EXHIBIT 99.1
HANYON TECHNOLOGY, INC.
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Balance Sheet
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Korean Won
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December 31, 1998
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Current assets;
Cash & cash equivalents (Note 3) 64,356,360
Bank deposits (Notes 4,10) 5,324,316,479
Short-term loans to
shareholders and employees 45,129,640
Other current assets (Note 5) 125,210,253
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sub-total 5,559,012,732
Non-current assets;
Restricted deposits (Note 4) 3,000,000
Investment securities (Note 6) 91,922,000
Key money deposits 417,895,000
Long-term loans to
shareholders and employees (Note 7) 215,000,000
Group severance deposit (Note 2) 200,049,315
Telephone right 790,000
Membership 39,000,000
PP&E, net (Notes 2,8) 481,365,210
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Total assets 7,008,034,257
=======================
Current liabilities;
Accounts payable 70,317,925
Accrued expenses (Note 9) 219,000,000
Withholdings 26,502,645
Advance receipts (Notes 2, 13) 519,051,100
Current income tax liability 937,218,816
Short term borrowings from
shareholders and employees 45,000,000
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sub-total 1,817,090,486
Non-current liabilities;
Accrued severance indemnities (Note 2) 414,688,798
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Total liabilities 2,231,779,284
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Common stock (Note 1) 150,000,000
Capital surplus 115,557,000
Retained earnings (Note 12) 4,510,697,973
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Total shareholders' equity 4,776,254,973
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Total liability and shareholders' equity 7,008,034,257
=======================
See the accompanying notes to the
financial statements.
1
HANYON TECHNOLOGY, INC.
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Income Statement
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Korean Won
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For the year ended
December 31, 1998
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Net sales (Notes 2,13) 8,211,607,541
Cost of goods sold 574,825,500
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Gross profit 7,636,782,041
Selling, general and administrative expenses (Note 14) 3,662,837,495
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Operating income 3,973,944,546
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Other income (expenses), net;
Interest income 499,575,424
Rent income 1,175,000
Foreign exchange gain (losses), net (469,018,460)
Gain on exemption of debt 34,027,650
Prior period adjustment (Note 2,13) (446,852,156)
Miscellaneous (139,076,348)
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(520,168,890)
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Income before income tax provision 3,453,775,656
Income tax provision 1,116,353,836
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Net Income 2,337,421,820
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See the accompanying notes to the
financial statements.
2
HANYON TECHNOLOGY,INC.
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Statement of Appropriation of Retained Earnings
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Korean Won
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For the year ended
December 31, 1998
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Unappropriated retained earnings before appropriation:
Retained earnings brought forward from prior year 1,786,803,523
Net income for the year 2,337,421,820
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4,124,225,343
Appropriations:
Reserve for business rationalization 74,039,946
Reserve for technical development 355,924,193
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429,964,139
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Unappropriated retained earnings carried
to subsequent year (Note 12) 3,694,261,204
=======================
See the accompanying notes to the
financial statements.
3
HANYON TECHNOLOGY,INC
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Statement of Cashflows
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Korean Won
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For the year ended
December 31, 1998
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Cash flows from operating activities;
Net income 2,337,421,820
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation 241,971,758
Provision for accrued severance indemnities 168,564,690
Payments of severance indemnities (107,504,300)
Decrease in accounts receivable 189,943,168
Decrease in advance payments (74,000,412)
Increase in accounts payable 38,539,504
Increase in accrued expenses 219,000,000
Increase in income tax payable 834,765,841
Others, net 102,016,007
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Net cash flows provided by operating activities 3,950,718,076
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Cash flows from investing activities;
Increase in bank deposits (3,981,567,723)
Increase in short-term loans (2,797,448)
Decrease in key money deposit 47,532,000
Disposition of fixed asset 1,570,820
Increase in group severance deposit (25,049,315)
Acquisition of fixed asset (122,066,439)
Acquisition of investment securities (91,872,000)
Increase in restricted deposits (3,000,000)
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Net cash used by investing activities (4,177,250,105)
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Cash flows from financing activities;
Decrease in short-term borrowing (34,656,850)
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Net cash used by financing activities (34,656,850)
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Net decrease in cash and cash equivalents (261,188,879)
Cash and cash equivalents at beginning of year 325,545,239
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Cash and cash equivalents at end of year 64,356,360
========================
See the accompanying notes to the
financial statements.
4
HANYON TECHNOLOGY, INC.
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NOTES TO FINANCIAL STATEMENTS
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December 31, 1998
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1. Organization and business of the Company
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Hanyon Technology Inc. (the Company) was incorporated on July 21, 1989
under the laws of the Republic of Korea to engage in the software
development, planning, research and consulting service of the automation
system integration for semiconductor and electronic industries.
As of December 31, 1998, the Company was authorized to issue 150,000 shares
of common stock with W5,000 par value, and the number of shares of common
stock issued and outstanding was 30,000 shares. On January 15, 1999, the
Company issued 10,000 common shares for cash of W50 million to increase its
capital.
As of April 20, 1999, the Company's issued and outstanding common shares
are 40,000 shares and paid-in capital amounts to W200 million. Under the
"Stock for Cash Purchase Agreement" between Brooks Automation Inc. and
shareholders of the Company dated March 31, 1999, Brooks Automation Inc.
will purchase 90.5% of shares of the Company from the shareholders.
2. Summary of significant accounting policies
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Basis of preparation of the financial statements
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The Company's books of accounts are maintained in Korean Won in accordance
with the pertinent laws and regulations of the Republic of Korea and the
accompanying Korean Won financial statements are prepared in conformity
with generally accepted accounting principles in Korea (Korean GAAP).
Accounting changes
------------------
The Company will change its accounting principles effective fiscal year
1999, in accordance with the revised Financial Accounting Standards (FAS)
generally accepted in Korea. Initial application of these accounting
changes are applied on a retroactive basis and the cumulative effect of
such changes will be presented as an adjustment to the opening balance of
retained earnings. In 1999, according to the revised FAS, the Company will
adopt deferred income tax accounting and record its cumulative effect as an
adjustment of beginning retained earnings at January 1, 1999.
Management's estimates and assumptions
--------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of making 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. Actual results could differ from those
estimates.
Financial instruments
---------------------
The amounts reported for cash and cash equivalents, bank deposits, accounts
receivable, certain other assets, accounts payable and accrued expenses
approximate fair value due to their short maturities or market interest
rates.
Allowance for doubtful accounts
-------------------------------
The Company records an allowance for doubtful accounts considering the
collectibility of the outstanding accounts receivable balances at the
balance sheet date and historical bad debt experience.
Investment securities
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Investment securities consist of government bonds and equity securities and
are stated at cost.
Foreign exchange
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The assets and liabilities of the Company include amounts denominated in
foreign currencies. As of December 31, 1998, these amounts have been
translated into Korean won at the exchange rates in effect as of the
balance sheet date. Gains and losses resulting from translation are
included in current operating results.
Property, plant and equipment
-----------------------------
Property, plant and equipment are stated at acquisition cost. Depreciation
is computed using the declining balance method based on estimated useful
lives as prescribed by the Korean Corporate Income Tax Law.
Improvements that significantly add to the productive capacity or extend
the life of assets are capitalized. Expenditures for maintenance and
repairs are charged to operation as incurred.
5
Accrued severance indemnities.
------------------------------
Under provisions of the Korean Labor Standards Law, an employee with more
than one year of continuous service is entitled, upon termination of
employment, to one month's pay, equivalent to the average of the last three
months' compensation, for each year of service. The accruals for employees'
severance indemnities at December 31, 1998 amounting to W414 million,
approximate these liabilities. The accrued severance indemnities are funded
approximately 48.2% at December 31, 1998 through a group insurance contract
with Daehan Life Insurance Co. The amounts funded under this insurance
contract are classified as group severance deposit. Subsequent accruals are
to be funded at the discretion of the Company. Group severance deposits may
only be withdrawn for the payment of severance benefits. Severance
indemnities paid by the Company in 1998 amounted to W107 million.
Prior period adjustments
------------------------
Prior period adjustments are corrections of errors and accounted for as
direct charges to current income in 1998.
Revenue recognition
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A majority of the Company's contracts with customers consist of fixed price
contracts and service revenue is recognized when a billing invoice is
issued upon completion of each agreed-upon phase of the contracts.
Downpayments received from the customer under the fixed price contract are
deferred as advance receipts and amortized and recognized as service
revenue at the time each phase of the contract is completed, in proportion
to the billing amount of each phase.
Income taxes
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The provision for income taxes in 1998 is based on corporation tax and
resident tax surcharges currently payable.
3. Cash and cash equivalents
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The Company considers all highly liquid investments with a maturity date of
three months or less when purchased to be cash and cash equivalents. Cash
and cash equivalents at December 31, 1998 consist of the following:
Cash on hand W 8,076,647
Demand deposits 64,301,333
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W 64,356,360
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4. Bank deposits
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Bank deposits at December 31, 1998 consist of the following:
Saving deposits W 2,525,680,453
Deposit in foreign currencies 2,798,636,026
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W 5,324,316,479
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Deposits of W3 million included in non-current assets are restricted as to
withdrawal as key money deposits for a checking account.
5. Other current assets
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Other current assets as of December 31, 1998 are as follows:
Accounts receivable - other W 21,495,848
Advance payment 101,467,000
Prepaid expenses 2,247,405
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6
W 125,210,253
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6. Investment securities
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Investment securities as of December 31, 1998 consist of the following:
Rate Amount
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Government Bond N/A W 50,000
Investment in common shares 22% 45,936,000
Stock subscription right 45,936,000
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W 91,922,000
===================
The Company invested US$66,000 to purchase 22% of Synergy Integration
Technology Inc., located in Taiwan, on June 3, 1998. As of December 31,
1998, however, shares were issued for only 50% of the Company's investment
with the remainder awaiting issuance until the other shareholders inject
their portion of additional capital, which was completed on May 3, 1999.
7. Long-term loans to shareholders and employees
---------------------------------------------
The Company provided housing loans to employees in the form of key money
deposits amounting to W215 million as of December 31, 1998.
8. Property, plant and equipment
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Property, plant and equipment as of December 31, 1998 consist of the
following:
Land W 161,851,432
Building 118,416,880
Vehicle 76,740,286
Furniture and fixture 964,007,834
Equipment 130,214,832
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1,451,231,264
Less: accumulated depreciation (969,886,054)
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W 481,365,210
======================
9. Accrued expenses
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Accrued expenses as of December 31,1998 are as follows:
Performance bonuses W 219,000,000
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W 219,000,000
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7
According to the Company's profit sharing system for employees, the Company
provides performance bonuses to employees determined as ten percent of net
income generated under Korean GAAP. As of December 31, 1998, the Company
accrued performance bonuses amounting to W219 million.
10. Assets and liabilities denominated in foreign currencies
--------------------------------------------------------
Assets and liabilities denominated in foreign currencies at December 31,
1998, consist of the following:
W 2,798,636,026
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Bank deposits (U$ 2,317,135)
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11. Income taxes
------------
The statutory corporate income tax rate for 1998 was 30.80% including
resident tax surcharge.
12. Retained earnings
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(1) Retained earnings at December 31, 1998 consist of the following:
Appropriated retained earnings:
Reserve for business rationalization W 245,307,255
Reserve for technical development 571,129,514
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816,436,769
Unappropriated retained earnings
carried forward to subsequent year 3,694,261,204
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W 4,510,697,973
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(2) Reserve for business rationalization
The Tax Exemption Control Law requires that a company claiming tax credits
should appropriate current tax reduction amount to reserve for business
rationalization. This reserve is not available for other purpose except for
deficit offset or capital transfer.
(3) Reserve for technical development
The Company is allowed to claim the amount of retained earnings
appropriated for the reserve for technical development as deductions in its
income tax return under the Tax Exemption Control Law. Actual expenses
incurred for technical development should be offset against this reserve
and any unused balance should be returned to taxable income within four
years.
13. Sales contracts
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The Company recognized its service revenue when a billing invoice is issued
upon completion of each agreed-upon phase of the contract. Total contract
amounts outstanding and unbilled amounts as of December 31, 1998 are as
follows:
Total Unbilled
contracts amounts
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Winbond Fab4 $ 4,135,125 $ 1,544,343
8
USIC from SCU 2,059,819 1,108,379
Promos add-on 163,000 163,000
USIC add-on 517,000 517,000
Hyundai LCD 2,330,000 1,398,000
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$ 9,204,944 $ 4,730,722
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Advance receipts from the customer under fixed price contracts are deferred
and recognized as revenue at the time each phase of the contract is
completed in proportion to the billing amount of each phase. Advance
receipts by contract are as follows:
Winbond Fab4 W 304,479,805 (*)
Winbond add on 36,720,000
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Winbond total 341,199,805
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USIC from SCU(B) 177,851,295
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Advance total W 519,051,100
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(*) During 1997, downpayment amounting to W442,879,716 (US$ 437,312)
received from the Winbond Fab4 project were recorded as service revenue
instead of advance receipts. The Company corrected this error in 1998
and recorded the amount as prior period adjustments in 1998.
14. Selling, general and administrative expenses
---------------------------------------------
Selling, general and administrative expenses for the year ended December
31, 1998 are as follows:
December 31, 1998
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Salaries W 1,115,479,500
Bonus 763,149,000
Provision for severance indemnities 168,564,690
Fringe benefits 85,742,715
Travel 698,043,660
Entertainment 82,873,140
Communications 45,502,111
Water and electricity 8,134,398
Taxes and dues 53,251,710
Depreciation 241,971,758
Rent 177,535,859
Repair 3,076,125
Insurance 20,047,318
Vehicle maintenance 16,243,765
Delivery 3,891,626
Training 15,499,778
Printing expenses 43,770,659
Supplies 32,389,205
Fees and commissions 47,192,340
Advertising 13,685,000
Samples 1,823,000
Subcontracts fee 5,000,000
Miscellaneous 19,970,048
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Total W 3,662,837,495
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9
Samil
PricewaterhouseCoopers [LOGO APPEARS HERE] Accounting
Corporation
Report of Independent Accountants Logo Appears
Here
June 2, 1999
To the Board of Directors and Shareholders of
Hanyon Technology, Inc.
We have audited the accompanying balance sheet of Hanyon Technology, Inc. as of
December 31, 1998 and the related statements of income, appropriations of
retained earnings and cash flows for the year ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion, as independent accountants, on these
financial statements, as to whether they have been prepared in conformity with
financial accounting standards generally accepted in the Republic of Korea. For
this purpose, we conducted our audit in accordance with auditing standards
generally accepted in the Republic of Korea.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Hanyon Technology, Inc. as of
December 31, 1998 and the results of their operations, the changes in their
retained earnings and their cash flows for the year ended December 31, 1998, in
conformity with financial accounting standards generally accepted in the
Republic of Korea.
The accompanying financial statements are not intended to present the financial
position, results of operations and cash flows in accordance with accounting
principles and jurisdictions other than Korea. The standards, procedures and
practices utilized to audit such financial statements are those generally
accepted and applied in the Republic of Korea.
/s/ Samil Accounting Corporation
10