)
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. Under the indenture, an event of default occurs if the Company fails to cure the default within 60 days after written notice of the default to the Company and the trustee by holders of at least 25% in aggregate principal amount of notes outstanding. 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 Company’s 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 million principal balance to the trustee.Delaware corporation. Under the terms of the indenture, holdersPurchase 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 majority in aggregate principal amountgain on disposal of the outstanding notes may electsoftware division and to rescind an accelerationreclassify 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 theHart-Scott-Rodino Antitrust Improvements Act of 1976 and its consequences. To dateclearance under any applicable foreign antitrust laws, and other customary closing conditions. The Company expects to close the Company has received no noticetransaction during the second fiscal quarter of any such election being made. If such an election were made, the funds paid to the trustee would be returned to2007.
Applied Materials purchases significant amounts of manufacturing equipment from the Company and the obligations set forth pursuant to the notes and the indenture would be restored.is among Brooks’ largest customers for such products.
Stock Option Restatement Litigation (Unaudited)
On May 12, 2006, the Company announced that it 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
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determine whether violations of the securities laws had occurred. On June 2, 2006, the SEC issued a voluntary request for information to the Company in connection with an informal inquiry by that office regarding a loan the Company previously reported had been made to Mr. Therrien in connection with his exercise of stock options in 1999. On June 23, 2006, the Company was 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 a subpoena to the Company seeking documents related to the Company’s stock option grant practices and a purported loan to Robert Therrien in August 1999 in connection with his exercise of a stock option.
On May 19, 2006, the Company 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 DOJ’s investigation was subsequently assumed by the United States Attorney for the District of Massachusetts. On June 22, 2006, the United States Attorney’s Office for the District of Massachusetts issued a grand jury subpoena to the Company in connection with an investigation by that office into the timing of stock option grants by the Company and the loan to Mr. Therrien mentioned above.
The Company is cooperating fully with the investigations being conducted by the SEC and the DOJ.
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 in the case 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. The complaint alleges defendants breached their fiduciary duties by backdating stock option grants; violating Generally Accepted Accounting Principles; causing us to issue false and misleading financial statements; and causing us to file false proxy statements and Form 4’s. The complaint further alleges that Messrs. Therrien, Grady, Emerick and Khoury were unjustly enriched as a result of their receipt and retention of backdated stock option grants. The Complaint seeks, on our behalf,inter alia, damages against the individual defendants for breaches of fiduciary duties; disgorgement of any backdated stock options or the proceeds of any related exercised stock options; other equitable relief to remedy breached fiduciary duties; and plaintiff’s costs.
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 in the action 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 of the Company. The complaint alleges defendants breached fiduciary duties owed the Company by causing or allowing the backdating of stock option grants; the issuance of inaccurate financial results; abuse of control; gross mismanagement; waste of corporate assets; and unjust enrichment. The complaint seeks, on our behalf,inter alia, damages against the director defendants for breaches of fiduciary duties, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment; the Court to direct the Company to take actions to improve corporate governance and internal procedures; extraordinary equitable and/or injunctive relief; restitution and disgorgement of profits; and plaintiff’s costs.
The parties have filed a motion to consolidate the two state derivative actions in Massachusetts Superior Court. If the motion is granted, a consolidated complaint is required to be filed within 30 days of the consolidation order.
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. The complaint alleges breach of fiduciary duties in connection with the management of the Company; disseminating false information to the market; failing to design and implement adequate internal controls; and as against Messrs. Therrien, Grady, Emerick and Khoury, unjust enrichment. The complaint seeks, on our behalf,inter alia, damages against the individual defendants for breaches of fiduciary duties; disgorgement of backdated stock options or proceeds from exercised stock options; other equitable relief to remedy the breaches of fiduciary duties; and plaintiff’s costs.
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BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 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; breach of fiduciary duty and/or aiding and abetting; abuse of control; gross mismanagement; constructive fraud; corporate waste; unjust enrichment; rescission against Messrs. Therrien, Emerick and Khoury; and breach of contract against Mr. Therrien. The complaint seeks, on our behalf,inter alia, damages against the individual defendants for breaches of fiduciary duties; extraordinary equitable and/or injunctive relief; and plaintiff’s costs.
The parties have filed a motion to consolidate the two federal derivative actions in the United States District Court for the District of Massachusetts. If the order is granted, the plaintiffs will have 45 days to file a consolidated complaint, or to designate one of the existing complaints as the operative complaint.
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 Company’s former Chief Financial Officer; Mr. Emerick; Mr. Khoury; Robert W. Woodbury, Jr., the Company’s 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 plaintiff’s costs.
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. 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 plaintiff’s costs.
The Company is aware of additional proposed class actions, posted on the websites of the Brower Piven, the Charles H. Johnson and Associates, and the Federwood & Sherwood law firms. The Company is not yet aware of the filing of such actions, and Brooks has not been served with a complaint or any other process in any of these matters.
Nasdaq Delisting Notice (Unaudited)
On May 12, 2006, the Company received a staff determination letter from the Nasdaq Stock Market stating that its failure to timely file its quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2006 was a violation of Nasdaq rules and that its securities would be delisted unless the Company requested a hearing. The Company requested a hearing, and this request stayed the delisting pending the outcome of the hearing. A hearing has been held at which the Company requested additional time to complete any necessary filings prior the delisting of its securities. On July 25, 2006, the Company received notice from the Nasdaq Stock Market that its common stock will not be delisted provided that it files its quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2006 and all required restatements on or prior to August 15, 2006. If the Company is unable to file these reports on or before August 15, 2006, the Company’s common stock may be delisted.
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Item 9. | | Changes In and Disagreements With Accountants on Financial Accounting and Financial Disclosure |
Not applicable.
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Item 9A. | Controls and Procedures |
Item 9A.Controls and Procedures
Background of Restatement
On May 10, 2006, our Board of Directors concluded that our consolidated financial statements for the years ended September 30, 2005, 2004 and 2003 as well as the selected financial data for the years ended September 30, 2002 and 2001 should be restated to record additional non-cash stock-based compensation expense resulting from stock options granted during fiscal years 1996 to 2005 that were incorrectly accounted for under generally accepted accounting principles (“GAAP”). Our decision to restate our financial statements was based on the facts obtained by management and an independent investigation into our stock option accounting that was conducted under the direction of a special committee (“Special Committee”) of the Board of Directors. The Board created the Special Committee, which was composed solely of independent directors, to conduct a review of matters related to past stock option grants (including the timing of such grants and associated documentation) after receiving inquiries regarding the timing of certain stock option grants. Separately, the Company’s management also reviewed stock option grants from 1995 through the second quarter of fiscal 2006 to determine whether any material accounting errors had occurred with respect to stock option grants.
We have concluded that there were material accounting errors with respect to a number of stock option grants. In general, these stock options were granted with an exercise price equal to the Nasdaq closing market price for our common stock on the date set forth on written consents signed by one or more directors. We used the stated date of these consents as the “measurement date” for the purpose of accounting for them under GAAP, and as a result recorded no compensation expense in connection with the grants.
We have concluded that a number of written consents were not fully executed or effective on the date set forth on the consents and thus that using the stated date as the measurement date was incorrect. We have determined a revised measurement date for each stock option grant based on the information now available to us. Generally, the changes in measurement dates are due to two kinds of errors: (1) we treated unanimous written consents of directors approving stock option grants as effective on the date stated on the consent, instead of the date upon which we received the consent form containing the last signature required for unanimity; and (2) we treated option grants to multiple employees as effective prior to the date upon which we had determined the exact number of options that would be granted to each individual employee. In cases where the closing market price on the revised measurement date exceeded the Nasdaq closing market price on the original measurement date, we have recognized compensation expense equal to this excess over the vesting term of each option.
We have determined that the cumulative, pre-tax, non-cash, stock-based compensation expense resulting from revised measurement dates was approximately $58.7 million during the period from our initial public offering in 1996 through September 30, 2005. The corrections made in the restatement relate to options covering approximately 6.0 million shares. In the restatement, we recorded stock-based compensation expense of $1.6 million, $3.1 million and $17.3 million for the years ended September 30, 2005, 2004 and 2003, respectively, and $36.7 million prior to fiscal 2003. In addition, we recorded an income tax benefit of $1.8 million prior to fiscal 2003. The cumulative effect of the restatement adjustments on our consolidated balance sheet at September 30, 2005 was an increase in additional paid-in capital offset by a corresponding increase in the accumulated deficit and deferred compensation which results in no net effect on stockholders’ equity. The adjustments increased previously reported diluted loss from continuing operations per common share by $0.03 and $0.47 for the years ended September 30, 2005 and 2003, respectively, and decreased diluted earnings from continuing operations per common share by $0.07 for the year ended September 30, 2004. Approximately 99% of the charges relating to revised measurement dates arose from incorrect measurement dates for stock options granted during fiscal years 1996 through 2002. Subsequent to fiscal 2002 and prior to the inception of the investigation, we had revised our stock option and restricted stock grant practices. Neither the Company nor the Special Committee concluded that anyone now affiliated with the Company was complicit in any intentional wrongdoing. The Company and the Special Committee were unable to conclude that the accounting errors relating to revised measurement dates for
87
stock option grants were the result of intentional misconduct of any company personnel. There was no impact on revenue or net cash provided by operating activities as a result of this compensation expense.
In addition to the compensation expenses described above, we also recorded approximately $5.8 million of non-cash, stock-based compensation expense in connection with a stock option held by former CEO Robert J. Therrien that we have concluded he was permitted to exercise in November 1999 despite its expiration in August of 1999. This transaction was previously accounted for and disclosed as a loan by the Company to Mr. Therrien for the purpose of permitting him to exercise the option. Specifically, in November 1999, three directors of the Company (including Mr. Therrien) signed a ratification document pursuant to which Mr. Therrien was deemed to have been granted a loan as of August 1999. According to the document, in June 1999 our directors (Messrs. Khoury, Emerick and Therrien) discussed extending a loan to Mr. Therrien for the purpose of permitting him to exercise an option to purchase 225,000 shares of the Company’s stock prior to its expiration in August 1999. Based on the document, the Company in November 1999 deemed Mr. Therrien to have timely exercised the options, and accounted for the exercise without recognizing compensation expense. As a result of facts obtained by the Special Committee, we determined that Mr. Therrien misrepresented the facts of the loan and the ratification document described above was false as there were no discussions concerning a loan in June 1999. As a result, we have determined that the option expired in August 1999 and that compensation expense should have been recorded in connection with Mr. Therrien’s purchase of stock in November 1999. At that time, Mr. Therrien paid approximately $560,000 (the exercise price of $2.43 per share, plus interest deemed due on the loan) for 225,000 shares then worth approximately $6,314,000 (or $28.06 per share). In the restatement, we have recognized compensation expense in November 1999 equal to the difference between the price paid by Mr. Therrien and the market value of the stock on the date of sale. The three directors including Mr. Therrien are no longer affiliated with the Company.
As part of our review, we assessed generally whether there were other matters which should have been corrected in our previously issued financial statements. Apart from the errors underlying the restatement described above, no other matters have come to our attention that should be adjusted in our previously issued financial statements.
As a result, we recorded in the restatement cumulative, non-cash pre-tax stock-based compensation expense of approximately $64.5 million and a tax benefit of $1.8 million. Principally as a result of losses incurred, we recorded a full valuation allowance against all deferred tax assets beginning in 2002 and consequently, there is no tax effect of the additional stock-based compensation expense recorded in the years ended September 30, 2005, 2004 and 2003.
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 underRule 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.
Management’s 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 inRules 13a-15(f) and15d-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:
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| • | | 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, 2005.2006. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) anInternal Control-Integrated FrameworkFramework.. Based on our assessment, we concluded that, as of September 30, 2005,2006, 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.
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Our management’s assessment of the effectiveness of our internal control over financial reporting as of September 30, 2005,2006, 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.
Management’s Consideration of the Restatement
In coming to the conclusion that our disclosure controls and procedures and our internal control over financial reporting were effective as of September 30, 2005, management considered, among other things, the control deficiencies related to accounting for stock-based compensation and control environment, which resulted in the need to restate our previously issued financial statements as disclosed in Note 3, “Restatement of Previously Issued Financial Statements,” included in Item 8 of this report. Management has concluded that the control deficiencies that resulted in the restatement of the previously issued financial statements did not constitute a material weakness as of September 30, 2005 because management determined that as of September 30, 2005 there were effective controls designed and in place to prevent or detect a material misstatement and therefore the likelihood of stock-based compensation, deferred compensation and deferred tax assets being materially misstated is not more than remote.
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, 2005,2006, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 9B. | Other Information |
Item 9B.Other Information
Not applicable.
PART III
Item 10.DirectorsOn December 8, 2006, we entered into an employment agreement with Robert W. Woodbury, Jr., our Senior Vice President and Executive OfficersChief Financial Officer, that replaces Mr. Woodbury’s 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 year’s 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 Registrantemployment agreement or related agreements. Good reason is defined to include diminution of Mr. Woodbury’s 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
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Item 10. | Directors and Executive Officers of the Registrant |
The information required by this Item 10 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed by the Company within 120 days after the close of its fiscal year.
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Item 11. | Executive Compensation |
Item 11.Executive Compensation
The information required by this Item 11 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed by the Company within 120 days after the close of its fiscal year.
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Item 12. | | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The table below sets forth certain information as of our fiscal year ended September 30, 2005 regarding the shares of our common stock available for grant or granted under stock option plans that (i) were approved by our stockholders, and (ii) were not approved by our stockholders.
Equity Compensation Plan Information
| | | | | | | | | | | | |
| | Number of Securities | | | | | | | Number of Securities | |
| | to be Issued Upon | | | Weighted-Average | | | Remaining Available for | |
| | Exercise of | | | Exercise Price of | | | Future Issuance Under | |
| | Outstanding Options, | | | Outstanding Options, | | | Equity Compensation | |
Plan Category | | Warrants and Rights | | | Warrants and Rights | | | Plans(1) | |
Equity compensation plans approved by security holders(2) | | | 3,216,205 | | | $ | 26.52 | | | | 3,053,686 | |
Equity compensation plans not approved by security holders(3) | | | 1,989,149 | | | | 24.95 | | | | 313,032 | |
| | | | | | | | | |
Total | | | 5,205,354 | | | $ | 25.83 | | | | 3,366,718 | |
| | | | | | | | | | |
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(1) | | Excludes securities reflected in the first column of the table. |
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(2) | | Includes an aggregate of 190,565 options at a weighted average exercise price of $49.355 assumed by the Company in connection with past acquisitions and business combinations. |
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(3) | | These plans are described in Note 14 “Stock Plans” of the Notes to the Consolidated Financial Statements. |
The balance of the information required by this Item 12 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed by the Company within 120 days after the close of its fiscal year.
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Item 13. | Certain Relationships and Related Transactions |
Item 13.Certain Relationships and Related Transactions
The information required by this Item 13 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed by the Company within 120 days after the close of its fiscal year.
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Item 14. | Principal Accountant Fees and Services |
Item 14.Principal Accountant Fees and Services
The information required by this Item 14 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed by the Company within 120 days after the close of its fiscal year.
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PART IV
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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 thisForm 10-K/A.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 | | Reference |
| 2.01 | | | Agreement and Plan of Merger dated September 21, 1998 relating to the combination of FASTech Integration, Inc. with the Company. | | A** |
| | | | | | |
| 2.02 | | | Stock for Cash Purchase Agreement dated March 31, 1999 relating to the acquisition of Hanyon Tech. Co., Ltd. by the Company. | | B** |
| | | | | | |
| 2.03 | | | Assets for Cash Purchase Agreement dated June 23, 1999 relating to the acquisition of substantially all the assets of Domain Manufacturing Corporation and its Subsidiary Domain Manufacturing SARL by the Company. | | C** |
| | | | | | |
| 2.04 | | | Agreement and Plan of Merger dated July 7, 1999 relating to the combination of Smart Machines Inc. with the Company. | | D** |
| | | | | | |
| 2.05 | | | Master Purchase Agreement dated September 9, 1999 relating to the acquisition of substantially all of the assets of the Infab Division of Jenoptik by the Company. | | E** |
| | | | | | |
| 2.06 | | | Agreement and Plan of Merger dated January 6, 2000 relating to the combination of AutoSimulations, Inc. and Auto-Soft Corporation with the Company. | | F** |
| | | | | | |
| 2.07 | | | Interests for Stock Purchase Agreement dated May 5, 2000 relating to the acquisition of Irvine Optical Company LLC by the Company, as amended. | | G** |
| | | | | | |
| 2.08 | | | Stock Purchase Agreement dated as of February 16, 2001 relating to the acquisition of SEMY Engineering, Inc. by the Company. | | H** |
| | | | | | |
| 2.09 | | | Asset Purchase Agreement dated June 26, 2001 relating to the acquisition of assets of the e-diagnostic infrastructure of KLA-Tencor Corporation and its subsidiary KLA-Tencor Technologies Corporation. | | I** |
| | | | | | |
| 2.10 | | | Agreement and Plan of Merger dated June 27, 2001 relating to the combination of Progressive Technologies Inc. with the Company. | | J** |
| | | | | | |
| 2.11 | | | Asset Purchase Agreement dated October 5, 2001 relating to the acquisition of substantially all of the assets of General Precision, Inc. and GPI-Mostek, Inc. by the Company. | | K** |
| | | | | | |
| 2.12 | | | Share Purchase Agreement dated October 9, 2001 relating to the acquisition of Tec-Sem AG by the Company. | | L** |
| | | | | | |
| 2.13 | | | Amended and Restated Agreement and Plan of Merger relating to the acquisition of PRI Automation, Inc. by the Company. | | M** |
| | | | |
Exhibit
| | |
No. | | Description |
|
| 3 | .01 | | Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 of the Company’s registration statement onForm S-4 (Reg.No. 333-127945), filed on August 30, 2005, as amended on September 26, 2005 (the “HelixS-4”). |
| 3 | .02 | | Certificate of Designations of the Company’s Series A Junior Participating Preferred Stock (incorporated herein by reference to Exhibit 3.03 of the Company’s registration statement onForm S-3(Registration No. 333-34487), filed on August 27, 1997). |
| 3 | .03 | | Certificate of Amendment of the Company’s Certificate of Incorporation (incorporated herein by reference to Exhibit 3.3 of the HelixS-4). |
| 3 | .04 | | Certificate of Amendment of the Company’s Certificate of Incorporation (incorporated herein by reference to Exhibit 3.4 of the HelixS-4). |
| 3 | .05 | | Certificate of Increase of Shares Designated as the Company’s Series A Junior Participating Preferred Stock (incorporated herein by reference to Exhibit 3.5 of the HelixS-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 HelixS-4). |
| 3 | .07 | | Certificate of Designations, Preferences, Rights and Limitations of the Company’s Special Voting Preferred Stock (incorporated herein by reference to Exhibit 4.13 of the Company’s registration statement onForm S-3 (RegistrationNo. 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 HelixS-4). |
| 3 | .09 | | Certificate of Amendment of Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.01 of the Company’s 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 Company’s current report onForm 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 Company’s current report onForm 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 Company’s current report onForm 8-K, filed on October 26, 2005). |
| 3 | .13 | | Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.4 of the Company’s current report onForm 8-K, filed on October 26, 2005). |
| 4 | .01 | | Specimen Certificate for shares of the Company’s common stock (incorporated herein by reference to the Company’s registration statement onForm S-3 (RegistrationNo. 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 Company’s Registration Statement onForm 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 Company’s registration statement onForm 8-A/A filed on June 4, 2002). |
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| | | | | | |
Exhibit No. | | Description | | Reference |
| 2.14 | | | Combination Agreement dated as of November 24, 1998 between PRI Automation, Inc., 1325949 Ontario Inc. and Promis Systems Corporation Ltd. | | N** |
| | | | | | |
| 2.15 | | | Share Sale-, Purchase- and Transfer Agreement dated July 3, 2002 relating to the acquisition of Hermos Informatik GmbH. | | O** |
| | | | | | |
| 2.16 | | | Service and Logistics Agreement by and between Applied Materials, Inc. and the Company, effective May 1, 2004. | | WW** |
| | | | | | |
| 2.17 | | | Agreement and Plan of Merger, dated as of July 11, 2005, by and among the Company, Helix Technology Corporation and Mt. Hood Corporation. | | aa-2.1** |
| | | | | | |
| 2.18 | | | Amendment No. 1 to Agreement and Plan of Merger, dated as of August 29, 2005, among the Company, Helix Technology Corporation and Mt. Hood Corporation. | | aa-2.2** |
| | | | | | |
| 3.01 | | | Certificate of Incorporation of the Company. | | P** |
| | | | | | |
| 3.02 | | | Certificate of Amendment to Certificate of Incorporation of the Company. | | aa-3.2** |
| | | | | | |
| 3.03 | | | Certificate of Amendment to Certificate of Incorporation of the Company. | | VV** |
| | | | | | |
| 3.04 | | | Certificate of Amendment to Certificate of Incorporation of the Company. | | ZZ-3.1** |
| | | | | | |
| 3.05 | | | Certificate of Elimination of Special Voting Preferred Stock. | | ZZ-3.2** |
| | | | | | |
| 3.06 | | | Certificate of Increase of shares Designated as Series A Junior Participating Preferred Stock. | | ZZ-3.3** |
| | | | | | |
| 3.07 | | | Certificate of Designation of Series A Junior Participating Preferred Stock. | | R** |
| | | | | | |
| 3.08 | | | Form of Certificate of Designations, Preferences, Rights and Limitations of Special Voting Preferred Stock of the Company. | | S** |
| | | | | | |
| 3.09 | | | Certificate of Ownership and Merger of PRI Automation, Inc. into the Company. | | aa-3.6** |
| | | | | | |
| 3.10 | | | Amended and Restated Bylaws of the Company. | | ZZ-3.4** |
| | | | | | |
| 4.01 | | | Specimen Certificate for shares of the Company’s common stock. | | T** |
| | | | | | |
| 4.02 | | | Description of Capital Stock (contained in the Certificate of Incorporation of the Company). | | P** |
| | | | | | |
| 4.03 | | | Rights Agreement dated July 23, 1997. | | U** |
| | | | | | |
| 4.04 | | | Amendment No. 1 to Rights Agreement between the Company and the Rights Agent. | | V** |
| | | | | | |
| 4.05 | | | Amendment No. 2 to Rights Agreement between the Company and the Rights Agent. | | Z** |
| | | | | | |
| 4.06 | | | Amendment No. 3 to Rights Agreement between the Company and the Rights Agent. | | bb-99.4** |
| | | | | | |
| 4.07 | | | Registration Rights Agreement dated January 6, 2000. | | V** |
| | | | | | |
| 4.08 | | | Shareholder Agreement dated January 6, 2000 by and among the Company, Daifuku America Corporation and Daifuku Co., Ltd. relating to the acquisition of the businesses of Auto-Soft Corporation and AutoSimulations, Inc. from Daifuku America Corporation by the Company. | | F** |
| | | | |
Exhibit
| | |
No. | | Description |
|
| 4 | .05 | | Amendment No. 3 to Rights Agreement between the Company and the Rights Agent (incorporated herein by reference to the Company’s registration statement onForm 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 Company’s quarterly report onForm 10-Q for the fiscal quarter ended June 30, 2006, filed on August 9, 2006 (the “2006 Q310-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 Q310-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 Q310-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 Q310-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 onForm S-2 (RegistrationNo. 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 Company’s registration statement onForm S-1 (RegistrationNo. 333-87296), filed on December 13, 1994 (the “BrooksS-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 Company’s current report onForm 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 Company’s registration statement onForm S-8 (RegistrationNo. 333-22717), filed on March 4, 1997). |
| 10 | .14 | | 1992 Combination Stock Option Plan (incorporated herein by reference to Exhibit 99.2 to the Company’s registration statement onForm S-8 (RegistrationNo. 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 Company’s current report onForm 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 Company’s registration statement onForm S-8 (RegistrationNo. 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 Company’s registration statement onForm S-8 (RegistrationNo. 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 Company’s registration statement onForm S-8 (RegistrationNo. 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 200410-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 200410-K). |
| 10 | .22 | | Form of 2000 Equity Incentive Plan Director Stock Option Agreement (incorporated herein by reference to Exhibit 10.46 to the 200410-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 200610-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 Company’s annual report onForm 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 Company’s annual report onForm 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 BrooksS-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. |
| | | | | | |
Exhibit No. | | Description | | Reference |
| 4.09 | | | Stockholder Agreement dated September 30, 1999 by and among the Company, Jenoptik AG, M+W Zander Holding GmbH and Robert J. Therrien relating to the acquisition of substantially all of the assets of the Infab Division of Jenoptik AG by the Company. | | E** |
| | | | | | |
| 4.10 | | | Indenture dated as of May 23, 2001 between the Company and State Street Bank and Trust Company (as Trustee). | | W** |
| | | | | | |
| 4.11 | | | Registration Rights Agreement dated May 23, 2001 among the Company and Credit Suisse First Boston Corporation and SG Cowen Securities Corporation (as representatives of several purchasers). | | W** |
| | | | | | |
| 4.12 | | | Form of 4.75% Convertible Subordinated Note of the Company in the principal amount of $175,000,000 dated as of May 23, 2001. | | W** |
| | | | | | |
| 4.13 | | | Stock Purchase Agreement dated June 20, 2001 relating to the acquisition of CCS Technology, Inc. by the Company. | | X** |
| | | | | | |
| 4.14 | | | Asset Purchase relating to the Agreement dated February 15, 2002 relating to the acquisition of substantially all of the assets of Intelligent Automation Systems, Inc. and IAS Products, Inc. by the Company. | | Y** |
| | | | | | |
| 4.15 | | | Asset Purchase Agreement by and among the Company, NexStar Corporation and Zygo Corporation dated December 13, 2001. | | AA** |
| | | | | | |
| 4.16 | | | Agreement and Plan of Merger dated September 20, 2002 among the Company, MTI Acquisitions Corp. and MicroTool, Inc. | | TT** |
| | | | | | |
| 9.1 | | | Form of Voting and Exchange Trust Agreement among PRI Automation, Inc., 1325949 Ontario Inc., Promis Systems Corporation Ltd. and Montreal Trust Company of Canada, as trustee. | | N** |
| | | | | | |
| 9.2 | | | Form of Supplement to Voting and Exchange Trust Agreement among the Company, 1325949 Ontario Inc., Brooks-PRI Automation (Canada), Inc. and Montreal Trust Company of Canada, trustee. | | S** |
| | | | | | |
| 9.3 | | | Form of Support Agreement among PRI Automation, Inc., 1325949 Ontario Inc., and Promis Systems Corporation, Ltd. | | N** |
| | | | | | |
| 9.4 | | | Form of Supplement to Support Agreement among the Company, 1325949 Ontario Inc., and Brooks-PRI Automation (Canada), Inc. | | Z** |
| | | | | | |
| 10.01 | | | Employment Agreement between the Company and Robert J. Therrien dated as of September 30, 2001.* | | AA** |
| | | | | | |
| 10.02 | | | Form of Indemnification Agreement for directors and officers of the Company.* | | Q** |
| | | | | | |
| 10.03 | | | Employment Agreement between the Company and Ellen B. Richstone. * | | BB** |
| | | | | | |
| 10.04 | | | Form of Agreement between Executive Officers and the Company Relating to Change of Control.* | | CC** |
| | | | | | |
| 10.05 | | | Agreement dated November 11, 1999 between Ellen B. Richstone and the Company Relating to Change of Control.* | | CC** |
| | | | | | |
| 10.06 | | | Transitional Services Agreement dated September 30, 1999 between the Company and Jenoptik AG relating to the Company’s German manufacturing facility. | | CC** |
93
| | | | | | |
Exhibit No. | | Description | | Reference |
| 10.07 | | | Corporate Noncompetition and Proprietary Information Agreement dated January 6, 2000 by and among the Company, Daifuku America Corporation and Daifuku Co., Ltd. relating to the acquisition of the businesses of Auto-Soft Corporation and AutoSimulations, Inc. from Daifuku America Corporation by the Company. | | F** |
| | | | | | |
| 10.08 | | | Agreement to Amend Corporate Noncompetition and Proprietary Information Agreement by and among the Company, Daifuku America Corporation and Daifuku Co., Ltd. dated April 2002. | | TT** |
| | | | | | |
| 10.09 | | | Demand Promissory Note Agreement dated as of May 2, 2000, between the Company and ABN AMRO Bank N.V. | | P** |
| | | | | | |
| 10.10 | | | Purchase Agreement for the Company’s headquarters dated January 17, 2001. | | DD** |
| | | | | | |
| 10.11 | | | Lease between the Company and the Nasr Family Trust for 25000 Avenue Stanford, Valencia, California. | | K** |
| | | | | | |
| 10.12 | | | 1993 Nonemployee Director Stock Option Plan.* | | EE** |
| | | | | | |
| 10.13 | | | 1992 Combination Stock Option Plan.* | | FF** |
| | | | | | |
| 10.14 | | | 1995 Employee Stock Purchase Plan, as amended.* | | P** |
| | | | | | |
| 10.15 | | | 1998 Employee Equity Incentive Option Plan.* | | P** |
| | | | | | |
| 10.16 | | | 2000 Combination Stock Option Plan.* | | P** |
| | | | | | |
| 10.17 | | | 2001 Restricted Stock Purchase Plan for KLA Product Line Acquisition.* | | GG** |
| | | | | | |
| 10.18 | | | Progressive Technologies Inc. 1991 Stock Option and Stock Purchase Plan.* | | HH** |
| | | | | | |
| 10.19 | | | Helix Technology Corporation 1996 Equity Incentive Plan.* | | cc-4.1** |
| | | | | | |
| 10.20 | | | Helix technology Corporation Amended and Restated Stock Option Plan for Non-Employee Directors.* | | cc-4.2** |
| | | | | | |
| 10.21 | | | Helix Technology Corporation 1981 Employee Stock Option Plan.* | | cc-4.3** |
| | | | | | |
| 10.22 | | | Deferred Compensation Plan.* | | dd-4.1** |
| | | | | | |
| 10.23 | | | Lease between Bentall Properties LTD and Westminster Management Corporation and Brooks Automation (Canada) Corp. for Crestwood Corporate Centre, Richmond, B.C. for 13777 Commerce Parkway, Richmond, B.C. | | AA** |
| | | | | | |
| 10.24 | | | Employment Agreement for Mitchell G. Tyson dated October 23, 2001.* | | TT** |
| | | | | | |
| 10.25 | | | Management Agreement dated as of November 20, 2000 between the Company and Wan Keun Lee, as the majority shareholder of Shinsung Eng. Co. Ltd. | | II** |
| | | | | | |
| 10.26 | | | Joint Venture Agreement between the Company, Chung Song Systems Co., Ltd. And Shinsung Eng. Co. Ltd. | | JJ** |
| | | | | | |
| 10.27 | | | Master Manufacturing Services Agreement dated as of October 26, 1999 by and between the Company and Shinsung Eng. Co. Ltd. | | KK** |
| | | | | | |
| 10.28 | | | Master Engineering Services Agreement dated as of October 26, 1999 by and between the Company and Shinsung Eng. Co. Ltd. | | KK** |
94
| | | | | | |
Exhibit No. | | Description | | Reference |
| 10.29 | | | PRI Automation, Inc. 2000 Stock Option Plan.* | | LL** |
| | | | | | |
| 10.30 | | | PRI Automation, Inc. 1997 Non-Incentive Stock Option Plan.* | | II** |
| | | | | | |
| 10.31 | | | PRI Automation, Inc. 1994 Incentive and Non-Qualified Stock Option Plan.* | | MM** |
| | | | | | |
| 10.32 | | | Commotion Technology, Inc. 2000 Flexible Stock Incentive Plan.* | | NN** |
| | | | | | |
| 10.33 | | | Promis Systems Corporation Ltd Amended and Restated Stock Option Plan.* | | OO** |
| | | | | | |
| 10.34 | | | Nonqualified Stock Option granted by PRI Automation, Inc. to Mark Johnston.* | | PP** |
| | | | | | |
| 10.35 | | | Equipe Technologies Non-Statutory Stock Options.* | | QQ** |
| | | | | | |
| 10.36 | | | Lease Agreement dated as of May 5, 1994 between the Company and The Prudential Insurance Company of America for 805 Middlesex Turnpike, Billerica, MA. | | RR** |
| | | | | | |
| 10.37 | | | 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. | | SS** |
| | | | | | |
| 10.38 | | | Lease Agreement dated as of October 12, 2000 between the Company and Progress Road LLC for 17 Progress Road, Billerica, MA. | | SS** |
| | | | | | |
| 10.39 | | | First Amendment to Lease dated as of March 21, 2000 between the Company and Progress Road LLC for 17 Progress Road, Billerica, MA. | | SS** |
| | | | | | |
| 10.40 | | | Lease between the Company and BerCar II, LLC for 12 Elizabeth Drive, Chelmsford, Massachusetts dated October 23, 2002. | | TT** |
| | | | | | |
| 10.41 | | | First Amendment to Lease between the Company and BerCar II, LLC for 12 Elizabeth Drive, Chelmsford, Massachusetts dated November 1, 2002. | | TT** |
| | | | | | |
| 10.42 | | | Separation Agreement for Ellen B. Richstone dated October 31, 2002.* | | TT** |
| | | | | | |
| 10.43 | | | Employment Agreement by and between the Company and Edward C. Grady dated January 31, 2003.* | | UU** |
| | | | | | |
| 10.44 | | | Employment Agreement by and between the Company and Robert W. Woodbury, Jr. dated February 26, 2003.* | | VV** |
| | | | | | |
| 10.45 | | | Service and Logistics Agreement by and between Applied Materials, Inc. and the Company, effective May 1, 2004(1).* | | WW** |
| | | | | | |
| 10.46 | | | Amended Employment Agreement by and between the Company and Robert J. Therrien dated June 1, 2004.* | | WW** |
| | | | | | |
| 10.47 | | | Amended and Restated Employment Agreement by and between the Company and Edward C. Grady dated June 1, 2004.* | | WW** |
| | | | | | |
| 10.48 | | | Form of 2000 Equity Incentive Plan New Employee Nonqualified Stock Option Agreement.* | | ee-10.44** |
| | | | | | |
| 10.49 | | | Form of 2000 Equity Incentive Plan Existing Employee Nonqualified Stock Option Agreement.* | | ee-10.45** |
| | | | | | |
| 10.50 | | | Form of 2000 Equity Incentive Plan Director Stock Option Agreement.* | | ee-10.46** |
95
| | | | | | |
Exhibit No. | | Description | | Reference |
| 10.51 | | | Form of 1998 Employee Equity Incentive Plan New Employee Nonqualified Stock Option Agreement.* | | ee-10.47** |
| | | | | | |
| 10.52 | | | Form of 1998 Employee Equity Incentive Plan Existing Employee Nonqualified Stock Option Agreement.* | | ee-10.47** |
| | | | | | |
| 10.53 | | | Fiscal 2004 Management Incentive Plan Program.* | | ee-10.48** |
| | | | | | |
| 10.54 | | | Fiscal 2005 Management Incentive Plan Program. | | ff |
| | | | | | |
| 12.01 | | | Calculation of Ratio of Earnings to Fixed Charges. | | ff |
| | | | | | |
| 21.01 | | | Subsidiaries of the Company. | | ff |
| | | | | | |
| 23.01 | | | Consent of PricewaterhouseCoopers LLP (Independent registered public accounting firm for the Company). | | ff |
| | | | | | |
| 31.01 | | | Rule 13a-14(a),15d-14(a) Certification. | | Filed herewith |
| | | | | | |
| 31.02 | | | Rule 13a-14(a),15d-14(a) Certification. | | Filed herewith |
| | | | | | |
| 32 | | | Section 1350 Certifications. | | Filed herewith |
| | |
(1) | | Portions of this agreement therein identified by *** have been omitted pursuant to a request for confidential treatment and have been filed separately with the Commission on July 29, 2004 pursuant to Rule 24b-2 of the Securities Act of 1934, as amended. |
|
A. | | Incorporated by reference to the Company’s registration statement on Form S-4 (Registration No. 333-64037) filed on September 23, 1998. |
|
B. | | Incorporated by reference to the Company’s current report on Form 8-K filed on May 6, 1999. |
|
C. | | Incorporated by reference to the Company’s current report on Form 8-K filed on July 14, 1999. |
|
D. | | Incorporated by reference to the Company’s current report on Form 8-K filed on September 15, 1999, as amended on September 29, 2000. |
|
E. | | Incorporated by reference to the Company’s current report on Form 8-K filed on October 15, 1999. |
|
F. | | Incorporated by reference to the Company’s current report on Form 8-K filed on January 19, 2000 as amended on February 14, 2000. |
|
G. | | Incorporated by reference to the Company’s registration statement on Form S-3 (Registration No. 333-42620) filed on July 31, 2000. |
|
H. | | Incorporated by reference to the Company’s current report on Form 8-K filed on March 1, 2001. |
|
I. | | Incorporated by reference to the Company’s current report on Form 8-K filed on July 9, 2001. |
|
J. | | Incorporated by reference to the Company’s current report on Form 8-K filed on July 24, 2001. |
|
K. | | Incorporated by reference to the Company’s current report on Form 8-K filed on October 19, 2001 as amended on April 4, 2002. |
|
L. | | Incorporated by reference to the Company’s current report on Form 8-K filed on October 22, 2001. |
96
| | |
M. | | Incorporated by reference to the Company’s registration statement on Form S-4 (Registration No. 333-75490, filed on April 4, 2002. |
|
N. | | Incorporated by reference to PRI Automation, Inc.’s registration statement on Form S-3 (Registration No. 333-69721) filed on December 24, 1998. |
|
O. | | Incorporated by reference to Company’s current report on Form 8-K filed on July 30, 2002. |
|
P. | | Incorporated by reference to the Company’s quarterly report on Form 10-Q filed on May 15, 2000 for the quarterly period ended March 31, 2000. |
|
Q. | | Incorporated by reference to the Company’s registration statement on Form S-1 (Registration No. 33-87296) filed on December 13, 1994. |
|
R. | | Incorporated by reference to the Company’s registration statement on Form S-3 (Registration No. 333-34487) filed on August 27, 1997. |
|
S. | | Incorporated by reference to the Company’s registration statement on Form S-3 (Registration No. 333-87194) filed April 29, 2002, as amended May 13, 2002. |
|
T. | | Incorporated by reference to the Company’s registration statement on Form S-3 (Registration No. 333-88320) filed May 15, 2002. |
|
U. | | Incorporated by reference to the Company’s current report on Form 8-K filed on August 7, 1997. |
|
V. | | Incorporated by reference to the Company’s registration statement on Form 10-K filed for the annual period ended September 30, 2001. |
|
W. | | Incorporated by reference to the Company’s current report on Form 8-K filed on May 29, 2001. |
|
X. | | Incorporated by reference to the Company’s registration statement on Form S-8 (Registration No. 333-67432) filed on August 13, 2001. |
|
Y. | | Incorporated by reference to the Company’s current report on Form 8-K filed on March 1, 2002. |
|
Z. | | Incorporated by reference to the Company’s registration statement on Form 8-A/ A filed on June 4, 2002. |
|
AA. | | Incorporated by reference to the Company’s annual report on Form 10-K filed December 13, 2001 for the annual period ended September 30, 2001, as amended on April 2002. |
|
BB. | | Incorporated by reference to the Company’s annual report on Form 10-K filed on December 30, 1998 for the year ended September 30, 1998. |
|
CC. | | Incorporated by reference to the Company’s annual report on Form 10-K filed on December 29, 1999 for the annual period ended September 30, 1999. |
|
DD. | | Incorporated by reference to the Company’s quarterly report on Form 10-Q filed on May 11, 2001 for the quarterly period ended March 31, 2001. |
|
EE. | | Incorporated by reference to the Company’s registration statement on Form S-8 (Registration No. 333-22717) filed on March 4, 1997. |
|
FF. | | Incorporated by reference to the Company’s registration statement on Form S-8 (Registration No. 333-07313) filed on July 1, 1996. |
97
| | |
GG. | | Incorporated by reference to the Company’s registration statement on Form S-8 (Registration No. 333-61928) filed on May 30, 2001. |
|
HH. | | Incorporated by reference to the Company’s registration statement on Form S-8 (Registration No. 333-67482 filed on August 13, 2001. |
|
II. | | Incorporated by reference to PRI Automation, Inc.’s annual report on Form 10-K filed on December 21, 2000 for the annual period ended September 30, 2000. |
|
JJ. | | Incorporated by reference to PRI Automation, Inc.’s quarterly report on Form 10-Q for the quarter ended June 28, 1998. |
|
KK. | | Incorporated by reference to PRI Automation, Inc.’s amendment No. 1 to annual report on Form 10-K/ A filed April 4, 2002 for the annual period ended September 30, 2002. |
|
LL. | | Incorporated by reference to PRI Automation, Inc.’s Registration Statement on Form S-8 (Registration No. 333-33894), filed on April 3, 2000. |
|
MM. | | Incorporated by reference to PRI Automation, Inc.’s Registration Statement on Form S-8 (Registration No. 333-25217), filed on April 14, 1997. |
|
NN. | | Incorporated by reference to PRI Automation, Inc.’s Registration Statement on Form S-8 (Registration No. 333-49822), filed on November 13, 2000. |
|
OO. | | Incorporated by reference to PRI Automation, Inc.’s Registration Statement on Form S-8 (Registration No. 333-74141), filed on March 9, 1999. |
|
PP. | | Incorporated by reference to PRI Automation, Inc.’s Registration Statement on Form S-8 (Registration No. 333-41067), filed on November 26, 1997. |
|
QQ. | | Incorporated by reference to PRI Automation, Inc.’s Registration Statement on Form S-8 (Registration No. 333-45063), filed on January 28, 1998. |
|
RR. | | Incorporated by reference to PRI Automation, Inc.’s Registration Statement on Form S-1 (Registration No. 33-81836). |
|
SS. | | Incorporated by reference to PRI Automation, Inc.’s annual report on Form 10-K filed on December 7, 2001 for the annual period ended September 30, 2001, as amended in April 2002. |
|
TT. | | Incorporated by reference to the Company’s annual report on Form 10-K filed on December 30, 2002 for the annual period ended September 30, 2002. |
|
UU. | | Incorporated by reference to the Company’s quarterly report on Form 10-Q filed on February 14, 2003 for the quarterly period ended December 31, 2002. |
|
VV. | | Incorporated by reference to the Company’s quarterly report on Form 10-Q filed on May 13, 2003 for the quarterly period ended March 31, 2003. |
|
WW. | | Incorporated by reference to the Company’s quarterly report on Form 10-Q filed on July 29, 2004 for the quarterly period ended June 30, 2004. |
|
ZZ. | | Incorporated by reference to the referenced exhibit number filed with the Company’s current report on Form 8-K filed on October 27, 2005. |
|
aa. | | Incorporated by reference to the referenced exhibit number filed with the Company’s registration statement on Form S-4 (Reg. No. 333-127945), filed on August 30, 2005, as amended on September 26, 2005. |
98
| | |
bb. | | Incorporated by reference to the referenced exhibit number filed with the Company’s registration statement on Form 8-A/A filed on July 11, 2005. |
|
cc. | | Incorporated by reference to the referenced exhibit number filed with the Company’s registration statement on Form S-8 (Reg. No. 333-129724), filed on November 16, 2005. |
|
dd. | | Incorporated by reference to the referenced exhibit number filed with the Company’s registration statement on Form S-8 (Reg. No. 333-123242), filed on March 10, 2005. |
|
ee. | | Incorporated by reference to the exhibit number filed with the Company’s annual report on Form 10-K for the annual period ended September 30, 2004. |
|
ff. | | Incorporated by reference to the same exhibit number to the Company’s annual report on Form 10-K filed on December 13, 2005 for the annual period ended September 30, 2005. |
| | |
* | | Management contract or compensatory plan or arrangement. |
|
** | | In accordance with Rule 12b-32 under the Securities Exchange Act of 1934, as amended, reference is made to the documents previously filed with the Securities and Exchange Commission, which documents are hereby incorporated by reference. |
99
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 | | BROOKS AUTOMATION, INC.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. | | By:Senior Vice President and Chief Financial Officer (Principal Accounting Officer) | | /s/Edward C. Grady | | December 13, 2006 |
| | | | |
/s/ A. Clinton Allen A. Clinton Allen | | Director | | December 13, 2006 |
| | | | Edward C. Grady, |
/s/ Robert J. Lepofsky Robert J. Lepofsky | | Director | | December 13, 2006 |
| | | | Chief Executive Officer |
/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 | | Director | | December 13, 2006 |
Date: July 31, 2006
100
94