Dailystocks.com - Ticker-based level links to all the information for the Stocks you own. Portal for Daytrading and Finance and Investing Web Sites
DailyStocks.com
What's New
Site Map
Help
FAQ
Log In
Home Quotes/Data/Chart Warren Buffett Fund Letters Ticker-based Links Education/Tips Insider Buying Index Quotes Forums Finance Site Directory
OTCBB Investors Daily Glossary News/Edtrl Company Overviews PowerRatings China Stocks Buy/Sell Indicators Company Profiles About Us
Nanotech List Videos Magic Formula Value Investing Daytrading/TA Analysis Activist Stocks Wi-fi List FOREX Quote ETF Quotes Commodities
Make DailyStocks Your Home Page AAII Ranked this System #1 Since 1998 Bookmark and Share


Welcome!
Welcome to the investing community at DailyStocks where we believe we have some of the most intelligent investors around. While we have had an online presence since 1997 as a portal, we are just beginning the forums section now. Our moderators are serious investors with MBA and CFAs with practical experience wwell-versed in fundamental, value, or technical investing. We look forward to your contribution to this community.

Recent Topics
Article by DailyStocks_admin    (10-13-08 08:54 AM)

Filed with the SEC from Oct 2 to Oct 8:

Brooks Automation (BRKS)
David Nierenberg's D3 Family Funds want Brooks Automation to "commit to an immediate and continuing substantial share-repurchase program."
Nierenberg maintains that the company can generate sufficient cash over the next three or four years both to fund aggressive buybacks and roughly double its revenues through internal growth and acquisitions.
Nierenberg also contends that Brooks has the financial strength to attain these objectives without borrowing money. The D3 Family Funds currently hold 6,346,806 shares (9.98% of the total outstanding).
BUSINESS OVERVIEW

Business

Brooks Automation, Inc. (“Brooks”, “we”, “us”, or “our”), a Delaware Corporation, is a leading supplier of technology products and solutions primarily serving the worldwide semiconductor market. We principally supply hardware and services to both original equipment manufacturers, or OEMs, who make semiconductor device manufacturing equipment, and chip manufacturers. We are a technology and market leader with offerings ranging from individual hardware modules to fully integrated systems as well as services to install and support our products worldwide.

Our company was founded in 1978 to develop and market automated substrate handling equipment for semiconductor manufacturing and became a publicly traded company in February 1995. Since that time, we have grown significantly from a niche supplier of wafer handling robot modules for vacuum-based processes into the largest merchant supplier of hardware automation products for the semiconductor industry in consecutive calendar years from 2001 through 2006. We were also the world’s 12 th largest semiconductor wafer fabrication facility equipment (“WFE”) company in 2006, according to the independent market research firm Gartner, Inc.

Industry Background

In recent years the semiconductor industry has experienced significant growth in both the volume and complexity of integrated circuit devices being manufactured all around the world, particularly in Asia. This growth is being driven by the increasing demand for high performance electronic products that require semiconductors. The products include computers, telecommunications equipment, consumer electronics, data storage media and wireless communications devices.

The production of advanced semiconductor chips is an extremely complex and logistically challenging manufacturing activity. To create the tens of millions of microscopic transistors and connect them both horizontally and in vertical layers in order to produce a functioning integrated circuit, or IC chip, the silicon wafers must go through hundreds of process steps that require complex processing equipment, or tools, to create the integrated circuits. A large production fab may have more than 70 different types of process and metrology tools, totaling as many as 500 tools or more. Up to 40% of these tools perform processes in a vacuum, such as removing, depositing, or measuring material on wafer surfaces. Wafers can go through as many as 400 different process steps before fabrication is complete. These steps, which comprise the initial fabrication of the integrated circuit and are referred to in the industry as front-end processes, are repeated many times to create the desired pattern on the silicon wafer. As the complexity of semiconductors continues to increase, the number of process steps also increases, resulting in a greater need for automation due to the handling requirements and increased number of tools. This requirement for efficient, higher throughput and extremely clean semiconductor wafer fabs has created a substantial market for wafer handling automation (moving the wafers around and between tools) and tool automation (the use of robots and modules used in conjunction with and inside process tools that move wafers from station to station).

Wafer handling robotics have emerged as a critical technology in determining the efficacy and productivity of the complex tools which process 300mm wafers in the world’s most advanced wafer fabs. A tool is built around a process chamber using automation technology provided by a company such as Brooks, to move wafers into and out of the chamber. Today, OEMs are building their tools using a cluster tools architecture, whereby several process chambers are mounted to one central frame that processes wafers. We specialize in developing and building the handling system technology used in these tools. Our products can be provided as an individual component or as a complete handling system. These products are provided to support both atmospheric and vacuum based processes.

In order to facilitate the handling and transportation of wafers into a process tool, an equipment front-end module, or EFEM, is utilized. An EFEM serves as an atmospheric interface for wafers being fabricated by tools that use either atmospheric or vacuum processes. We provide the products and technology to create the required vacuum as well as automate these processes. For vacuum-based processes, automation systems use vacuum robots to transfer wafers into the OEM’s process modules. Our vacuum automation systems use vacuum robots to transfer wafers into the OEM’s process modules. In addition, high vacuum pumps, which we also provide, are required in certain process steps to remove all potentially contaminating gases and impurities from the processing environment and to optimize that environment by maintaining pressure consistency of the known process gas. In achieving optimal production yields, semiconductor manufacturers must also ensure that each process operates at carefully controlled pressure levels. Impurities or incorrect pressure levels can lower production yields, thereby significantly increasing the cost per useable semiconductor chip produced. We provide various pressure measurement instruments that form part of this pressure control loop on production processing equipment. Some key vacuum processes include: dry etching and dry stripping; chemical vapor deposition, or CVD; physical vapor deposition, or PVD; and ion implantation.

Today, all new wafer fabrication facilities, or fabs, being constructed are designed to support the production of semiconductors on 300 millimeter (mm) wafers. The capital expenditure by a semiconductor company to create a modern 300mm fab can exceed $3 billion and is well in excess of $2 billion for a 200mm facility. While most 200mm fabs are only partially automated, virtually all 300mm fabs are fully automated. Automation hardware, software and services have grown from approximately $50 million for a 200mm fab to over $180 million for a 300mm facility. Typically 75% to 80% of the capital investment for a fab is for manufacturing equipment, while the remainder is dedicated to land, the physical building, the clean room production floor and automation, network and facilities infrastructure.

The served available market for semiconductor automation approximated $2.0 billion in 2006, according to Gartner. Brooks concentrates on the tool automation portion of the broad automation market, which Gartner estimates to be approximately $650 million in 2006. In addition, we continue to recognize the importance of establishing and maintaining a world-class customer service infrastructure that can address the majority of the global semiconductor industry’s automation and tool up-time needs.

Current Trends

The demand for semiconductors and semiconductor manufacturing equipment is cyclical. Historically, this industry has experienced periodic expansions and contractions, which are commonly referred to as “upturns” and “downturns.” Globally, the semiconductor industry experienced a prolonged downturn from fiscal 2001 to the end of fiscal 2003. Industry economics improved significantly in fiscal 2004 and we were able to return to profitability for the period, benefiting from improved market demand and from cost reduction initiatives that we implemented during the downturn. Industry conditions weakened again during fiscal 2005 leading to a revenue and profitability decline for the period. During fiscal 2006 and continuing into fiscal 2007, Brooks again benefited from a cyclical upturn in demand for its products and services, which helped drive revenues and earnings to record levels. During the fourth quarter of fiscal 2007, the Company began to observe a slowdown in the demand for semiconductor capital equipment. It is difficult to accurately predict the length of such downturns, but the Company does not anticipate this downturn to be prolonged or as severe as downturns experienced over the course of its history. Still, we believe it is both reasonable and prudent to expect that the global semiconductor industry will experience market conditions that fluctuate unpredictably and at times, severely.

The majority of equipment automation is still addressed internally by engineering teams working inside customer OEMs, but the trend of outsourcing the procurement of automation technology and production systems has been gathering momentum since the late 1980’s. This internal market is also referred to as the captive market. The trend of outsourcing has accelerated through the semiconductor industry’s transition to cluster tools, which have increased the need for reliability and performance. Furthermore, the need for outsourcing automation has been driven by the need of our OEM customers to leverage their expertise in process technology, rather than mechanical technology. Since the early 2000’s, many of the major OEMs have begun to look outside their captive capabilities to suppliers, like us, who could provide them with fully integrated and tested systems. Accordingly, we believe that our primary opportunity comes from being able to provide reliable technology solutions to the larger semiconductor OEMs that currently satisfy their substrate handling needs through their captive supplier.

The global semiconductor industry is experiencing a material shift in the fabrication of wafers from North American and European based facilities to wafer fabs and foundries located in Asia. In addition to this regional shift, the global semiconductor industry is one that is continuously focused on cost reduction. As such, companies that are a part of, or a supplier to, this industry are expected to support their customers’ focus on reducing the costs of operating and maintaining their manufacturing network. In addition to innovative technology solutions that increase device yields at the wafer and wafer throughput per tool, we are aggressively looking to access markets and resources that enable us to leverage the benefits of lower cost materials and production facilities located in Asia.

Segments

In the fourth quarter of fiscal 2007 we made changes to our internal reporting structure and will now be reporting results in three segments: Automation Systems Group; Critical Components Group; and Global Customer Support Group.

Our Automation Systems Group segment provides a range of wafer handling products and systems that support both atmospheric and vacuum process technology used by our customers.

The Critical Components Group segment includes cryogenic vacuum pumping, thermal management and vacuum measurement solutions used to create, measure and control critical process vacuum applications. The pump, gauge and chiller products serve various markets that use vacuum as a critical enabler to overall system performance.

The Global Customer Support Group segment consists of our service organization, which provides an extensive range of support to our customers to address their on-site needs, consultation, or spare parts logistics, all of which enable the customer to maximize wafer fab utilization, process tool uptime and productivity.

Products

The Automation Systems Group provides automation products for vacuum and atmospheric equipment, as well as mini-environment products, calibration and alignment products and high-precision airflow controls primarily for the semiconductor industry and high performance electronics industries. These products include wafer transport robots and platforms sold to semiconductor equipment manufacturers, as well as products for lithograghy that automate storage, inspection and transport of photomasks or reticles sold directly to chip manufacturers. We offer hardware for process and metrology equipment as either modules or systems. The products sold as modules are discrete components such as robots, load ports, and aligners, while those products sold as systems are pre-integrated assemblies such as the cluster tool platform that may consist of a number of modules provided by us or other suppliers.

The Critical Components Group provides products and subsystems designed to create, measure and control vacuum technology solutions such as cryogenic pumps for creating vacuum, product for measuring vacuum, and thermal management products that are used in manufacturing equipment for the semiconductor, data storage and flat panel display industries.

The Global Customer Support Group provides customers worldwide with crucial and timely support of all our hardware offerings. We assist with the installation of hardware products, product training, consulting and sustaining on-site support. Our extensive range of global support and system monitoring services are designed to lower the total cost of ownership for our customers. The objective is to increase our customers’ system uptime through rapid response to potential operating problems. We also develop and deliver enhancements to our customers’ installed base of production tools through upgrades and other services. In addition, we maintain spare parts inventories in regional hubs to enable our personnel to serve our customers and to service our products more efficiently.

We continuously direct resources to introduce new generations of products and services to replace the current offerings. These products and services are the culmination of an extensive R&D program and extensive customer interactions over the past few years. New products and services are developed using a product life cycle management process designed to meet goals for performance, manufacturability, cost, reliability and support.

Customers

We sell our products and services to nearly every major semiconductor chip manufacturer and OEM in the world, including all of the top ten chip companies and nine of the top ten equipment companies. Our customers also include companies who are in the data storage and other high performance electronics industries. Additionally, certain Brooks’ products are sold to non-semiconductor customers producing imaging, coating, and analytic instruments. We have major customers in North America, Europe and Asia.

We expect international revenues to continue to represent a significant percentage of total revenues, as our industry is seeing an increasing business shift to Asia. See Note 16, “Segment and Geographic Information” of Notes to the Consolidated Financial Statements for further discussion of our sales by geographic region and revenue, income and assets by reportable segment. See Part I, Item 1A, “Risk Factors” for a discussion of the risks related to foreign operations.

Relatively few customers account for a substantial portion of our revenues, with the top 20 customers accounting for approximately 66% of our business in fiscal 2007. We have two customers, Applied Materials, Inc. and Lam Research Corporation, that each accounted for more than 10% of our overall revenues for the year.

Sales, Marketing and Customer Support

We market and sell our equipment in North America, Europe and Asia through our direct sales organization. The sales process for our products is often multilevel, involving a team comprised of individuals from sales, marketing, engineering, operations and senior management. In many cases a customer is assigned a team that engages the customer at different levels of its organization to facilitate planning, provide product customization when required, and to assure open communication and support.

Our marketing activities include participation in trade shows, delivery of seminars, participation in industry forums, distribution of sales literature, publication of press releases and articles in business and industry publications. To enhance communication and support, particularly with our international customers, we maintain sales and service centers in the North American, European, and Asian locations. These facilities, together with our headquarters, maintain local support capability and demonstration equipment for customers to evaluate. Customers are encouraged to discuss features and applications of our demonstration equipment with our engineers located at these facilities.

Competition

The semiconductor fab and process equipment manufacturing industries are highly competitive and characterized by continual changes and improvements in technology. The majority of equipment automation is still done in-house by OEMs. Our competitors among external vacuum automation suppliers are primarily Japanese companies such as Daihan, Daikin and Rorze. Also, contract manufacturing companies such as Sanmina, FoxSemicon and Flextronics are offering limited assembly and manufacturing services to the OEM companies. Our competitors among vacuum subsystems suppliers include Sumitomo Heavy Industries (SHI), Genesis, MKS Instruments and Inficon.

Atmospheric tool automation is outsourced to a larger degree and has a larger field of competitors due to the lower barriers to entry. We compete directly with other equipment automation suppliers of atmospheric modules and systems such as Asyst, Hirata, Kawasaki, Rorze, Sankyo, TDK and Shinko. Contract manufacturers are also providing assembly and manufacturing services for atmospheric systems.

We have a significant share of the market for vacuum cryogenic pumps and face few competitors. These competitors include SHI and Genesis. The vacuum measurement market for gauges is more fragmented with a variety of competitors that include MKS Instruments and Inficon.

We believe our customers will purchase our equipment automation products and vacuum subsystems as long as we continue to provide the necessary throughput, reliability, contamination control and accuracy for their advanced processing tools at an acceptable price point. We believe that we have competitive offerings with respect to all of these factors; however, we cannot guarantee that we will be successful in selling our products to OEMs who currently satisfy their automation needs in-house or from other independent suppliers, regardless of the performance or price of our products.

In addressing the Asian markets, we may be at a competitive disadvantage to local suppliers. We are seeking to improve the positioning of our products and services through establishing stronger local capabilities, such as the Yaskawa Brooks Automation (YBA) joint venture in Japan and more material sourcing in China.

We believe that the competitive factors when selling hardware directly to the fabs are technical capabilities, reliability, price/performance, ease of integration and global sales and support resources. We believe that our solutions compete favorably with respect to all these factors.

Research and Development

Our research and development efforts are focused on developing new products and services as well as further enhancing the functionality, degree of integration, reliability and performance of our existing products. Our engineering, marketing, operations and management personnel have developed close collaborative relationships with many of their counterparts in customer organizations and have leveraged these relationships in such ways as to identify market demands and focus our research and development investment to meet those demands. With the rapid pace of change that characterizes semiconductor technology it is essential for us to provide high-performance and reliable products in order for us to maintain our leadership position.

Manufacturing

Our manufacturing operations are used for product assembly, integration and testing. We have adopted quality assurance procedures that include standard design practices, component selection procedures, vendor control procedures and comprehensive reliability testing and analysis to assure the performance of our products. Our major manufacturing facilities are located in Chelmsford, Massachusetts; Gresham, Oregon; Petaluma, California; and Longmont, Colorado. We have recently acquired a manufacturing site in Wuxi, China as part of the Company’s longer — term strategy to source products from lower cost Asian-based suppliers. The Wuxi facility will also conduct final assembly operations and the integration of products using sub-components being sourced from suppliers within lower cost Asian regions. Additionally, we manufacture certain sub-components for our vacuum products utilizing a third party maquiladora in Monterrey, Mexico.

We utilize a just-in-time manufacturing strategy, based on the concepts of demand flow technology, for a large portion of our manufacturing process. We believe that this strategy coupled with the outsourcing of non-critical components such as machined parts, wire harnesses and PC boards reduces our fixed operating costs, improves our working capital efficiency, reduces our manufacturing cycle times and improves our flexibility to rapidly adjust production capacities. While we often use single source suppliers for certain key components and common assemblies to achieve quality control and the benefits of economies of scale, we believe that these parts and materials are readily available from other supply sources. We will continue to broaden the sourcing of our components to low cost regions, more specifically Asia.

Patents and Proprietary Rights

We rely upon patents, trade secret laws, confidentiality procedures, copyrights, trademarks and licensing agreements to protect our technology. Due to the rapid technological change that characterizes the semiconductor and flat panel display process equipment industries, we believe that the improvement of existing technology, reliance upon trade secrets and unpatented proprietary know-how and the development of new products may be as important as patent protection in establishing and maintaining competitive advantage. To protect trade secrets and know-how, it is our policy to require all technical and management personnel to enter into nondisclosure agreements. We cannot guarantee that these efforts will meaningfully protect our trade secrets.

We have obtained patents and will continue to make efforts to obtain patents, when available, in connection with our product development program. We cannot guarantee that any patent obtained will provide protection or be of commercial benefit to us. Despite these efforts, others may independently develop substantially equivalent proprietary information and techniques. As of September 30, 2007, we have obtained 375 United States patents and had 124 United States patent applications pending on our behalf. In addition, we have obtained 460 foreign patents and had 449 foreign patent applications pending on our behalf. Our United States patents expire at various times through April 2023. We cannot guarantee that our pending patent applications or any future applications will be approved, or that any patents will not be challenged by third parties. Others may have filed and in the future may file patent applications that are similar or identical to ours. These patent applications may have priority over patent applications filed by us.

We have successfully licensed our FOUP (front-opening unified pod) load port technology to several companies and continue to pursue the licensing of this technology to more companies that we believe are utilizing our intellectual property.

There has been substantial litigation regarding patent and other intellectual property rights in the semiconductor and related industries. We have in the past been, and may in the future be, notified that we may be infringing intellectual property rights possessed by other third parties. We cannot guarantee that infringement claims by third parties or other claims for indemnification by customers or end users of our products resulting from infringement claims will not be asserted in the future or that such assertions, if proven to be true, will not materially and adversely affect our business, financial condition and results of operations. If any such claims are asserted against our intellectual property rights, we may seek to enter into a royalty or licensing arrangement. We cannot guarantee, however, that a license will be available on reasonable terms or at all. We could decide in the alternative to resort to litigation to challenge such claims or to attempt to design around the patented technology. Litigation or an attempted design around could be costly and would divert our management’s attention and resources. In addition, if we do not prevail in such litigation or succeed in an attempted design around, we could be forced to pay significant damages or amounts in settlement. Even if a design around is effective, the functional value of the product in question could be greatly diminished.

We acquired certain assets, including a transport system known as IridNet, from the Infab division of Jenoptik AG on September 30, 1999. Asyst Technologies, Inc. had previously filed suit against Jenoptik AG and other defendants, or collectively, the defendants, in the Northern District of California charging that products of the defendants, including IridNet, infringe Asyst’s U.S. Patent Nos. 4,974,166, or the ‘166 patent, and 5,097,421, or the ‘421 patent. Asyst later withdrew its claims related to the ‘166 patent from the case. Summary judgment of noninfringement was granted in that case by the District Court and judgment was issued in favor of Jenoptik on the ground that the product at issue did not infringe the asserted claims of the ‘421 patent. Following certain rulings and findings adverse to Jenoptik, on August 3, 2007 the District Court issued final judgment in favor of Jenoptik. In November 2007, Asyst filed a notice of appeal appealing the District Court’s latest decision.

We had received notice that Asyst might amend its complaint in this Jenoptik litigation to name Brooks as an additional defendant, but no such action was ever taken. Based on our investigation of Asyst’s allegations, we do not believe we are infringing any claims of Asyst’s patents. Asyst may decide to seek to prohibit us from developing, marketing and using the IridNet product without a license. We cannot guarantee that a license would be available to us on reasonable terms, if at all. In any case, we could face litigation with Asyst. Jenoptik has agreed to indemnify us for any loss we may incur in this action.

Backlog

Backlog for our products as of September 30, 2007, totaled $111.2 million as compared to $152.5 million at September 30, 2006. Backlog consists of purchase orders for which a customer has scheduled delivery within the next 12 months. Backlog consists of orders principally for hardware and service agreements. Orders included in the backlog may be cancelled or rescheduled by customers without significant penalty. Backlog as of any particular date should not be relied upon as indicative of our revenues for any future period. A substantial percentage of current business generates no backlog because we deliver our products and services in the same period in which the order is received.

Recent Developments

On March 30, 2007, we completed the sale of our software division, Brooks Software, to Applied Materials, Inc., a Delaware corporation (“Applied”) for cash consideration and the assumption of certain liabilities related to Brooks Software. Brooks Software provided real-time applications for greater efficiency and productivity in collaborative, complex manufacturing environments. We transferred 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 assumed certain liabilities related to Brooks Software.

The sale was consummated pursuant to the terms of an Asset Purchase Agreement dated as of November 3, 2006 by and between the Company and Applied. Applied is among our largest customers for tool automation products. Following a bidding process in which multiple possible purchasers participated, the purchase price for Brooks Software was determined by arm’s-length negotiations between the Company and Applied. We sold our software division in order to focus on our core semiconductor-related hardware businesses. We recognized a gain on disposal of the software division.

Effective October 1, 2006, our consolidated financial statements and notes have been reclassified to reflect this business as a discontinued operation in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

Employees

At September 30, 2007, we had approximately 1,900 full time employees. In addition, the Company utilized 300 part time employees and contractors. We believe our future success will depend in larger part on our ability to attract and retain highly skilled employees. Approximately 120 employees in our Jena, German facility are covered by a collective bargaining agreement. We consider our relationships with these and all employees to be good.

CEO BACKGROUND
Mr. Robert J. Lepofsky became our President and Chief Executive Officer on October 1, 2007. He became a director in October 2005 following the acquisition of Helix Technology Corporation, and he was appointed to our Board pursuant to the Helix Merger Agreement. Mr. Lepofsky was President and Chief Executive Officer of Helix from January 1989 until December 2004, having previously served as Helix’s Senior Vice President and Chief Operating Officer from 1979 through 1988. He became Chairman of the Board of Helix on January 1, 2005. He joined Ensign-Bickford Industries, Inc., a privately held, broadly diversified company, in January 2005 as President and Chief Executive Officer and remained in that position until his retirement in November 2006. Mr. Lepofsky is also a director of Moldflow Corporation, a provider of software products and services for optimizing the design and manufacture of injection-molded plastic products, and of Avantair, Inc., a provider of fractional aircraft shares for business and personal use. In the not-for-profit sector Mr. Lepofsky serves as a member and Vice Chairman of the Board of CareGroup Health System, a major Harvard-affiliated healthcare system in Boston.

Mr. Joseph R. Martin has been a director of Brooks since June 2001 and Chairman of the Board since May 2006. Mr. Martin served as Executive Vice President and Chief Financial Officer, and later Sr. Executive Vice President, of Fairchild Semiconductor Corporation, a supplier of power semiconductors, from 1997 to 2004, and then served as member of the Office of the Chairman and Vice Chairman of the Board of Directors until his retirement in June 2005. Mr. Martin is a member of the board of directors of Soitec, Inc., a semiconductor wafer processing company, and of SynQor, Incorporated, a manufacturer of power solutions.

Mr. John K. McGillicuddy has been a director since October 2003. Mr. McGillicuddy was a partner with the international accounting firm of KPMG LLP, a public accounting firm, from 1975 until his retirement in June 2000. Mr. McGillicuddy is also a member of the board of directors of Watts Water Technologies, Inc., a manufacturer of water safety and flow control products.

Professor Krishna G. Palepu is the Ross Graham Walker Professor of Business Administration and Senior Associate Dean for International Development at the Harvard Business School. Professor Palepu became a Director in November 2005. Prior to assuming his current administrative position, Professor Palepu held other positions at Harvard Business School, including Senior Associate Dean, Director of Research, and Chair, Accounting and Control Unit. He is currently a member of the board of directors of Dr. Reddy’s Laboratories Limited, and Satyam Computer Services Limited, two Indian companies listed on the New York Stock Exchange. Dr. Reddy’s Laboratories is a global, vertically integrated pharmaceutical company, and Satyam Computer Services is a global information systems and technology company delivering consulting, systems integration and outsourcing services to clients in more than 20 industries. Professor Palepu is also a director of BTM Corporation, a management solutions provider focused on converging business with technology.

Mr. Kirk P. Pond was the President and Chief Executive Officer of Fairchild Semiconductor International, Inc., from June 1996 until May 2005. He served as the Chairman of Fairchild’s Board of Directors from 1997 and until June 2006. Prior to Fairchild Semiconductor’s separation from National Semiconductor, Mr. Pond had held several executive positions with National Semiconductor, including Executive Vice President and Chief Operating Officer. Mr. Pond served as a member of the Board of Directors of the Federal Reserve Bank of Boston from January 2004 until January 2007 and since 2005 has been a director of Wright Express Corporation. Mr. Pond has also served on the advisory board of the University of Arkansas Engineering School since 1987.

Mr. Alfred Woollacott, III is a certified public accountant and was a partner with the accounting firm of KPMG LLP from 1979 until his retirement in September 2002. He became a Director in October 2005 following our acquisition of Helix and was appointed to our Board pursuant to our merger agreement with Helix. He is currently a board member of William Hart Realty Trust and the Hart Haven Community Association.

Dr. Mark S. Wrighton has been Chancellor of Washington University in St. Louis since July 1995. He became a Director in October 2005 following our acquisition of Helix and was appointed to our Board pursuant to our merger agreement with Helix. Dr. Wrighton also serves as director of Cabot Corporation, a chemical manufacturer.

Dr. Marvin G. Schorr served as Chairman of the Board of Helix from August 1996 to December 2004. Dr. Schorr became Brooks Director Emeritus in October 2005 pursuant to our merger agreement with Helix. Dr. Schorr is a director of Tech/Ops Sevcon, Inc., a manufacturer and seller of control products for battery operated vehicles.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

We are a leading supplier of technology products and solutions primarily serving the worldwide semiconductor market. We principally supply hardware and services to both original equipment manufacturers, or OEMs, who make semiconductor device manufacturing equipment, and chip manufacturers. We are a technology and market leader with offerings ranging from individual hardware modules to fully integrated systems as well as services to install and support our products worldwide.

In the fourth quarter of fiscal 2007, we made changes to our internal reporting structure and will now be reporting results in three segments: Automation Systems Group, Critical Components Group and Global Customer Support Group. Our Automation Systems Group segment provides a range of wafer handling products and systems that support both atmospheric and vacuum process technology used by our customers. Our Critical Components Group segment includes cryogenic vacuum pumping, thermal management and vacuum measurement products used to create, measure and control critical process vacuum applications. Our Global Customer Support Group segment provides an extensive range of support to our customers to address their on-site needs, consultation, or spare parts logistics, all of which enable the customer to maximize wafer fab utilization, process tool uptime and productivity. Certain reclassifications have been made in the 2006 and 2005 consolidated financial statements to conform to the 2007 presentation.

In fiscal 2007, our total revenues increased 22.4% to $743.3 million from the prior year. This increase is primarily due to the additional revenues related to our acquisition of Synetics Solutions Inc., along with higher industry demand for semiconductor capital equipment in fiscal 2007.

Our automation systems group segment revenues increased 31.4% from the prior year to $462.7 million. This increase is primarily attributable to the additional revenues related to our Synetics acquisition along with higher demand for semiconductor capital equipment during fiscal year 2007. Our critical components group segment revenues increased 13.4% from the prior year to $156.1 million. This increase is primarily attributable to higher demand for our cryogenic technology products. Our global customer support group segment increased 5.5% from the prior year to $124.4 million primarily due to a higher level of repair revenues. We expect fiscal 2008 revenues to decrease from 2007 due to a softening of demand for semiconductor capital equipment.

Gross margins decreased to 29.5% for fiscal 2007 from 30.7% in the prior year. The decrease is primarily attributable to the lower gross margins on the additional Synetics revenues. We expect our gross margins to remain relatively stable in the near term, as the Company has several cost reduction initiatives underway to improve gross margins, along with higher margins from new product introductions, offset by lower manufacturing cost absorption on lower revenues.

We recorded income from continuing operations of $54.3 million or $0.73 per diluted share in fiscal 2007 compared to $22.3 million or $0.31 per diluted share in fiscal 2006. This improvement is largely the result of higher revenue and gross margin dollars, and lower interest expense. We generated $72.9 million of cash from operations in fiscal year 2007, compared to a cash flow from operations of $65.2 million in fiscal 2006. At September 30, 2007, we had cash, cash equivalents and marketable securities aggregating to $274.6 million.

Recent Developments

On March 30, 2007, we completed the sale of our software division, Brooks Software, to Applied Materials, Inc., a Delaware corporation (“Applied”) for cash consideration and the assumption of certain liabilities related to Brooks Software. Brooks Software provided real-time applications for greater efficiency and productivity in collaborative, complex manufacturing environments. We transferred 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 assumed certain liabilities related to Brooks Software.

The sale was consummated pursuant to the terms of an Asset Purchase Agreement dated as of November 3, 2006 by and between the Company and Applied. Applied is among our largest customers for tool automation products. Following a bidding process in which multiple possible purchasers participated, the purchase price for Brooks Software was determined by arm’s-length negotiations between the Company and Applied. We sold our software division in order to focus on our core semiconductor-related hardware businesses. We recognized a gain on disposal of the software division.

Effective October 1, 2006, our consolidated financial statements and notes have been reclassified to reflect this business as a discontinued operation in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

On May 31, 2007, we announced that our Board of Directors (the “Board”) had authorized a modified “Dutch Auction” self-tender offer to purchase up to 6,060,000 shares of our common stock, representing approximately 8% of our approximately 75.8 million outstanding shares as of April 30, 2007. This transaction closed on July 5, 2007. In the tender offer, shareholders had the opportunity to tender some or all of their shares at a price not less than $16.50 per share or more than $19.00 per share, net to the seller in cash, without interest. The tender offer commenced on June 1, 2007 and expired on June 28, 2007. This action followed the closing of our recent sale of the Brooks Software Division, which generated proceeds to us that strengthened our cash assets. Following the sale of the Brooks Software Division, the Board determined that the best use for much of the cash generated in that transaction was to invest in Brooks through a share repurchase returning money to our shareholders.

On July 5, 2007, we announced the final results of our modified “Dutch Auction” tender offer. In accordance with the terms and conditions of the tender offer, we accepted for purchase 6,060,000 shares of our common stock at a purchase price of $18.20 per share, for a total cost of approximately $110.8 million, which includes $0.5 million of associated fees. The total shares tendered before proration was approximately 7,400,000 common shares. Since the offer was oversubscribed, the number of shares that we accepted for purchase from each tendering shareholder was prorated, based upon the proration procedures described in the Offer to Purchase mailed to shareholders and certain other limited exceptions. Shareholders who validly tendered shares at a price equal to or below $18.20 per share had approximately 82% of those shares accepted for purchase. The depositary promptly issued payment for the shares accepted for purchase in the tender. Any shares properly tendered and not properly withdrawn, but not purchased, were returned promptly to stockholders by the depositary. We financed the tender offer with available cash on hand.

Year Ended September 30, 2007, Compared to Year Ended September 30, 2006

Revenues

We reported revenues of $743.3 million for the year ended September 30, 2007, compared to $607.5 million in the previous year, a 22.4% increase. The increase reflects higher revenues related to our automation systems group segment of $110.7 million, higher revenues associated with our critical components group segment of $18.5 million, and higher revenues associated with our global customer support group segment of $6.6 million due primarily to higher demand for semiconductor capital equipment experienced in fiscal 2007.

Our automation systems group segment reported revenues of $462.7 million in the year ended September 30, 2007, an increase of 31.4% from $352.1 million in the prior year. This increase reflects the additional revenues of $75.5 million related to the Synetics acquisition, along with higher revenues related to our legacy Brooks automation products of $35.1 million due to higher demand for semiconductor capital equipment experienced in fiscal 2007.

Our critical components group segment reported revenues of $156.1 million, a 13.4% increase from $137.6 million in the prior year. This increase reflects higher revenues of $13.8 million for cryogenic vacuum pumping including incremental product license revenues of $8.5 million experienced in the third quarter of fiscal 2007, higher revenues of $3.4 million associated with thermal measurement products, and $1.3 million of additional revenues for vacuum measurement and air flow control products.

Our global customer support group segment reported revenues of $124.4 million, a 5.5% increase from $117.9 million in the prior year. This increase is primarily attributed to higher revenues of $4.6 million related to repairs, higher revenues of $3.2 million for hardware maintenance and field services, offset by lower revenues for hardware spares of $1.3 million.

Product revenues increased $124.7 million, or 25.5%, to $613.5 million, in the year ended September 30, 2007, from $488.8 million in the previous year. This increase is primarily attributable to additional revenues of $72.8 million related to the Synetics acquisition, along with higher revenues related to our legacy automation systems segment of $32.7 million, and higher revenues associated with our critical components segment of $18.5 million due primarily to higher demand for semiconductor capital equipment experienced in fiscal 2007.

Service revenues increased $11.1 million, or 9.4%, to $129.8 million, in the year ended September 30, 2007, from $118.7 million in the previous year . This increase is attributable to additional revenues of $2.7 million related to the Synetics acquisition, along with higher revenues for hardware support of $8.4 million.

Revenues outside the United States were $248.8 million, or 33.5% of total revenues, and $230.7 million, or 38.0% of total revenues, in the years ended September 30, 2007 and 2006, respectively. We expect that foreign revenues will continue to account for a significant portion of total revenues.

Gross Margin

Gross margin dollars increased to $219.6 million for the year ended September 30, 2007 or $228.9 million excluding $9.3 million of completed technology amortization, compared to $186.7 million for the year ended September 30, 2006, or $206.5 million excluding $11.7 million of charges to write-off the step-up in inventory related to the Helix and Synetics acquisitions and $8.1 million of completed technology amortization. Gross margin percentage decreased to 29.5% for the year ended September 30, 2007, compared to 30.7% for the year ended September 30, 2006, primarily due to the lower margin on the additional Synetics revenues. Excluding the $11.7 million inventory write-off taken in fiscal year 2006 and the amortization of completed technology, the overall increase in gross margin primarily reflects the additional margin associated with our automation systems group segment of $14.4 million, higher margin associated with our critical components group segment of $4.1 million, and higher margin associated with our global customer support group segment of $3.9 million due primarily to higher demand for semiconductor capital equipment experienced in fiscal 2007.

Gross margin of our automation systems group segment increased to $127.7 million in the year ended September 30, 2007 or $128.3 million excluding $0.6 million of completed technology amortization related to the Synetics acquisition, compared to $113.1 million in the prior year or $113.7 million excluding $0.4 million of charges to write-off the step-up in inventory and $0.2 million of completed technology amortization related to the Synetics acquisition. Excluding the inventory write-off taken in fiscal year 2006 and the amortization of completed technology, this increase reflects the additional margin of $9.3 million related to the Synetics acquisition, along with additional margin on higher revenues related to our legacy Brooks automation products of $5.3 million.

Gross margin of our critical components group segment increased to $58.5 million in the year ended September 30, 2007 or $62.4 million excluding $3.9 million of completed technology amortization, compared to $50.9 million in the prior year or $58.3 million excluding $3.8 million of charges to write-off the step-up in inventory and $3.6 million of completed technology amortization related to the Helix acquisition. Excluding the inventory write-off taken in fiscal year 2006 and the amortization of completed technology, this increase primarily reflects the incremental margin of $8.5 million from product license revenue, additional margin of $2.1 million on higher revenues of thermal measurement and air flow control products, offset by lower margins of $6.5 million on cryogenic pumping and vacuum measurement products.

Gross margin of our global customer support group segment increased to $33.5 million in the year ended September 30, 2007 or $38.3 million excluding $4.8 million of completed technology amortization, compared to $22.6 million in the prior year or $34.4 million excluding $7.4 million of charges to write-off the step-up in inventory and $4.4 million of completed technology amortization related to the Helix acquisition. Excluding the inventory write-off taken in fiscal year 2006 and the amortization of completed technology, this increase reflects additional margin on higher revenues of hardware support services.

Gross margin on product revenues increased to $184.1 million for the year ended September 30, 2007, compared to $160.7 million for the prior year. The increase in product margins is primarily attributable to additional margin of $8.5 million related to the Synetics acquisition, along with higher margin of $5.2 million related to our legacy automation products, higher margin of $7.6 million associated with our critical components products, and higher margin of $2.1 million related to end-user factory hardware products. Gross margin percentage on product revenues decreased to 30.0% for the year ended September 30, 2007, compared to 32.9% for the year ended September 30, 2006, primarily due to the lower margin on the additional Synetics revenues.

Gross margin on service revenues was $35.5 million or 27.3% for the year ended September 30, 2007, compared to $26.0 million or 21.9% in the previous year. The increase in service margins is primarily attributable to incremental margin of $8.8 million on higher global customer support service revenue.

Research and Development

Research and development expenses for the year ended September 30, 2007, were $51.7 million, an increase of $6.1 million, compared to $45.6 million in the previous year. Research and development expenses decreased as a percentage of revenues, to 7.0%, from 7.5% in the prior year. The increase in absolute spending is primarily attributable to the additional spending of $3.5 million related to the Synetics acquisition, plus additional spending associated with our critical components and global customer support segments of $2.2 million and $2.3 million respectively, offset by lower spending in our legacy automation systems business. The decrease in absolute legacy Brooks spending and the overall decrease in R&D spending as a percentage of revenue is the result of our continued efforts to control costs and focus our development activities.

Selling, General and Administrative

Selling, general and administrative expenses were $120.4 million for the year ended September 30, 2007, an increase of $3.2 million, compared to $117.2 million in the prior year. Selling, general and administrative expenses decreased as a percentage of revenues, to 16.2% in the year ended September 30, 2007, from 19.3% in the previous year. The increase in absolute spending is primarily attributable to the additional spending of $5.3 million related to the Synetics acquisition, additional amortization of various intangible assets of $1.7 million primarily related to the Synetics acquisition, offset by lower management incentive costs of $3.0 million. A total of $5.2 million was incurred in fiscal year 2007 on legal expenses arising out of matters described more fully in the Contingencies note to the consolidated financial statements, compared to $4.8 million in fiscal 2006.

Restructuring Charges

We recorded a charge to continuing operations of $7.1 million in the year ended September 30, 2007. This charge consists of $3.1 million to fully recognize our remaining obligation on the lease associated with our vacant facility in Billerica, Massachusetts, along with $4.0 million of severance costs associated with workforce reductions of approximately 90 employees in operations, service and administrative functions principally in the U.S., Germany and Korea. The accruals for workforce reductions are expected to be paid over the next twelve months. We estimate that salary and benefit savings as a result of these actions will be approximately $7.1 million annually. The impact of these cost reductions on our liquidity is not significant, as these cost savings are expected to yield actual cash savings within twelve months.

We recorded a charge to continuing operation of $4.3 million in the year ended September 30, 2006. This charge consisted of $2.0 million of excess facilities charges primarily related to a vacant facility in Billerica Massachusetts due to a longer period than initially estimated to sub-lease the facility, $2.5 million for costs incurred related to the termination of approximately 30 employees worldwide whose positions were made redundant as a result of the Helix acquisition, offset by the $0.2 million reversal of previously accrued termination costs to employees who will no longer be terminated or whose termination was settled at a reduced cost.

We recorded a charge of $1.0 million in fiscal year 2006 for workforce reductions related to our discontinued software division which is included in the loss from discontinued operations.

Interest Income and Expense

Interest income decreased by $1.8 million, to $11.9 million, in the year ended September 30, 2007, from $13.7 million the previous year. This decrease is due primarily to lower investment balances following the repayment of $175.0 million of the Convertible Subordinated Notes in the quarter ended September 30, 2006, and the purchase of 6,060,000 shares of our common stock in the quarter ended September 30, 2007 for a total cost of approximately $110.8 million. We recorded interest expense of $0.6 million in fiscal year 2007 compared to $9.4 million in the previous year. The interest expense incurred in the prior year related primarily to the Convertible Subordinated Notes that were paid off in the quarter ended September 30, 2006.

Gain on Investment

During the three months ended June 30, 2007, a company in which Brooks held a minority equity interest was acquired by a closely-held Swiss public company. Our minority equity investment had been previously written down to zero in 2003. As a result, we received shares of common stock from the acquirer in exchange for our minority equity interest and recorded a gain of $5.1 million.

Other (Income) Expense

Other expense, net of $1.1 million for the year ended September 30, 2007 consisted of foreign exchanges losses of $3.2 million, offset by the receipt of $2.1 million of principal repayment on two notes that had been previously written off. Other income, net of $0.2 million for the year ended September 30, 2006 consisted of the receipt of $2.0 million of principal repayment on a note that had been previously written off and a gain of $0.3 million on the sale of other assets offset by an accrual of $1.6 million related to various legal contingencies and foreign exchanges losses of $0.5 million.

Income Tax Provision

We recorded an income tax provision of $2.3 million in the year ended September 30, 2007 and an income tax provision of $3.4 million in the year ended September 30, 2006. The tax provision recorded in fiscal 2007 and 2006 is principally attributable to alternative minimum tax and tax on foreign income. We continued to provide a full valuation allowance for our net deferred tax assets at September 30, 2007 and 2006, as we believe it is more likely than not that the future tax benefits from accumulated net operating losses and deferred taxes will not be realized.

Equity in Earnings of Joint Ventures

Income associated with our 50% interest in ULVAC Cryogenics, Inc., a joint venture with ULVAC Corporation of Japan, was $0.9 million in the year ended September 30, 2007, compared to $1.0 million in the prior year. We also recorded income of $0.1 million associated with our 50% interest in Yaskawa Brooks Automation, Inc., a joint venture with Yaskawa Electric Corporation of Japan that began operations on September 21, 2006.

Discontinued Operations

We completed the sale of our software division to Applied Materials on March 30, 2007. We recorded income from the operation of our discontinued software business of $13.3 million for the year ended September 30, 2007, compared to income of $3.5 million associated with this business for the year ended September 30, 2006. This favorable change is primarily the result of reduced research and development and SG&A spending, lower amortization of completed technology and the recognition of a tax benefit resulting from the reversal of tax reserves due to an audit settlement, offset by lower margin on lower revenues for six months of operations in fiscal 2007 vs. twelve months in fiscal 2006.

CONF CALL

Michael McCarthy

Thank you, Blanche, and good evening everybody. My name is Mike McCarthy, Director, Investor Relations and Corporate Communications for Brooks. I'd like to welcome each of you who are joining us to discuss our fiscal 2008 third quarter earnings results. Our press release was issued at about 4:00 PM Eastern Time and is available on our website, as are copies of slides used as background for the call this evening. The URL is www.brooks.com.

Before we begin, I'd like to remind all participants that during the course of the call we will be making some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. There are a number of factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements. I refer you to the section of our earnings release titled ‘Safe Harbor Statement’ in the Company's most recent filings with the SEC, including our 10-Q, which was filed in conjunction with our issuing the press release this afternoon. This call will remain archived for instant replay on our website until we report our fiscal 2008 fourth quarter results in mid-November.

Bob Lepofsky, our CEO, will open the call with some brief comments about the Company's performance and strategic positioning. He'll be followed by Martin Headley, our CFO, who will provide a more detailed overview of our third quarter results, after which we will begin the question-and-answer session.

I would now like to turn the call over to Bob.

Bob Lepofsky

Thank you, Michael, and good afternoon ladies and gentlemen. We appreciate you taking the time to join us for today’s conference call. I am sure I do not have to remind anyone on this call, we are operating in a very difficult external environment. Results for the June-ending quarter came in just below the low end of our expected range of performance, not bad under the circumstances.

The semiconductor capital equipment industry remains depressed and uncertainty surrounding calendar second half end product demand is limiting forward visibility. Chip makers around the world are also well aware of the short cycle times that are now the norm in our business. Coupled with weak demand, you have production equipment delivery times that are very short. Consequently, from a chip maker’s point of view there is little incentive to rush to place new orders until there is more certainty regarding demand and thus the need for additional capacity in their fabs.

On the other hand, while they are not buying equipment today, when they do begin buying again they expect OEMs and their suppliers to be prepared to ramp and ramp quickly. Anyone unprepared to respond risks losing opportunities and market position.

At Brooks, our game plan is simple. We are using this time to improve our business model, capture market share, and ensure that our engineering, production, and product support capacity is aligned with the short-term requirements and long-term needs and strategies of our customers. As Martin will detail in a few moments, our uninspiring bottom line this quarter masks the progress we have made since the first of this year.

Despite printing red ink on the bottom line after all charges we have been able to deliver positive EBITDA, and cash generation from operations as a result of our restructuring initiatives. As those of you who follow Brooks know, we set out a three-step game plan. First, we focused on improving customer responsiveness and our financial performance. Second, we focused on investments the Company had made looking to harness the yet untapped potential of those moves, particularly those in product development, acquired assets, and strategic partnerships. And finally, we said we would look to opportunities that could broaden our product portfolio, extend our market reach and accelerate our growth in the years ahead.

While our top line has remained under pressure, we have executed on our plan, and as a result, we think we are now well positioned to move forward. We have substantially restructured this Company. Along the way we have simplified the organization, added new talent, took about 15% out of the payroll, eliminated about 15% of our global floor space.

What we didn’t do was to reduce our ability to ramp, to invest in our future, or respond to new opportunities. We have just become more effective, more efficient, and more responsive to our customers. We have ended up with an operating model that ensures positive EBITDA and operating cash flow. It is a model that can drop at least $0.40 of every incremental dollar of sales to the pre-tax line, and we are, as planned, converging on $125 million quarterly revenue breakeven point.

Consequently, while squeezed at current revenue run rates coming out of the downturn, we are prepared to deliver higher profitability and cash flows than in any time in Brooks’ history.

In the current environment, with some of our larges OEM accounts, we saw quarter-to-quarter declines of 40% to 50% from the March- to June-ending quarters. Other customers actually recorded sequential growth, so with the breadth of our customer base, we were able to limit the overall revenue decline to only about 16% sequentially.

Importantly, over the last six months, our customers have seen the difference that has come from our work. Several of our largest customers now refer to us as the New Brooks, and they are rewarding us with new business and expanded scope of supply opportunities. It is this kind of new business that we think will help mitigate some of the revenue pressure that we would otherwise expect in the upcoming December-ending quarter.

As we have reported earlier, a part of our restructuring was changing the mission of our Wuxi, China facility. That facility is now expected to operate as an extension of our Portland operations, serving the needs of our customers’ own China and Asian strategies. The facility was re-tooled and shipment ready in record time. It will make its first shipment under this new mandate next week on time, on budget, and meeting all of our customer requirements. As a result, Wuxi is a critical link in several customers’ Asian strategies. We have come a long way in a facility that was losing $0.5 million a month just seven months ago.

In the Japanese market, we are continuing to make important strides. Our YBA joint venture logged major milestones with our larges OEM target. We shipped our first vacuum robotic solution in the quarter to that key OEM and are aligned for participation on several new product roadmaps. Across our product lines and around the globe, our people are deeply engaged with customers and are logging designing wins.

From pumps to gauges, to robotic modules and load ports, more customers are turning to Brooks everyday. Our engineers are very busy working on new designs and new applications, another good sign we are on the right track. Over 15% of our revenues currently come from customers outside of the semiconductor industry and at the present time we are very actively engaged in building this part of our business.

We have been investing in product and market development in a number of areas including solar. Led by initiatives in our Polycold and CTI groups, our book of business is growing and our customer base is expanding. Most thin film solar production lines operating today depend on our products. In many cases, our vacuum solutions were designed in from day one. In other instances, we are now being brought in to solve newly identified problems or displace underperforming alternative solutions.

At the same time, we have sharpened our focus on product development activities to ensure that longer term customers can benefit from the full range of our expertise in both vacuum solutions and automation solutions. So while new orders are sparse, new applications and new opportunities are not, and we are prepared to support these activities today in order to reap the benefits tomorrow. Our works in areas such as the solar sector are but first steps in our plan to broaden the base of Brooks. We do not intend to de-focus or dilute our work in the semiconductor sector, but we do want to expand our reach and enhance our growth track. We are evaluating internal and external growth initiatives and will deploy our resources to projects that can further broaden our base and accelerate our growth.

So, despite the current headwinds, we think that Brooks is well positioned to begin a period of sustained growth and performance as we come out of this downturn.

Now, before I hand the call over to Martin, I want to take this opportunity to thank our employees and business partners who are working harder and accomplishing so much more than we could reasonably expect in an environment that is far more challenging than many have seen and none of us could have predicted just nine months ago.

With that, I would ask Martin to give you some more detailed insights into our quarter and our prospects. Martin?

Martin Headley

Thank you very much, Bob. As Mike mentioned earlier, we have again posted slides to the Brooks website that we believe will be useful in getting a clearer understanding of our results. During my prepared comments, I will make reference to the appropriate slide.

Turning to Slide two, I will begin by walking you through how our results compared with our guidance provided for the June quarter at our last conference call. As you may recall, we provided revenue guidance of $125 million to $140 million, and indicated the results in diluted loss from continuing operations, excluding special charges should be $0.12 at the low end of the revenue range through to breakeven at the $140 million revenue range.

Revenues of $124 million for the quarter and a GAAP loss from continuing operations of $10.3 million, or $0.17 are what we reported today. This loss included restructuring expenses of $2.6 million, or $0.04 per share. With the vagaries of rounded earnings, this results in a loss before special charges of $43.2 million, or $0.12 on a diluted per share basis.

So although revenues were below the low end of the revenue guidance range, our restructuring and cost containment activities enabled us to achieve a slightly better than modeled profit performance.

For those analysts and investors modeling on a cash EPS basis, the impact of the $4.1 million quarterly intangibles amortization was $0.06 in the second quarter, $0.07 in the third quarter, with a reduction in the average diluted share count, and has been $0.17 through the first nine months of the fiscal year.

Slide three shows the summary second quarter and third quarter income statements through the operating loss line. Cost reductions executed during the quarter and the full quarter impact of second quarter actions offset the loss variable contribution from the reduction in revenues from $147.6 million in the second quarter to $124 million in the third quarter.

To better understand these dynamics, we have included Slide four, where we bridge from the operating performance in the second quarter, a loss of $7.5 million through to the operating performance in the third quarter, a loss of $9.6 million. The significant contribution margin on lost revenues, at least 40% on a routine basis was the boat anchor. Revenue declines were $23.6 million, but included a $1.1 million increase in royalty license revenues, which flows through operating profit at 100% contribution.

The loss contribution on $24.7 million fewer products and service revenues was $12 million. Our restructuring and cost containment programs had the impact of reducing cost by $5.1 million in the quarter. Most of these savings are permanent as the restructuring program will have reduced headcount by 15% when fully implemented in the upcoming weeks, and will also have reduced our facility footprint by nearly 15%.

Success in settling the class action lawsuit arising from equity incentive matter had a positive impact both in recognizing a $1.4 million reimbursement of previously expensed professional fees as well as a $1 million reduction in the burn rate of legal cost we continue to incur on these matters.

You will see that both the claim for liability settlement and the receivable for full collection from our insurance underwriters are included in our June balance sheet following the resolution of the matter.

We also benefited from avoiding a couple of non-recurring costs arising in the second quarter. The $600,000 incurred in connection with the collection of a foreign VAT receivable, and the $800,000 atypical warranty cost in our Automation Systems business.

Finally, any good reconciliation includes a small (inaudible) in this case the net impact from cost increases and items such as product mix.

Slide five shows what happened below the operating profit line with lower net interest income sequentially driven by lower return rates and lower average cash holdings following the stock repurchase activities early in the second quarter. We had no recurrence of the second quarter permanent impairment charge of $2.5 million. And finally, we saw a reversal of the favorable foreign currency impact in the second quarter.

A significant piece of this issue was the impact of the Japanese yen strengthening against the dollar in the March quarter and weakening during the June quarter. There were also less marked fluctuations in the Korean won and Singapore dollar.

In the next three slides, I will briefly cover our sequential segment performance. On Slide five, we set out sequential performance of our Critical Components segment where revenues declined 19% sequentially with the largest decline on absolute and relative basis occurring in our CTI vacuum pump business for semi-wafer equipment customers. Earlier in the fiscal year this segment benefited from some end market diversification. You can see the impact of the flow through of lost variable contribution to over 40% levels with the under absorption of fixed cost moderating the gross margin rate. Operating expenses declined principally because reduced corporate cost resulted in lower allocations to the segment.

On Slide seven, we see the sequential impact of the Automation Systems segment. Here, the higher license revenues impacted both revenue and gross profit to the extent of $1.1 million. Excluding this impact, the Automation Systems product sales were down $23.7 million, a sequential reduction of over 25%. This segment with a greater customer concentration saw the greatest reduction as compared to our business expectations going into the quarter.

Operating expenses were reduced by 18% sequentially from both research and development savings as new programs release into volume production and the impact of the broader based restructuring activities across the whole Company.

On Slide eight you will see that we had strong performance from our Global Customer Support segment with strong contributions from legacy hardware products. The gross margins benefited slightly from the volume fall through and restructuring and cost containment again benefit the operating expense levels.

Turning to Slide nine, we see that we continue to report positive adjusted EBITDA and cash flow from continuing operations even below the $500 million annualized revenue run rate, and before all our actions to improve profitability rolled through.

Cash flows from continuing operations were $1.4 million in the quarter with adjusted EBITDA of $1.8 million and a reduction in net working capital being offset by the cost of executing our restructuring program. Our net working capital as percent of annualized sales slipped to 21.1% at June 30, 2008 from 18.3% at March 31, 2008, with lower accounts payable at the lower activity levels, some inventory purchased in support of new programs, and some build in the inventory of long lead time components. As a contrast, our receivables management continued its improvement achieving less than 15% of annualized quarter revenues.

Capital expenditures during the quarter were $6.5 million with approximately $4.3 million of that associated with investment in our Oracle ERP implementation.

Slide 10 sets out our guidance for the September 2008 quarter. The semiconductor wafer fab equipment market shows no sign of recovery in the September quarter. We are projecting that revenues could be in the range of between $110 million and $125 million. Although we are targeting to exit the quarter with a breakeven at about $125 million, the projection of revenues below that level and a higher breakeven earlier in the quarter will result in a another GAAP loss for the quarter excluding special charges.

Our GAAP earnings guidance for continuing operations before special charges is between $0.05 and $0.15.

Finally, one statistic I have not provided yet is the order bookings for the June fiscal quarter of 2008, which were $106 million, down 20% on a sequential basis.

With that, I will turn the call back to Blanche for the question-and-answer segment of our call. Blanche?

SHARE THIS PAGE:  Add to Delicious Delicious  Share    Bookmark and Share



 
Icon Legend Permissions Topic Options
You can comment on this topic
Print Topic

Email Topic

1191 Views