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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
 
     
(Mark One)    
 
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For fiscal year ended September 30, 2011
or
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from          to          .
 
Commission File Number: 0-25434
Brooks Automation, Inc.
(Exact name of Registrant as Specified in Its Charter)
     
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

15 Elizabeth Drive
Chelmsford, Massachusetts
(Address of Principal Executive Offices)
 
04-3040660
(I.R.S. Employer
Identification No.)

01824
(Zip Code)
 
978-262-2400
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
     
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
  The NASDAQ Stock Market LLC
 
Securities registered pursuant to Section 12(g) of the Act:
None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes o     No þ
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ     No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
             
Large accelerated filer þ
  Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).  Yes o     No þ
 
The aggregate market value of the registrant’s Common Stock, $0.01 par value, held by nonaffiliates of the registrant as of March 31, 2011, was approximately $884,316,500 based on the closing price per share of $13.73 on that date on the Nasdaq Stock Market. As of March 31, 2011, 66,150,294 shares of the registrant’s Common Stock, $0.01 par value, were outstanding. As of November 10, 2011, 66,275,320 shares of the registrant’s Common Stock, $0.01, par value, were outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant’s Proxy Statement involving the election of directors, which is expected to be filed within 120 days after the end of the registrant’s fiscal year, are incorporated by reference in Part III of this Report.
 


 

 
TABLE OF CONTENTS
 
                 
PART I
  Item 1.     Business     3  
  Item 1A.     Risk Factors     9  
  Item 1B.     Unresolved Staff Comments     15  
  Item 2.     Properties     15  
  Item 3.     Legal Proceedings     15  
  Item 4.     Removed and Reserved     17  
 
PART II
  Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     17  
  Item 6.     Selected Financial Data     19  
  Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations     21  
  Item 7A.     Quantitative and Qualitative Disclosures About Market Risk     38  
  Item 8.     Financial Statements and Supplementary Data     40  
  Item 9.     Changes In and Disagreements With Accountants on Financial Accounting and Financial Disclosure     82  
  Item 9A.     Controls and Procedures     82  
  Item 9B.     Other Information     83  
 
PART III
  Item 10.     Directors, Executive Officers and Corporate Governance     83  
  Item 11.     Executive Compensation     83  
  Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     83  
  Item 13.     Certain Relationships and Related Transactions, and Director Independence     83  
  Item 14.     Principal Accountant Fees and Services     83  
 
PART IV
  Item 15.     Exhibits and Financial Schedules     83  
SIGNATURES     87  
 EX-10.18
 EX-10.22
 EX-10.29
 EX-21.01
 EX-23.01
 EX-31.01
 EX-31.02
 EX-32
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT


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PART I
 
Item 1.   Business
 
Brooks Automation, Inc. (“Brooks”, “we”, “us”, or “our”), a Delaware corporation, is a leading worldwide provider of automation, vacuum and instrumentation solutions for multiple markets including semiconductor manufacturing, life sciences, and clean energy. Our technologies, engineering competencies and global service capabilities provide customers speed to market and ensure high uptime and rapid response, which equate to superior value in their mission-critical controlled environments. Since 1978, we have been a leading partner to the global semiconductor manufacturing markets and through product development initiatives and strategic business acquisitions we have expanded our reach to meet the needs of customers in life sciences, analytical and research markets, and clean energy solutions. Brooks is headquartered in Chelmsford, MA with full service operations in North America, Europe and Asia.
 
Our company initially developed and marketed automated handling equipment for front end semiconductor manufacturing tools and became a publicly traded company in February 1995. Through both internal product development and significant business acquisition activity we became the leading provider of these automation solutions in this market. Since that time, we have diversified both the markets we serve as well as our core product capabilities. A notable step in our diversification was the acquisition of Helix Technology Corporation in 2005 which provided us with leading technology solutions in vacuum and instrumentation equipment and which allowed us to serve a broader set of markets.
 
During the period 2006 through June 2011 we acquired and then further developed a significant contract manufacturing business providing leading wafer front-end equipment manufacturers with an extension of their own assembly and test capability to better focus on their core processes and to offer flexibility during industry cycles. In June 2011, we divested this business in order to focus on technology solutions for other markets. Because we continue to have significant commerce with this business (both providing automation components for integration in the tools built by the contract manufacturing business and as a supplier of certain sub-contracted sub-systems), the disposition did not qualify for discontinued operations treatment. Accordingly, we continue to present the historical results of the business as continuing operations in our consolidated financial statements.
 
We recently identified life sciences as a strategically underserved market with favorable growth opportunities where Brooks’ core competencies of automation and cold temperature management of a controlled environment could provide enabling technology solutions. During 2011 we made two strategic acquisitions to penetrate this market. In April 2011, we acquired RTS Life Sciences, a Manchester, UK-based business, and in July 2011, we acquired Nexus Biosystems, Inc., a Poway, CA-based business with a significant presence in Oberdiessbach, Switzerland. We are currently integrating these businesses that now operate as Brooks Life Science Systems (“BLSS”).
 
Markets
 
Our fiscal 2011 and 2010 revenues by end market were as follows:
 
                 
    2011     2010  
 
Semiconductor capital equipment
    65 %     71 %
Service and spares
    13 %     13 %
Industrial capital equipment
    11 %     8 %
Life sciences
    2 %      
Other adjacent markets
    9 %     8 %
                 
      100 %     100 %
 
The markets we serve are changing rapidly as a result of our internal product and sales initiatives, our acquisitions and divestiture and the cyclical nature of the semiconductor capital equipment market. Our divested contract manufacturing business exclusively served semiconductor product end markets whereas our most recent acquisitions exclusively serve life sciences markets. We remain committed to growing our semiconductor market


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share and during fiscal year 2011, semiconductor end market product revenues, excluding contract manufacturing revenues, increased by 18% from the prior year. Industrial and other adjacent market revenues increased 42% during that same period.
 
Semiconductor capital equipment
 
The global semiconductor capital equipment industry is a highly cyclical industry with a long term growth profile driven by the expanded use of semiconductor devices and the device complexity, each necessitating incremental equipment purchases. This growth is increasingly focused in Asia. 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 that occur in a vacuum environment also increases, resulting in a greater need for both automation and vacuum technology solutions due to the sensitive handling requirements and increased number of tools. The requirement for efficient, higher throughput and extremely clean manufacturing for semiconductor wafer fabs and other high performance electronic-based products has created a substantial market for substrate handling automation (moving the wafers around and between tools in a semiconductor fab), tool automation (the use of robots and modules used in conjunction with and inside process tools that move wafers from station to station), and vacuum systems technology to create and sustain the environment necessary to fabricate various products. Advanced chip processing used to form three dimensional structures of the previously patterned integrated circuit is emerging. This processing, often referred to as wafer level packaging, is typically performed at what would be considered the back-end processing of a chip. To accomplish this work, there is an extension of some front-end processes into the back-end, thereby increasing the market for automation solutions.
 
Service and spares
 
Whereas sales for production equipment are typically made to original equipment manufacturers (“OEMs”), the service and spares support of that equipment is more typically a relationship with the end-user manufacturer who is using that equipment in a productive capacity. While the majority of the market that we currently address with our service and spares activities is the semiconductor manufacturing market, we are actively looking to increase our service offerings in the life science market.
 
Industrial capital equipment
 
There are a variety of industrial manufacturing operations that require either a vacuum or significant cooling for effective deposition of films or coatings. The expansion of technologies such as touch screen equipment is driving greater application of these operations and the requirement for the associated vacuum and instrumentation solutions that we provide. These deposition processes are typically performed on equipment that cycle from an uncontrolled atmospheric environment for loading and unloading to a controlled vacuum environment for processing. The transition to the controlled vacuum environment requires removal of large amounts of moisture inherent from the air in a typical operation. This moisture removal is accomplished by deep cooling of coils within the vacuum chamber and the increased need for the equipment necessary to deliver refrigerant supply to those coils results in increased demand for our products.
 
Life Sciences
 
There is a broad market of devices, systems and consumables that support the pharmaceutical, biotechnology, health care research and diagnostics industries in the advanced handling, processing, storage and distribution of biological and compound samples. At the heart of these activities is sample storage. Facilities that store biological


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samples are commonly called biobanks or biorepositories. Such sample storage is generally more effective in maintaining a controlled environment, tracking samples, and reliably and quickly handling samples, if the store is automated. These automated sample management systems are at the heart of the complete sample handling process. With the advent of personalized medicine linking DNA to optimal treatment regimens, the expansion of mass storage of key biological material to support rapidly expanding comparative and longitudinal studies, and the accumulation of samples taken from surgical and other procedures, we believe that the numbers of samples in storage is expanding at between 25 — 30% per annum on a global basis. We believe that this expansion, together with manual stores that become overwhelmed by the numbers of samples they accumulate, will drive a solid growth in automated sample management equipment.
 
Other adjacent markets
 
There are a variety of markets that have adopted, or are adopting, similar manufacturing methods to those utilized by the semiconductor industry. Frequently, these markets have common customers but technology applications in the end markets are still maturing. We serve a variety of these evolving markets including light emitting diode (“LED”) applications. High Brightness LED (“HBLED”) is a potential clean energy solution replacing incandescent lighting sources. We believe that the application of HBLED solutions to these general illumination applications is expected to expand as manufacturing processes for these products advance, resulting in lower costs of production and more attractive pricing for these products. Organic LED (“OLED”) solutions provide lower power consumption for high clarity video. OLED applications are gaining traction in the mobile computing and telecommunications device markets. Other evolving markets which utilize our products include microelectronic mechanical systems (“MEMS”) manufacturing and solar panel manufacturing. MEMS applications, which include accelerometers, self tuning antennae and pressure gauges, are expanding in automotive, mobile computing and telecommunications device markets. We believe that solar panel production is also expanding, and our products are used in the production of thin film solar panels which require cooling to effectuate deposition and adhesion.
 
Products
 
In the semiconductor industry, 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 to move wafers into and out of the chamber. Today, OEMs build their tools using a cluster architecture, whereby several process chambers are mounted to one central frame that processes wafers. We specialize in developing and building the handling system, as well as the vacuum technology used in these tools. Our products can be provided as an individual component or as a complete handling system. Automation products are provided to support both atmospheric and vacuum based processes.
 
We provide high vacuum pumps and instrumentation which are required in certain process steps to condition the processing environment and to optimize that environment by maintaining pressure consistency of the known process gas. To achieve optimal production yields, semiconductor manufacturers must 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.
 
In the HBLED market we have worked with leading manufacturers to develop advanced automation solutions that improve the productivity of processes that were previously manual. In other adjacent markets we either provide standard vacuum and instrumentation solutions or have adapted our automation solutions to specific payload, throughput and tool architecture requirements.
 
For the life science markets we provide automated sample management systems that store samples (e.g.: DNA, blood, drug compounds, biologics) in a controlled environment and automate the process of storing samples (typically in racks or plates) and the subsequent extractions of specifically selected samples from those racks or plates. The storage environments ensure samples are preserved within a narrow temperature band for long periods


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and provide for absolute accuracy in the identification and selection of samples. We are an early pioneer in bringing to market stores that operate as low as minus 80OC.
 
In providing comprehensive solutions to the life science markets we also provide systems for automated blood fractionation, sealing and de-sealing equipment for samples stored on plates and automated cappers and de-cappers for samples stored in tubes. We also provide consumables in the form of sample plates, micro-plates and tubes.
 
Segments
 
In the third and fourth quarters of fiscal 2011 we realigned our management structure and its underlying financial reporting structure. As a result of this realignment, we now report financial results in four segments: Brooks Product Solutions; Brooks Life Science Systems; Brooks Global Services; and Contract Manufacturing.
 
The Brooks Product Solutions segment provides a variety of products critical to technology equipment productivity and availability. Those products include atmospheric and vacuum tool automation systems, atmospheric and vacuum robots and robotic modules and cryogenic vacuum pumping, thermal management and vacuum measurement solutions used to create, measure and control critical process vacuum applications.
 
The Brooks Life Science Systems segment provides automated sample management systems including automated sample storage, automated blood fractionation equipment, sample preparation and handling equipment, consumables, parts and support services to a wide range of life science customers including pharmaceutical companies, biotechnology companies, biobanks, national laboratories, research institutes and research universities.
 
The Brooks Global Services segment provides an extensive range of support services including on and off-site repair services, on and off-site diagnostic support services, and installation services to enable our customers to maximize process tool uptime and productivity. This segment also provides end-user customers with spare part support services to maximize customer tool productivity. The segment predominantly serves semiconductor industry customers.
 
The business of the Contract Manufacturing segment which provided outsourced contract manufacturing services to semiconductor equipment manufacturers was sold in June 2011.
 
Customers
 
Within the semiconductor industry, we sell our products and services to most of the major semiconductor chip manufacturers and OEMs in the world. Our customers outside the semiconductor industry are broadly diversified. We have major customers in North America, Europe and Asia. Additionally, although much of our equipment sales ship to United States OEMs, many of those products ultimately are utilized in international markets. See Part I, Item 1A, “Risk Factors” for a discussion of the risks related to foreign operations. The Brooks Global Services business provides support to leading fabs and foundries across the globe.
 
Our life sciences systems solutions are used by pharmaceutical customers (including the top twenty), national laboratories, biological drug development companies, research institutes and research hospitals. There is no continuing concentration of customers for BLSS although given the size of particular projects, an individual customer may be significant to the life science segment in a given quarter or fiscal year.
 
Relatively few customers account for a substantial portion of our revenues, with the top 10 customers accounting for approximately 55% of our business in fiscal 2011. 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.
 
In our assessment of customer concentration, we primarily consider the OEM who designs the proprietary tool as our customer since they make the design-in decision rather than an intermediary contract manufacturer who is the entity to whom we invoice. For fiscal 2011, no contract manufacturer represented more than 10% of revenues. In addition, if the sale of our Contract Manufacturing segment occurred on October 1, 2010, none of our contract manufacturing customers would have exceeded 10% of our fiscal year 2011 revenues.


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Sales, Marketing and Customer Support
 
We market and sell most of our semiconductor, industrial and other adjacent market products and services in Asia, Europe, the Middle East and North America 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 ensure open communication and support. Some of our vacuum and instrumentation products and services for certain international markets are sold through local country distributors. Additionally, we serve the Japanese market for our robotics and automation products through our Yaskawa Brooks Automation (YBA) joint venture with Yaskawa Electric Corporation of Japan.
 
We market to most of our life sciences customers through our direct Brooks Life Science Systems sales force. In regions with emerging life science industries such as China, India and the Middle East, we leverage local distributors to assist in the sales process. The sales process for our larger sample management systems may take 6-18 months to complete and it involves a team comprised of individuals from sales, marketing, engineering and senior management.
 
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 Asia, Europe, the Middle East and North America. 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.
 
Net revenues for the years ended September 30, 2011, 2010 and 2009 based upon the source of the order by geographic area are as follows (in thousands):
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
North America
  $ 349,456     $ 322,542     $ 115,734  
Asia/Pacific
    244,524       203,172       68,393  
Europe
    94,125       67,258       34,579  
                         
    $ 688,105     $ 592,972     $ 218,706  
                         
 
Competition
 
We operate in a variety of niches of varying breadth and with differing competitors and competitive dynamics. The semiconductor and adjacent market, and process equipment manufacturing industries are highly competitive and characterized by continual changes and improvements in technology. The significant portion of equipment automation is still done in-house by OEMs. Our competitors among external vacuum automation suppliers are primarily Japanese companies such as Daihen, Daikin and Rorze. Our competitors among vacuum components suppliers include Sumitomo Heavy Industries, Genesis and Telemark. We have a significant share of the market for vacuum cryogenic pumps and mixed gas cryo-chillers. Competitors in markets for our instrumentation products include MKS Instruments and Inficon. Atmospheric tool automation is typically less demanding and has a larger field of competitors. We compete directly with other equipment automation suppliers of atmospheric modules and systems such as Hirata, Kawasaki, Genmark, Rorze, Sankyo, TDK and Symphonia. Contract manufacturers such as Celestica and Flextronics are also providing assembly and manufacturing services for atmospheric systems.
 
Our Life Science Systems business competes with a number of smaller private companies in providing automated sample management systems. These competitors include Hamilton, Matrical, HighRes Biosolutions, Liconic, TTP and Tusbakimoto Chain.
 
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 in our products at


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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.
 
Research and Development
 
Our research and development efforts are focused on developing new products and also enhancing the functionality, degree of integration, reliability and performance of our existing products. Our engineering, marketing, operations and management personnel leverage their close collaborative relationships with many of their counterparts in customer organizations in an effort to proactively identify market demands with an ability to refocus our research and development investment to meet our customer demands. With the rapid pace of change that characterizes the markets we serve, it is essential for us to provide high-performance and reliable products in order for us to maintain our leadership position.
 
Our research and development spending for fiscal years 2011, 2010 and 2009 was $39.8 million, $31.2 million and $31.6 million, respectively. We expect to increase the pace of spending for research and development in the near term to support new generations of products, most notably for automated sample management.
 
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 ensure the performance of our products. Our major manufacturing facilities are located in Chelmsford, Massachusetts; Poway, California; Petaluma, California; Longmont, Colorado; Monterrey, Mexico; Yongin-City, South Korea and Manchester, UK. We also provide service and spare parts support to end users throughout the world. Many of our service customers are based outside of the U.S., with many in Asia. We have service and support locations close to these customers to provide rapid response to their service needs. We have service and support locations in Chelmsford, Massachusetts; Chu Bei City, Taiwan; Yongin City, South Korea; Yokohama, Japan; Shanghai, China; Singapore; Jena, Germany; Oberdiessbach, Switzerland; and, Israel.
 
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 expect to continue to broaden the sourcing of our components to low cost regions, including Asia.
 
Patents and Proprietary Rights
 
We rely on patents, trade secret laws, confidentiality procedures, copyrights, trademarks and licensing agreements to protect our technology. Our United States patents expire at various times through April 2030. Due to the rapid technological change that characterizes the life sciences, semiconductor, flat panel display and related 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 a competitive advantage. To protect trade secrets and know-how, it is our policy to require all technical and management personnel to enter into proprietary information and nondisclosure agreements. We cannot guarantee that these efforts will meaningfully protect our trade secrets.
 
We have successfully licensed our FOUP (front-opening unified pod) load port technology to significant FOUP manufacturers.


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Backlog
 
Backlog for our products as of September 30, 2011, totaled $99.7 million as compared to $106.4 million at September 30, 2010. 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.
 
Employees
 
At September 30, 2011, we had 1,433 full time employees. In addition, we utilized 217 part time employees and contractors. Approximately 46 employees in our facility in Jena, Germany are covered by a collective bargaining agreement. We consider our relationships with these and all employees to be good.
 
Available Information
 
We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including Brooks Automation, Inc., that file electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov.
 
Our internet website address is http://www.brooks.com. Through our website, we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after such materials are electronically filed, or furnished to, the SEC. These SEC reports can be accessed through the investor relations section of our website. The information found on our website is not part of this or any other report we file with or furnish to the SEC.
 
Item 1A.   Risk Factors
 
Factors That May Affect Future Results
 
You should carefully consider the risks described below and the other information in this report before deciding to invest in shares of our common stock. These are the risks and uncertainties we believe are most important for you to consider. Additional risks and uncertainties not presently known to us, which we currently deem immaterial or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. If any of the following risks or uncertainties actually occurs, our business, financial condition and operating results would likely suffer. In that event, the market price of our common stock could decline and you could lose all or part of your investment.
 
Risks Relating to Our Industry
 
Due in part to the cyclical nature of the semiconductor manufacturing industry and related industries, as well as due to volatility in worldwide capital and equity markets, we have previously incurred operating losses and may have future losses.
 
Our business is largely dependent on capital expenditures in the semiconductor manufacturing industry and other businesses employing similar manufacturing technology. The semiconductor manufacturing industry in turn depends on current and anticipated demand for integrated circuits and the products that use them. In recent years, these businesses have experienced unpredictable and volatile business cycles due in large part to rapid changes in demand and manufacturing capacity for semiconductors, and these cycles have had an impact on our business, sometimes causing declining revenues and operating losses. We could experience future operating losses during an


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industry downturn. If an industry downturn continues for an extended period of time, our business could be materially harmed. Conversely, in periods of rapidly increasing demand, we could have insufficient inventory and manufacturing capacity to meet our customer needs on a timely basis, which could result in the loss of customers and various other expenses that could reduce gross margins and profitability.
 
We face competition which may lead to price pressure and otherwise adversely affect our sales.
 
We face competition throughout the world in each of our product areas. This comes from competitors as discussed in Part I, Item 1, “Business — Competition” as well as internal robotic capabilities at larger OEMs. Many of our competitors have substantial engineering, manufacturing, marketing and customer support capabilities. We expect our competitors to continue to improve the performance of their current products and to introduce new products and technologies that could adversely affect sales of our current and future products and services. New products and technologies developed by our competitors or more efficient production of their products could require us to make significant price reductions or decide not to compete for certain orders. If we fail to respond adequately to pricing pressures or fail to develop products with improved performance or developments with respect to the other factors on which we compete, we could lose customers or orders. If we are unable to compete effectively, our business and prospects could be materially harmed.
 
Risks Relating to Brooks
 
Our operating results could fluctuate significantly, which could negatively impact our business.
 
Our revenues, operating margins and other operating results could fluctuate significantly from quarter to quarter depending upon a variety of factors, including:
 
  •  demand for our products as a result of the cyclical nature of the semiconductor manufacturing industry and the markets upon which it depends or otherwise;
 
  •  changes in the timing and terms of product orders by our customers as a result of our customer concentration or otherwise;
 
  •  changes in the mix of products and services that we offer;
 
  •  changes in the demand for the mix of products and services that we offer;
 
  •  timing and market acceptance of our new product introductions;
 
  •  delays or problems in the planned introduction of new products, or in the performance of any such products following delivery to customers;
 
  •  new products, services or technological innovations by our competitors, which can, among other things, render our products less competitive due to the rapid technological change in our industry;
 
  •  the timing and related costs of any acquisitions, divestitures or other strategic transactions;
 
  •  our ability to reduce our costs in response to decreased demand for our products and services;
 
  •  disruptions in our manufacturing process or in the supply of components to us;
 
  •  write-offs for excess or obsolete inventory; and
 
  •  competitive pricing pressures.
 
As a result of these risks, we believe that quarter to quarter comparisons of our revenue and operating results may not be meaningful, and that these comparisons may not be an accurate indicator of our future performance.


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If we do not continue to introduce new products and services that reflect advances in technology in a timely and effective manner, our products and services may become obsolete and our operating results will suffer.
 
Our success is dependent on our ability to respond to the technological change present in the markets we serve. The success of our product development and introduction depends on our ability to:
 
  •  accurately identify and define new market opportunities and products;
 
  •  obtain market acceptance of our products;
 
  •  timely innovate, develop and commercialize new technologies and applications;
 
  •  adjust to changing market conditions;
 
  •  differentiate our offerings from our competitors’ offerings;
 
  •  obtain intellectual property rights where necessary;
 
  •  continue to develop a comprehensive, integrated product and service strategy;
 
  •  properly price our products and services; and
 
  •  design our products to high standards of manufacturability such that they meet customer requirements.
 
If we cannot succeed in responding in a timely manner to technological and/or market changes or if the new products that we introduce do not achieve market acceptance, it could diminish our competitive position which could materially harm our business and our prospects.
 
The global nature of our business exposes us to multiple risks.
 
For the fiscal years ended September 30, 2011 and 2010, approximately 49% and 46%, respectively, of our revenues were derived from sales outside North America. We expect that international sales, including increased sales in Asia, will continue to account for a significant portion of our revenues. We maintain a global footprint of sales, service and repair operations. As a result of our international operations, we are exposed to many risks and uncertainties, including:
 
  •  longer sales-cycles and time to collection;
 
  •  tariff and international trade barriers;
 
  •  fewer or less certain legal protections for intellectual property and contract rights abroad;
 
  •  different and changing legal and regulatory requirements in the jurisdictions in which we operate;
 
  •  government currency control and restrictions on repatriation of earnings;
 
  •  fluctuations in foreign currency exchange and interest rates, particularly in Asia and Europe; and
 
  •  political and economic instability, changes, hostilities and other disruptions in regions where we operate.
 
Negative developments in any of these areas in one or more countries could result in a reduction in demand for our products, the cancellation or delay of orders already placed, threats to our intellectual property, difficulty in collecting receivables, and a higher cost of doing business, any of which could materially harm our business and profitability.
 
Our business could be materially harmed if we fail to adequately integrate the operations of the businesses that we have acquired or may acquire.
 
We have made in the past, and may make in the future, acquisitions or significant investments in businesses with complementary products, services and/or technologies. Our acquisitions present numerous risks, including:
 
  •  difficulties in integrating the operations, technologies, products and personnel of the acquired companies and realizing the anticipated synergies of the combined businesses;


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  •  defining and executing a comprehensive product strategy;
 
  •  managing the risks of entering markets or types of businesses in which we have limited or no direct experience;
 
  •  the potential loss of key employees, customers and strategic partners of ours or of acquired companies;
 
  •  unanticipated problems or latent liabilities, such as problems with the quality of the installed base of the target company’s products or infringement of another Company’s intellectual property by a target Company’s activities or products;
 
  •  problems associated with compliance with the target company’s existing contracts;
 
  •  difficulties in managing geographically dispersed operations; and
 
  •  the diversion of management’s attention from normal daily operations of the business.
 
If we acquire a new business, we may be required to expend significant funds, incur additional debt or issue additional securities, which may negatively affect our operations and be dilutive to our stockholders. In periods following an acquisition, we will be required to evaluate goodwill and acquisition-related intangible assets for impairment. When such assets are found to be impaired, they will be written down to estimated fair value, with a charge against earnings. The failure to adequately address these risks could materially harm our business and financial results.
 
Entering new markets introduces new competitors and commercial risks.
 
A key part of our growth strategy is to continue expanding into markets beyond the semiconductor manufacturing market, as evidenced by our recent acquisitions of RTS and Nexus Biosystems in the life sciences market. As part of this strategy, we expect to diversify our product sales by leveraging our core technologies, which requires investments and resources which may not be available as needed. We cannot guarantee that we will be successful in leveraging our capabilities into the life sciences market or any other new markets to meet all the needs of these new customers and to compete favorably. Because a significant portion of our growth potential may be dependent on our ability to increase sales to markets beyond semiconductor manufacturing, an inability to successfully enter new markets may adversely impact future financial results.
 
Changes in key personnel could impair our ability to execute our business strategy.
 
The continuing service of our executive officers and essential engineering, technical and management personnel, together with our ability to attract and retain such personnel, is an important factor in our continuing ability to execute our strategy. There is substantial competition to attract such employees and the loss of any such key employees could have a material adverse effect on our business and operating results. The same could be true if we were to experience a high turnover rate among engineering and technical personnel and we were unable to replace them.
 
We may be subject to claims of infringement of third-party intellectual property rights, or demands that we license third-party technology, which could result in significant expense and prevent us from using our technology.
 
We rely upon patents, trade secret laws, confidentiality procedures, copyrights, trademarks and licensing agreements to protect our technology. Due to the rapid technological change that characterizes the semiconductor and flat panel display process equipment industries, we believe that the improvement of existing technology, reliance upon trade secrets and unpatented proprietary know-how and the development of new products may be as important as patent protection in establishing and maintaining competitive advantage. To protect trade secrets and know-how, it is our policy to require all technical and management personnel to enter into nondisclosure agreements. We cannot guarantee that these efforts will meaningfully protect our trade secrets.
 
There has been substantial litigation regarding patent and other intellectual property rights in the semiconductor related industries. We have in the past been, and may in the future be, notified that we may be infringing


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intellectual property rights possessed by 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.
 
We cannot predict the extent to which we might be required to seek licenses or alter our products so that they no longer infringe the rights of others. We also cannot guarantee that licenses will be available or the terms of any licenses we may be required to obtain will be reasonable. Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical and could detract from the value of our products. If a judgment of infringement were obtained against us, we could be required to pay substantial damages and a court could issue an order preventing us from selling one or more of our products. Further, the cost and diversion of management attention brought about by such litigation could be substantial, even if we were to prevail. Any of these events could result in significant expense to us and may materially harm our business and our prospects.
 
Our failure to protect our intellectual property could adversely affect our future operations.
 
Our ability to compete is significantly affected by our ability to protect our intellectual property. Existing trade secret, trademark and copyright laws offer only limited protection. Our success depends in part on our ability to obtain and enforce patent protection for our products both in the United States and in other countries. We own numerous U.S. and foreign patents, and we intend to file additional applications, as appropriate, for patents covering our products and technology. Our current patents will expire from time to time through April 2030 and new patents may not be issued for any pending or future patent applications, and the claims allowed under any issued patents may not be sufficiently broad to protect our technology. Any issued patents owned by or licensed to us may be challenged, invalidated or circumvented, and the rights under these patents may not provide us with competitive advantages. In addition, the laws of some countries in which our products are or may be developed, manufactured or sold may not fully protect our products. We cannot guarantee that the steps we have taken to protect our intellectual property will be adequate to prevent the misappropriation of our technology. Other companies could independently develop similar or superior technology without violating our intellectual property rights. In the future, it may be necessary to engage in litigation or like activities to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of proprietary rights of others, including our customers. This could require us to incur significant expenses and to divert the efforts and attention of our management and technical personnel from our business operations.
 
If our manufacturing sites were to experience a significant disruption in operations, our business could be materially harmed.
 
We have a limited number of manufacturing facilities for our products. If the operations of these facilities were disrupted as a result of a natural disaster, fire, power or other utility outage, work stoppage or other similar event, our business could be seriously harmed because we may be unable to manufacture and ship products and parts to our customers in a timely fashion.
 
Our business could be materially harmed if one or more key suppliers fail to continuously deliver key components of acceptable cost and quality.
 
We currently obtain many of our key components on an as-needed, purchase order basis from numerous suppliers. In some cases we have only a single source of supply for necessary components and materials used in the manufacturing of our products. Further, we are increasing our sourcing of products in Asia, and particularly in China, and we do not have a previous course of dealing with many of these suppliers. We do not generally have long-term supply contracts with any of these suppliers, and many of them underwent cost-containment measures in light of the last industry downturn. As the industry has recovered, these suppliers have faced challenges in delivering components on a timely basis. This volatility in demand has led some of our vendors to exit the semiconductor market, and other vendors may also decide to exit this market. Our inability to obtain components or materials in required quantities or of acceptable cost and quality and with the necessary continuity of supply could result in delays or reductions in product shipments to our customers. In addition, if a supplier or sub-supplier suffers a production stoppage or delay for any reason, including natural disasters like the ones that recently affected Japan


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and Thailand, this could result in a delay or reduction in product shipments to our customers. Any of these contingencies could cause us to lose customers, result in delayed or lost revenue and otherwise materially harm our business.
 
Our stock price is volatile.
 
The market price of our common stock has fluctuated widely. From the beginning of fiscal year 2010 through the end of fiscal year 2011, our stock price fluctuated between a high of $14.59 per share and a low of $5.46 per share. Consequently, the current market price of our common stock may not be indicative of future market prices, and we may be unable to sustain or increase the value of an investment in our common stock. Factors affecting our stock price may include:
 
  •  variations in operating results from quarter to quarter;
 
  •  changes in earnings estimates by analysts or our failure to meet analysts’ expectations;
 
  •  changes in the market price per share of our public company customers;
 
  •  market conditions in the semiconductor and other industries into which we sell products;
 
  •  economic conditions in Europe and general economic conditions;
 
  •  political changes, hostilities or natural disasters such as hurricanes and floods;
 
  •  low trading volume of our common stock; and
 
  •  the number of firms making a market in our common stock.
 
In addition, the stock market has in the past experienced significant price and volume fluctuations. These fluctuations have particularly affected the market prices of the securities of high technology companies like ours. These market fluctuations could adversely affect the market price of our common stock.
 
Risks Relating to Our Customers
 
Because we rely on a limited number of customers for a large portion of our revenues, the loss of one or more of these customers could materially harm our business.
 
We receive a significant portion of our revenues in each fiscal period from a relatively limited number of customers, and that trend is likely to continue. Sales to our ten largest customers accounted for approximately 55%, 63% and 44% of our total revenues in the fiscal years ended September 30, 2011, 2010 and 2009, respectively. While we expect this percentage to decrease due to the sale of our contract manufacturing business and our recent life sciences acquisitions, the loss of one or more of these major customers, a significant decrease in orders from one of these customers, or the inability of one or more customers to make payments to us when they are due could materially affect our revenue, business and reputation.
 
Because of the lengthy sales cycles of many of our products, we may incur significant expenses before we generate any revenues related to those products.
 
Our customers may need several months to test and evaluate our products. This increases the possibility that a customer may decide to cancel or change plans, which could reduce or eliminate our sales to that customer. The impact of this risk can be magnified during the periods in which we introduce a number of new products, as has been the case in recent years. As a result of this lengthy sales cycle, we may incur significant research and development expenses, and selling, general and administrative expenses before we generate the related revenues for these products, and we may never generate the anticipated revenues if our customer cancels or changes its plans.
 
In addition, many of our products will not be sold directly to the end-user but will be components of other products. As a result, we rely on OEMs to select our products from among alternative offerings to be incorporated into their equipment at the design stage; so-called design-ins. The OEMs’ decisions often precede the generation of volume sales, if any, by a year or more. Moreover, if we are unable to achieve these design-ins from an OEM, we


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would have difficulty selling our products to that OEM because changing suppliers involves significant cost, time, effort and risk on the part of that OEM.
 
Customers generally do not make long term commitments to purchase our products and our customers may cease purchasing our products at any time.
 
Sales of our products are often made pursuant to individual purchase orders and not under long-term commitments and contracts. Our customers frequently do not provide any assurance of minimum or future sales and are not prohibited from purchasing products from our competitors at any time. Accordingly, we are exposed to competitive pricing pressures on each order. Our customers also engage in the practice of purchasing products from more than one manufacturer to avoid dependence on sole-source suppliers for certain of their needs. The existence of these practices makes it more difficult for us to increase price, gain new customers and win repeat business from existing customers.
 
Item 1B.   Unresolved Staff Comments
 
None.
 
Item 2.   Properties
 
Our corporate headquarters and primary manufacturing/research and development facilities are currently located in three buildings in Chelmsford, Massachusetts, which we purchased in January 2001. We lease a fourth building in Chelmsford adjacent to the three that we own. In summary, we maintain the following active principal facilities:
 
                 
        Square Footage
    Ownership Status/Lease
Location
 
Functions
  (Approx.)     Expiration
 
Chelmsford, Massachusetts
  Corporate headquarters, training, manufacturing and R&D     214,000     Owned
Chelmsford, Massachusetts
  Manufacturing     97,000     October 2014
Petaluma, California
  Manufacturing and R&D     72,300     September 2013
Poway, California
  Manufacturing and R&D     67,600     July 2015
Longmont, Colorado
  Manufacturing and R&D     60,900     February 2015
Yongin-City, South Korea
  Manufacturing, R&D and sales & support     51,700     November 2021
Manchester, UK
  Manufacturing, R&D and sales & support     42,000     December 2019
Jena, Germany
  Manufacturing, R&D and sales & support     30,140     February 2017
ChuBei City, Taiwan
  Sales & support     28,600     June 2012
 
Our Brooks Product Solutions segment utilizes the facilities in Massachusetts, Petaluma, California, Colorado and South Korea as well as a smaller manufacturing and R&D facility in Germany. Our Brooks Global Services segment utilizes the facilities in Massachusetts, South Korea, Germany and Taiwan. Our Brooks Life Science Systems segment utilizes the facilities in Poway, California and the UK.
 
We maintain additional sales and support and training offices in California and Texas and overseas in Europe (France, Germany and Switzerland), as well as in Asia (Japan, China, Singapore and Taiwan) and the Middle East (Israel).
 
We utilize a third party to manage a manufacturing operation in Mexico. As part of our arrangement with this third party, we guarantee a lease for a 56,100 square foot manufacturing facility. The remaining payments under this lease, which expires in 2013, are approximately $0.5 million.
 
Item 3.   Legal Proceedings
 
On August 22, 2006, an action captioned as Mark Levy v. Robert J. Therrien and Brooks Automation, Inc., was filed in the United States District Court for the District of Delaware, seeking recovery, on behalf of Brooks, from Mr. Therrien (the Company’s former Chairman and CEO) under Section 16(b) of the Exchange Act for alleged


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“short-swing” profits earned by Mr. Therrien due to the loan and stock option exercise in November 1999, and a sale by Mr. Therrien of Brooks stock in March 2000. The complaint sought disgorgement of all profits earned by Mr. Therrien on the transactions, attorneys’ fees and other expenses. On February 20, 2007, a second Section 16(b) action, concerning the same loan and stock option exercise in November 1999 discussed above and seeking the same remedy, was filed in the United States District Court of the District of Delaware, captioned Aron Rosenberg v. Robert J. Therrien and Brooks Automation, Inc. On April 4, 2007, the court issued an order consolidating the Levy and Rosenberg actions (the “Section 16(b) Action”).
 
On February 24, 2011, the parties executed a settlement agreement which, upon court approval, would resolve the Section 16(b) Action. Pursuant to this agreement, Mr. Therrien sold 150,000 shares of Brooks stock, the proceeds of which form the settlement fund and totaled approximately $1.9 million. The plaintiffs agreed to seek a fee not exceeding 30 percent of this settlement fund, the remainder of which would be delivered to the Company following court approval. Notice of the proposed settlement, which described the proposed settlement in further detail, was mailed to shareholders of record as of March 31, 2011.
 
In connection with the agreement to settle the Section 16(b) Action, the Company reached an agreement with Mr. Therrien and the Company’s former Directors and Officers Liability Insurance Carriers (the “Global Settlement Agreement”) to resolve (1) Mr. Therrien’s civil litigation with the United States Securities and Exchange Commission (“SEC”), (2) any of the Company’s advancement or indemnification obligations to Mr. Therrien in connection with that matter, and (3) the Company’s claim against these insurance carriers for reimbursement of certain defense costs which the Company paid to Mr. Therrien pursuant to his indemnification agreement with the Company. Pursuant to the Global Settlement Agreement, Mr. Therrien agreed to enter into a settlement with the SEC. If approved by the SEC and the court in that matter, in addition to delivering to the Company the net proceeds of the sale of 150,000 shares of Brooks stock in connection with the Section 16(b) matter, Mr. Therrien would pay the SEC approximately $728,000 in disgorgement and $100,000 in fines. To resolve any indemnification claim by Mr. Therrien against the Company in connection with this matter, the Company has agreed to reimburse him $500,000 towards his disgorgement payment. Finally, upon resolution of both the Section 16(b) matter and the SEC matter, the Company’s insurers have agreed to pay Brooks a net sum of approximately $3.4 million. This payment would resolve any claim the Company may have against its former insurers for certain defense costs paid to Mr. Therrien.
 
On May 17, 2011, the court in the Section 16(b) Action held a hearing to determine the fairness of the proposed settlement in that action. Following the hearing, the court approved that settlement, finding that the settlement in the Section 16(b) Action and the Global Settlement Agreement were both in the best interest of the parties and the Company’s shareholders. On June 16, 2011, the settlement of the Section 16(b) Action became final and the Company received $1.3 million in settlement proceeds of which 50% will be paid to our insurance company and the remaining 50% has been recorded as income. Mr. Therrien has agreed to and submitted a proposed settlement to the SEC for approval by the Commission, which must also be approved by the court before it becomes final. If this settlement becomes final, then the contingencies within the Global Settlement Agreement will be satisfied, which will have the effect of resolving all pending litigation related to the Company’s past stock option granting practices, and the Company would expect to record income of approximately $4 million upon final resolution, inclusive of the $0.7 million previously recognized.
 
The Company is subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course of business. The Company believes that none of these claims will have a material adverse effect on its consolidated financial condition or results of operations.


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Item 4.   Removed and Reserved
 
PART II
 
Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Our common stock is traded on the NASDAQ Stock Market LLC under the symbol “BRKS”. The following table sets forth, for the periods indicated, the high and low close prices per share of our common stock, as reported by the NASDAQ Stock Market LLC:
 
                 
    High   Low
 
Fiscal year ended September 30, 2011
               
First quarter
  $ 9.48     $ 6.37  
Second quarter
    13.94       8.72  
Third quarter
    14.59       9.96  
Fourth quarter
    11.66       7.74  
Fiscal year ended September 30, 2010
               
First quarter
  $ 9.11     $ 6.13  
Second quarter
    10.82       7.20  
Third quarter
    10.23       6.63  
Fourth quarter
    9.17       5.46  
 
Number of Holders
 
As of October 31, 2011, there were 980 holders of record of our common stock.
 
Dividend Policy
 
Dividends are declared at the discretion of our Board of Directors and depend on actual cash from operations, our financial condition and capital requirements and any other factors our Board of Directors may consider relevant. Future dividend declarations, as well as the record and payment dates for such dividends, will be determined by our Board of Directors on a quarterly basis.
 
On August 3, 2011, our Board of Directors approved a cash dividend of $0.08 per share of the Company’s stock. A dividend of approximately $5.2 million was paid on September 30, 2011 to shareholders of record at the close of business on September 9, 2011. An additional $0.1 million was recorded as dividends payable at September 30, 2011, to be paid as restricted shares vest. If restricted shares are forfeited prior to vesting, the unpaid dividends will be canceled.
 
On November 8, 2011, our Board of Directors approved a cash dividend of $0.08 per share of the Company’s stock. The total dividend of approximately $5.3 million will be paid on December 30, 2011 to shareholders of record at the close of business on December 9, 2011.


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Comparative Stock Performance
 
The following graph compares the cumulative total shareholder return (assuming reinvestment of dividends) from investing $100 on September 30, 2006, and plotted at the last trading day of each of the fiscal years ended September 30, 2007, 2008, 2009, 2010 and 2011, in each of (i) the Company’s Common Stock; (ii) the NASDAQ/AMEX/NYSE Market Index of companies; (iii) a peer group comprised of: Advanced Energy Industries, Inc., Cymer, Inc., Entegris, Inc., FEI Company, LAM Research Corporation, Mattson Technology Corporation, MKS Instruments, Inc., Novellus Systems, Inc., Phototronics, Inc., Ultra Clean Technology, Inc., Varian Semiconductor Equipment Associates, Inc. and Veeco Instruments, Inc. We believe this graph best represents our peer groups in the end markets that we serve. The stock price performance on the graph below is not necessarily indicative of future price performance.
 
Performance Graph

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Brooks Automation, Inc., The NASDAQ/AMEX/NYSE Index
and a Peer Group
 
PERFORMANCE GRAPH
 
 
* $100 invested on 9/30/06 in stock or index, including reinvestment of dividends.
 
Fiscal year ending September 30.
 
                                                 
    9/29/06     9/28/07     9/30/08     9/30/09     9/30/10     9/30/11  
 
Brooks Automation, Inc. 
    100.00       109.12       64.06       59.23       51.42       63.01  
NASDAQ/AMEX/NYSE
    100.00       122.06       95.47       92.26       100.97       96.91  
Peer Group
    100.00       115.49       71.97       81.63       88.50       100.16  
 
The information included under the heading “Performance Graph” in Item 5 of this Annual Report on Form 10-K shall not be deemed to be “soliciting material” or subject to Regulation 14A, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.


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Issuance of Unregistered Common Stock
 
Not applicable.
 
Issuer’s Purchases of Equity Securities
 
As part of our equity compensation program, we offer recipients of restricted stock awards the opportunity to elect to sell their shares at the time of vesting to satisfy tax obligations in connection with such vesting. The following table provides information concerning shares of our Common Stock, $0.01 par value, purchased in connection with the forfeiture of shares to satisfy the employees’ obligations with respect to withholding taxes in connection with the vesting of certain shares of restricted stock during the three months ended September 30, 2011. Upon purchase, these shares are immediately retired.
 
                                 
                      Maximum
 
                      Number (or
 
                      Approximate
 
                Total Number of
    Dollar Value) of
 
    Total
          Shares Purchased as
    Shares that May Yet
 
    Number
    Average Price
    Part of Publicly
    be Purchased Under
 
    of Shares
    Paid
    Announced Plans
    the Plans or
 
Period
  Purchased     per Share     or Programs     Programs  
 
July 1 — 31, 2011
        $           $  
August 1 — 31, 2011
    1,587       9.20       1,587        
September 1 — 30, 2011
    2,116       8.37       2,116        
                                 
Total
    3,703     $ 8.73       3,703     $  
                                 
 
Item 6.   Selected Financial Data
 
The selected consolidated financial data set forth below should be read in conjunction with our consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” appearing elsewhere in this report.
 
                                         
    Year Ended September 30,  
    2011(6)(7)     2010(5)     2009(4)     2008(3)     2007(1)(2)  
          (In thousands, except per share data)  
 
Revenues
  $ 688,105     $ 592,972     $ 218,706     $ 526,366     $ 743,258  
Gross profit (loss)
  $ 223,021     $ 166,295     $ (5,996 )   $ 126,828     $ 219,595  
Income (loss) from continuing operations before income taxes and equity in earnings (losses) of joint ventures
  $ 127,576     $ 56,064     $ (226,917 )   $ (236,152 )   $ 55,636  
Net income (loss) from continuing operations
  $ 128,404     $ 59,025     $ (227,773 )   $ (236,678 )   $ 54,369  
Net income (loss) attributable to Brooks Automation, Inc. 
  $ 128,352     $ 58,982     $ (227,858 )   $ (235,946 )   $ 151,472  
Basic net income (loss) from continuing operations per share attributable to Brooks Automation, Inc. common stockholders
  $ 1.99     $ 0.92     $ (3.62 )   $ (3.67 )   $ 0.74  
Diluted net income (loss) from continuing operations per share attributable to Brooks Automation, Inc. common stockholders
  $ 1.97     $ 0.92     $ (3.62 )   $ (3.67 )   $ 0.73  
Shares used in computing basic earnings (loss) per share
    64,549       63,777       62,911       64,542       73,492  
Shares used in computing diluted earnings (loss) per share
    65,003       64,174       62,911       64,542       74,074  
Cash dividends per share
  $ 0.08     $     $     $     $  
 


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    As of September 30,  
    2011     2010     2009     2008     2007  
    (In thousands)  
 
Total assets
  $ 636,620     $ 518,224     $ 413,322     $ 663,638     $ 1,014,838  
Working capital
  $ 224,785     $ 219,176     $ 150,700     $ 235,795     $ 346,883  
Total Brooks Automation, Inc. stockholders’ equity
  $ 518,009     $ 388,815     $ 319,129     $ 541,995     $ 859,779  
 
                                 
    Year Ended September 30, 2011  
    First
    Second
    Third
    Fourth
 
    Quarter     Quarter     Quarter(7)     Quarter  
    (In thousands, except per share data)  
 
Revenues
  $ 178,367     $ 192,651     $ 186,136     $ 130,951  
Gross profit
  $ 57,319     $ 61,674     $ 56,970     $ 47,058  
Net income
  $ 23,486     $ 26,603     $ 66,189     $ 12,126  
Net income attributable to Brooks Automation, Inc. 
  $ 23,486     $ 26,585     $ 66,183     $ 12,098  
Basic net income per share attributable to Brooks Automation, Inc. common stockholders
  $ 0.37     $ 0.41     $ 1.02     $ 0.19  
Diluted net income per share attributable to Brooks Automation, Inc. common stockholders
  $ 0.36     $ 0.41     $ 1.02     $ 0.19  
 
                                         
    Year Ended September 30, 2010        
    First
    Second
    Third
    Fourth
       
    Quarter     Quarter(5)     Quarter     Quarter        
    (In thousands, except per share data)  
 
Revenues
  $ 106,197     $ 148,353     $ 156,790     $ 181,632          
Gross profit
  $ 26,246     $ 38,950     $ 45,905     $ 55,194          
Net income (loss)
  $ (2,877 )   $ 20,948     $ 16,646     $ 24,308          
Net income (loss) attributable to Brooks Automation, Inc. 
  $ (2,795 )   $ 21,029     $ 16,572     $ 24,176          
Basic and diluted net income (loss) per share attributable to Brooks Automation, Inc. common stockholders
  $ (0.04 )   $ 0.33     $ 0.26     $ 0.38          
 
 
(1) Amounts from continuing operations exclude results of operations of the Specialty Equipment and Life Sciences division and the Software division which were reclassified as a discontinued operation in October 2006.
 
(2) Amounts include results of operations of Keystone Electronics (Wuxi) Co., Ltd. (acquired effective July 1, 2007) for the periods subsequent to its acquisition. Net income (loss) attributable to Brooks Automation, Inc. includes a $97.2 million gain from discontinued operations in connection with the Software division.
 
(3) Income (loss) from continuing operations before income taxes and equity in earnings of joint ventures, income (loss) from continuing operations and net income (loss) attributable to Brooks Automation, Inc. includes a $197.9 million charge for the impairment of goodwill and a $5.7 million charge for the impairment of long-lived assets.
 
(4) Gross profit (loss) includes a $20.9 million impairment of long-lived assets. Income (loss) before income taxes and equity in earnings of joint ventures, income (loss) and net income (loss) attributable to Brooks Automation, Inc. includes a $71.8 million charge for the impairment of goodwill and a $35.5 million charge for the impairment of long-lived assets.
 
(5) Income (loss) before income taxes and equity in earnings of joint ventures, income (loss) and net income (loss) attributable to Brooks Automation, Inc. includes a $7.8 million gain on the sale of certain patents and patents pending related to a legacy product line.
 
(6) Amounts include results of operations of RTS Life Science Limited (acquired effective April 1, 2011) and Nexus Biosystems, Inc. (acquired effective July 25, 2011) for the periods subsequent to their acquisition.

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(7) On June 28, 2011, we disposed of our contract manufacturing business which did not qualify as discontinued operations. As such, the operations prior to the divestiture were included in our results of operations. Income (loss) before income taxes and equity in earnings of joint ventures, income (loss) and net income (loss) attributable to Brooks Automation, Inc. includes a $45.0 million pre-tax gain on the sale of our contract manufacturing business.
 
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Certain statements in this Form 10-K constitute “forward-looking statements” which involve known risks, uncertainties and other factors which may cause the actual results, our performance or our achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements such as estimates of future revenue, gross margin, and expense levels as well as the performance of the semiconductor industry as a whole. Such factors include the “Risk Factors” set forth in Part I, Item 1A. Precautionary statements made herein should be read as being applicable to all related forward-looking statements whenever they appear in this report.
 
Overview
 
We are a leading provider of automation, vacuum and instrumentation solutions for multiple markets and are a valued business partner to original equipment manufacturers (“OEMs”) and equipment users throughout the world. We serve markets where equipment productivity and availability is a critical factor for our customers’ success, typically in demanding temperature and/or pressure environments. Our largest served market is the semiconductor capital equipment industry, which represented approximately 65% and 71% of our consolidated revenues for fiscal years 2011 and 2010, respectively. We have targeted certain non-semiconductor revenue opportunities and made recent acquisitions and a divestiture which has led to an increase in the non-semiconductor portion of our revenues. For the fourth quarter of fiscal year 2011, the semiconductor capital equipment portion of our revenues declined to 47%. The non-semiconductor markets served by us include life sciences, industrial capital equipment, and other adjacent markets which includes clean energy.
 
The demand for semiconductors and semiconductor manufacturing equipment is cyclical, resulting in periodic expansions and contractions. Demand for our products has been impacted by these cyclical industry conditions. We expect the semiconductor equipment market will continue to be a key end market for our products, however, we intend to acquire and develop technologies that will create opportunities outside of the semiconductor equipment market. On April 1, 2011, we acquired RTS Life Sciences (“RTS”), a United Kingdom-based provider of automation solutions to the life sciences markets. The purchase price was approximately $3.4 million, net of cash on hand. On July 25, 2011, we acquired Nexus Biosystems, Inc. (“Nexus”), a U.S.-based provider of automation solutions and consumables to the life sciences markets, specifically biobanking and compound sample management. The Company paid, in cash, an aggregate merger consideration of $84.9 million, net of cash on hand to acquire Nexus.
 
On April 20, 2011, we entered into an agreement with affiliates of Celestica Inc. (the “Buyers”) to sell the assets of our extended factory contract manufacturing business (the “Business”). The Buyers also agreed to assume certain liabilities related to the Business (the “Asset Sale”). The Asset Sale was completed on June 28, 2011 (the “Closing”). At the Closing, the Buyers paid Brooks a total purchase price of $78.0 million in cash, plus $1.3 million as consideration for cash acquired in the Asset Sale. An additional $2.5 million of proceeds was paid during our fourth quarter of 2011, which represents a working capital normalizing adjustment.
 
Brooks and the Buyers also entered into certain commercial supply and license agreements at the Closing which will govern the ongoing relationship between the Buyers and Brooks. Pursuant to those agreements, Brooks will supply the Buyers with certain products and has licensed to the Buyers certain intellectual property needed to run the Business and the Buyers will supply certain products to Brooks.
 
Effective as of the beginning of our third quarter of fiscal year 2011, we implemented a financial reporting structure that included three segments: Brooks Product Solutions, Brooks Global Services and Contract Manufacturing. This structure was implemented in response to changes in our management structure and in anticipation of the sale of our Contract Manufacturing segment. Effective as of the beginning of our fourth quarter of fiscal year


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2011, we added a fourth segment, Brooks Life Science Systems, which includes the operations of the businesses acquired from RTS and Nexus, which have been consolidated into one operating segment. Historic results included in this annual report have been reclassified where applicable to conform to this new operating segment structure.
 
The Brooks Product Solutions segment provides a variety of products critical to technology equipment productivity and availability. Those products include atmospheric and vacuum tool automation systems, atmospheric and vacuum robots and robotic modules and cryogenic vacuum pumping, thermal management and vacuum measurement solutions used to create, measure and control critical process vacuum applications.
 
The Brooks Global Services segment provides an extensive range of support services including on and off-site repair services, on and off-site diagnostic support services, and installation services to enable our customers to maximize process tool uptime and productivity. This segment also provides end-user customers with spare part support services to maximize customer tool productivity.
 
The Brooks Life Science Systems segment provides automated sample management systems including automated sample storage, automated blood fractionation equipment, sample preparation and handling equipment, consumables, parts and support services to wide range of life science customers including pharmaceutical companies, biotechnology companies, biobanks, national laboratories, research institutes and research universities.
 
The Contract Manufacturing segment provided services to build equipment front-end modules and other subassemblies which enable our customers to effectively develop and source high quality and high reliability process tools for semiconductor and adjacent market applications. We sold this segment in the Asset Sale which closed on June 28, 2011.
 
Critical Accounting Policies and Estimates
 
The preparation of the Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, goodwill, income taxes, warranty obligations, pensions and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, including current and anticipated worldwide economic conditions both in general and specifically in relation to the semiconductor industry, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. As discussed in the year over year comparisons below, actual results may differ from these estimates under different assumptions or conditions.
 
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.
 
Revenues
 
Product revenues are associated with the sale of hardware systems, components and spare parts as well as product license revenue. Service revenues are associated with service contracts, repairs, upgrades and field service. Shipping and handling fees, if any, billed to customers are recognized as revenue. The related shipping and handling costs are recognized in cost of sales.
 
Revenue from product sales that does not include significant customization is recorded upon delivery and transfer of risk of loss to the customer provided there is evidence of an arrangement, fees are fixed or determinable, collection of the related receivable is reasonably assured and, if applicable, customer acceptance criteria have been successfully demonstrated. Customer acceptance provisions include final testing and acceptance carried out prior to shipment. These pre-shipment testing and acceptance procedures ensure that the product meets the published specification requirements before the product is shipped. When significant on site customer acceptance provisions are present in the arrangement, revenue is recognized upon completion of customer acceptance testing.
 
Revenue from product sales that does include significant customization, which primarily include life science automation systems, is recorded using the percentage of completion method whereby revenue is recorded as work progresses based on a percentage that incurred costs to date bear to total estimated costs. In addition, contracts are


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reviewed on a regular basis to determine whether a loss exists. A loss will be accrued in the period in which estimated contract revenue is less than the current estimate of total contract costs.
 
Revenue associated with service agreements is generally recognized ratably over the term of the contract. Revenue from repair services or upgrades of customer-owned equipment is recognized upon completion of the repair effort and upon the shipment of the repaired item back to the customer. In instances where the repair or upgrade includes installation, revenue is recognized when the installation is completed.
 
Intangible Assets, Goodwill and Other Long-Lived Assets
 
As a result of our acquisitions, we have identified intangible assets other than goodwill and generated significant goodwill. General intangible assets other than goodwill are valued based on estimates of future cash flows and amortized over their estimated useful life. Goodwill is subject to annual impairment testing as well as testing upon the occurrence of any event that indicates a potential impairment. General intangible assets other than goodwill and other long-lived assets are subject to an impairment test if there is an indicator of impairment. We conduct our annual goodwill impairment test as of our fiscal year end, or September 30th.
 
Under U.S. Generally Accepted Accounting Principles (“GAAP”), the testing of goodwill for impairment is to be performed at a level referred to as a reporting unit. A reporting unit is either the “operating segment level” or one level below, which is referred to as a “component”. The level at which the impairment test is performed requires an assessment as to whether the operations below the operating segment constitute a self-sustaining business, testing is generally required to be performed at this level. We currently have three reporting units that have goodwill, including two reporting units that are part of our Brooks Product Solutions operating segment and the sole reporting unit included in our Brooks Life Science Systems operating segment.
 
We determine the fair value of our reporting units using the Income Approach, specifically the Discounted Cash Flow Method (“DCF Method”). The DCF Method includes five year future cash flow projections, which are discounted to present value, and an estimate of terminal values, which are also discounted to present value. Terminal values represent the present value an investor would pay today for the rights to the cash flows of the business for the years subsequent to the discrete cash flow projection period. We consider the DCF Method to be the most appropriate valuation indicator as the DCF analyses are based on management’s long-term financial projections.
 
Goodwill impairment testing is a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of each reporting unit to its respective carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the reporting unit’s carrying amount exceeds the fair value, the second step of the goodwill impairment test must be completed to measure the amount of the impairment loss, if any. The second step compares the implied fair value of goodwill with the carrying value of goodwill. The implied fair value is determined by allocating the fair value of the reporting unit to all of the assets and liabilities of that unit, the excess of the fair value over amounts assigned to its assets and liabilities is the implied fair value of goodwill. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.
 
We recorded goodwill impairment charges of $71.8 million in the three month period ended March 31, 2009. The details of this goodwill impairment charge are discussed further under the Impairment Charges caption in our comparison of fiscal year 2010 and 2009 results. Our tests of goodwill as of September 30, 2009, 2010 and 2011 indicated that we did not have any further impairment to goodwill.
 
Under GAAP, we are required to test long-lived assets, which exclude goodwill and intangible assets that are not amortized, when indicators of impairment are present. For purposes of this test, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. When we determine that indicators of potential impairment exist, the next step of the impairment test requires that the potentially impaired long-lived asset group is tested for recoverability. The test for recoverability compares the undiscounted future cash flows of the long-lived asset group to its carrying value. If the carrying values of the long-lived asset group exceed the future cash flows, the assets are considered to be potentially impaired. The next step in the impairment process is to determine the fair value of the individual net


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assets within the long-lived asset group. If the aggregate fair values of the individual net assets of the group are less than the carrying values, an impairment charge is recorded equal to the excess of the aggregate carrying value of the group over the aggregate fair value. The loss is allocated to each asset within the group based on their relative carrying values, with no asset reduced below its fair value. We recorded impairment charges of $35.5 million related to certain long-lived assets in the year ended September 30, 2009, which we discuss in further detail under the Impairment Charges caption. We have not tested long-lived assets other than goodwill since 2009, since no events have occurred that would require an impairment assessment.
 
Accounts Receivable
 
We record trade accounts receivable at the invoiced amount. Trade accounts receivables do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on historical write-off experience. We review our allowance for doubtful accounts quarterly. Past due balances are reviewed individually for collectibility. Account balances are charged off against the allowance when we feel it is probable the receivable will not be recovered. We do not have any off-balance-sheet credit exposure related to our customers.
 
Warranty
 
We provide for the estimated cost of product warranties at the time revenue is recognized. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is estimated by assessing product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability would be required and may result in additional benefits or charges to operations.
 
Inventory
 
We provide reserves for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. We fully reserve for inventories and noncancelable purchase orders for inventory deemed obsolete. We perform periodic reviews of all inventory items to identify excess inventories on hand by comparing on-hand balances to anticipated usage using recent historical activity as well as anticipated or forecasted demand, based upon sales and marketing inputs through our planning systems. If estimates of demand diminish further or actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.
 
Deferred Taxes
 
We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have considered future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance. In the event we determine that we would be able to realize our deferred tax assets in excess of their net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we subsequently determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.
 
Management has considered the weight of all available evidence in determining whether a valuation allowance continues to be required against its deferred tax assets. We continued to provide a full valuation allowance for our net deferred tax assets at September 30, 2011, as we believe it is more likely than not that the future tax benefits from accumulated net operating losses and other temporary differences will not be realized. We will continue to assess the need for a valuation allowance in future periods. If we continue to generate profits in most of our jurisdictions, it is reasonably possible that there will be a significant reduction in the valuation allowance in the next twelve months. Reduction of the valuation allowance, in whole or in part, would result in a non-cash income tax benefit during the period of reduction.


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Pension Plans
 
We sponsor a defined benefit pension plan in the U.S. and two non-U.S. defined benefit pension plans. The cost and obligations of these arrangements are calculated using many assumptions to estimate the benefits that the employee earns while working, the amount of which cannot be completely determined until the benefit payments cease. Major assumptions used in the accounting for these employee benefit plans include the discount rate, expected return on plan assets and rate of increase in employee compensation levels. Assumptions are determined based on company data and appropriate market indicators in consultation with third-party actuaries, and are evaluated each year as of the plans’ measurement date. Net periodic pension costs for our pension plans totaled $0.7 million for fiscal year 2011. Our unfunded benefit obligation totaled $7.9 million at September 30, 2011, as compared to $5.9 million at September 30, 2010.  Should any of our assumptions change, they would have an effect on net periodic pension costs and the unfunded benefit obligation. We expect to contribute approximately $0.7 million to our defined benefit pension plans during fiscal year 2012.
 
Stock-Based Compensation
 
We measure compensation cost for all employee stock awards at fair value on date of grant and recognize compensation expense over the service period for awards expected to vest. The fair value of restricted stock is determined based on the number of shares granted and the excess of the quoted price of our common stock over the exercise price of the restricted stock on the date of grant, if any, and the fair value of stock options is determined using the Black-Scholes valuation model. Such value is recognized as expense over the service period, net of estimated forfeitures. The estimation of stock awards that will ultimately vest requires significant judgment. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. In addition, for stock-based awards where vesting is dependent upon achieving certain operating performance goals, we estimate the likelihood of achieving the performance goals. Actual results, and future changes in estimates, may differ from our current estimates. Restricted stock with market-based vesting criteria is valued using a lattice model.
 
Year Ended September 30, 2011, Compared to Year Ended September 30, 2010
 
Revenues
 
We reported revenues of $688.1 million for fiscal year 2011, compared to $593.0 million in the previous year, a 16% increase. The total increase in revenues of $95.1 million is the result of increased demand for our products and services which resulted in $88.8 million of increased revenues from our Brooks Product Solutions segment and $13.9 million of higher revenues from our Brooks Global Services segment. In addition, the acquisitions of RTS and Nexus provided $10.6 million of increased revenues from our Brooks Life Science Systems segment. These increases were partially offset by an $18.2 million decrease in Contract Manufacturing revenues, due to the sale of that segment at the end of our third fiscal quarter. Recent order rates from semiconductor companies have moderated and we anticipate that revenues for our first quarter of fiscal year 2012 will be 7% to 12% lower than those achieved for the fourth quarter of fiscal year 2011.
 
Our Brooks Product Solutions segment reported revenues of $451.3 million for fiscal year 2011, an increase of 24% from $362.5 million in the prior year. These increases are primarily attributable to higher volumes of shipments to semiconductor capital equipment customers, which increased $46.8 million for fiscal year 2011 as compared to the prior year, and an increase of $42.0 million from non-semiconductor customers for fiscal year 2011 as compared to the prior year.
 
Our Brooks Global Services segment reported revenues of $88.8 million for fiscal year 2011, a 19% increase from $74.9 million in the prior year. The increase includes a $1.0 million increase in product revenues, which are comprised mostly of spare part sales to end users, and a $12.9 million increase in revenues from services. These increases are primarily attributable to increased demand from our semiconductor customers.
 
Our Brooks Life Science Systems segment reported revenues of $10.6 million for fiscal year 2011. This segment includes revenues for RTS, which was acquired on April 1, 2011 and for Nexus, which was acquired on July 25, 2011. Revenues from these newly acquired entities are included in our operating results from their


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respective acquisition dates through the end of our fiscal year. Revenue from this segment includes $7.7 million for the sale of product, including automation systems and consumables, and includes $2.9 million of service revenue for the support of deployed automation systems.
 
Our Contract Manufacturing segment reported revenues of $137.3 million for fiscal year 2011, a 12% decrease from $155.5 million in the prior year. This decrease is due to the sale of this segment at the end of our third fiscal quarter. Through the first nine months of fiscal year 2011, Contract Manufacturing revenues increased 28% as compared to the same prior year period.
 
Revenues from the Brooks Product Solutions segment for the fiscal years 2011 and 2010 include intercompany sales of $49.2 million and $62.9 million, respectively, from this segment to the Contract Manufacturing segment. These intercompany revenues have been eliminated from the revenues of Contract Manufacturing.
 
Revenues for the Contract Manufacturing segment for the fiscal years 2011 and 2010 exclude intercompany sales of $10.7 million and $12.5 million, respectively, from this segment to the Brooks Product Solutions segment.
 
Revenues outside the United States were $339.9 million, or 49% of total revenues, and $271.5 million, or 46% of total revenues, for fiscal years 2011 and 2010, respectively. We expect that foreign revenues will continue to account for a significant portion of total revenues.
 
Gross Margin
 
Gross margin dollars increased to $223.0 million for fiscal year 2011 as compared to $166.3 million in the prior year. This increase was attributable to higher revenues of $95.1 million and the acquisitions of RTS and Nexus which increased gross margin by $2.3 million. These increases were partially offset by reduced benefits from the sale of previously reserved excess and obsolete inventory. The net benefit in the prior period exceeded the net charge in the current period by $4.1 million. Gross margin was reduced by $2.2 million of amortization expense for completed technology intangible assets, as compared to $1.9 million in the prior year period. This increase in amortization expense is primarily due to the acquisitions of RTS and Nexus.
 
Gross margin percentage increased to 32.4% for fiscal year 2011, compared to 28.0% for the prior year. This increase is primarily attributable to higher absorption of indirect factory overhead on higher revenues. Further, the sale of our Contract Manufacturing segment, which earned lower gross margins than our other operating segments, favorably impacted our gross margin percentage in the fourth quarter of fiscal year 2011. We estimate that the impact of the sale of Contract Manufacturing will increase our annual gross margin percentage by approximately 6% as compared to historical levels that included the operations of the business. These increases in gross margin percentage were partially offset by reduced benefits from the sale of previously reserved excess and obsolete inventory. The increase in the net charge for excess and obsolete inventory in fiscal year 2011 as compared to the prior year decreased gross margin percentage by 0.6%.
 
Gross margin of our Brooks Product Solutions segment increased to $171.8 million for fiscal year 2011 as compared to $128.5 million for the prior year. This increase was attributable to higher revenues of $88.8 million for fiscal year 2011 as compared to the prior year. This increase was offset by reduced benefits from the sale of previously reserved excess and obsolete inventory. The net benefit in the prior period exceeded the net charge in the current period by $3.8 million. Gross margin for this segment was reduced by amortization of completed technology intangible assets of $1.5 million for both fiscal year 2011 and 2010. Gross margin percentage for this segment was 38.1% for fiscal year 2011 as compared to 35.4% in the prior year. This increase is primarily the result of higher absorption of indirect factory overhead on higher revenues. This increase was partially offset by increased net charges for excess and obsolete inventory which reduced gross margin percentage by 1.0% as compared to the prior year.
 
Gross margin of our Brooks Global Services segment increased to $31.8 million for fiscal year 2011 as compared to $20.4 million in the prior year. The increase was attributable to higher revenues of $13.9 million for fiscal year 2011 as compared to the prior year and $0.7 million of reduced charges for excess and obsolete inventory as compared to the prior year. Gross margin was reduced by $0.4 million for amortization of completed technology intangible assets for fiscal years 2011 and 2010. Gross margin percentage was 35.7% for fiscal year 2011 as compared to 27.2% in the prior year. The increase in gross margin percentage was attributable to higher absorption


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of indirect service overhead on higher revenues. In addition, decreased charges for excess and obsolete inventory led to an increase in gross margin percentage of 0.9% for fiscal year 2011 as compared to the prior year.
 
Gross margin for our Brooks Life Science Systems segment was $2.3 million for fiscal year 2011, and includes only those amounts earned since the acquisition date of RTS and Nexus. Gross margin has been reduced by $1.3 million for the impact of the valuation of inventory and deferred revenue obligations as of the purchase date for both RTS and Nexus. Gross margin has also been reduced by $0.6 million for charges for excess and obsolete inventory related to Nexus, based on a review of inventories performed by us after the acquisition date. Gross margin was reduced by $0.3 million for amortization of completed technology intangible assets. Gross margin percentage was 21.2% for fiscal year 2011, and has been reduced 7.3% for the impact of the valuation of deferred revenue obligations and the step-up in value of acquired inventory. Gross margin percentage was also decreased by 6.0% for charges for excess and obsolete inventories. Gross margin was further reduced by 2.8% for amortization of completed technology intangible assets.
 
Gross margin of our Contract Manufacturing segment decreased slightly to $17.2 million for fiscal year 2011 as compared to $17.5 million for the prior year. This decrease is due to an $18.2 million decrease in revenues, caused by the sale of this segment at the end of our third quarter. For the first nine months of fiscal year 2011, revenues for Contract Manufacturing had increased 28% over the same prior year period. This increase in revenues led to higher absorption of indirect factory overhead and resulted in a higher gross margin percentage. Gross margin percentage was 12.5% for fiscal year 2011 as compared to 11.2% in the prior year.
 
Research and Development
 
Research and development, or R&D, expenses for fiscal year 2011 were $39.8 million, an increase of $8.6 million, compared to $31.2 million in the previous year. This increase includes $1.8 million of R&D costs incurred by RTS and Nexus since their respective acquisition dates. The balance of the increase is the result of our increased pace of spending for R&D throughout fiscal year 2011 as we support enhancements to our current product offerings and our strategy to grow longer-term revenues outside of the semiconductor market. We expect the rate of growth in R&D spending to moderate in the near term from the levels incurred during the fourth quarter of fiscal year 2011.
 
Selling, General and Administrative
 
Selling, general and administrative, or SG&A, expenses were $102.5 million for fiscal year 2011, an increase of $16.9 million compared to $85.6 million in the prior year. The increase is partly attributable to higher labor-related costs of $8.9 million as a result of increased accruals for incentive based compensation due to our improved financial performance, combined with a 3% increase in SG&A headcount. We have included the results of RTS and Nexus in our results since their respective acquisition dates, which increased our SG&A costs by $4.0 million, which includes a $0.4 million increase in amortization of intangible assets. Other increases in SG&A costs include outside strategic consulting costs of $1.7 million, professional fees associated with the acquisition of Nexus of $0.7 million, higher commissions to independent sales representatives of $0.8 million due to higher revenues and $0.7 million of increased legal fees associated with our intellectual property portfolio as we increase our investments in R&D.
 
Restructuring Charges
 
We recorded a restructuring charge of $1.0 million for fiscal year 2011. These charges include severance related costs of $0.7 million, which are comprised of $0.3 million of severance for the elimination of 19 employees, including 13 employees in the Brooks Life Science Systems segment resulting from the consolidation of certain functions as the operations of RTS and Nexus are combined into one operating segment, and $0.4 million of adjustments for contingent severance arrangements for corporate management positions eliminated in prior periods. We also incurred $0.3 million of facility-related costs for facilities exited in previous years. We have reached the end


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of the lease period for all of our exited leased facilities as of September 30, 2011, and do not expect further restructuring costs related to these facilities.
 
We recorded a restructuring charge of $2.5 million for fiscal year 2010. These charges include severance related costs of $0.9 million, and facility related costs of $1.6 million. The severance costs primarily include adjustments for contingent severance arrangements for corporate management positions eliminated in prior periods. The facility costs include $0.4 million to amortize the deferred discount on multi-year facility restructuring liabilities. In addition, we revised the present value discounting of multi-year facility related restructuring liabilities during the first quarter of fiscal year 2010 when certain accounting errors were identified in our prior period financial statements that, individually and in aggregate, are not material to our financial statements taken as a whole for any related prior periods, and recorded a charge of $1.2 million in the first quarter of fiscal year 2010.
 
Interest Income
 
Interest income was $1.2 million for fiscal year 2011 as compared to $1.1 million for the prior year. The increase is primarily related to higher balances available for investing.
 
Sale of Intellectual Property Rights
 
During fiscal year 2010, we sold certain patents and patents pending related to a legacy product line and recorded a gain of $7.8 million. The terms of the sale permit us to continue to use these patents to support our ongoing service and spare parts business included within our Brooks Global Services segment.
 
Sale of Contract Manufacturing Business
 
We closed the sale of our extended factory contract manufacturing business on June 28, 2011 with affiliates of Celestica Inc. (the “Buyers”). The gross proceeds on this transaction were $81.8 million, of which $79.3 million was received on the closing. The balance of $2.5 million represents a working capital normalizing adjustment, and was received during our fourth quarter of 2011. The gross proceeds include the reimbursement of $1.3 million of cash on hand at the closing offset by $2.3 million of transaction expenses. The pre-tax gain on the sale was $45.0 million. Our income tax provision includes $2.4 million of incremental taxes on this gain.
 
We also entered into certain commercial supply and license agreements with the Buyers which will govern the ongoing relationship between the Buyers and us. Pursuant to those agreements we will supply the Buyers with certain products and have licensed to the Buyers certain intellectual property needed to run the business and the Buyers will supply certain products to us. Due to the significance of these ongoing commercial arrangements, the sale did not qualify for discontinued operations treatment. Therefore, historical financial results of the divested business will not be segregated within our consolidated financial statements for the historical periods in which this business was part of us.
 
Loss on Investment
 
During fiscal year 2010, we recorded a charge of $0.2 million for the sale of our minority equity investment in a closely-held Swiss public company. We no longer have an equity investment in this entity.
 
Other Income
 
Other income, net of $1.9 million for fiscal year 2011 consists primarily of joint venture management fee income of $1.1 million and $0.7 million from a litigation settlement. Other income, net of $0.4 million for fiscal year 2010 consists of joint venture management fee income of $0.7 million which has been partially offset by foreign exchange losses of $0.3 million.
 
Income Tax Provision
 
We recorded an income tax provision of $2.0 million for fiscal year 2011, which includes $2.5 million of foreign and U.S. state income taxes, and an additional $2.4 million of income taxes relating to the sale of our Contract Manufacturing segment. These provisions have been reduced by net favorable adjustments of $3.9 million


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to our liability for unrecognized tax benefits, primarily due to the expiration of certain statutes and a favorable audit outcome. We recorded an income tax benefit of $2.7 million for fiscal year 2010. This benefit includes a $3.9 million refund from the carryback of alternative minimum tax losses as a result of the Worker, Home Ownership and Business Assistance Act of 2009 which provides for 100% (previously 90%) of certain net operating loss carrybacks against alternative minimum taxable income. The tax benefit for fiscal year 2010 was partially offset by U.S. state income taxes and foreign taxes. We continued to provide a full valuation allowance for our net deferred tax assets at September 30, 2011, as we believe it is more likely than not that the future tax benefits from accumulated net operating losses and other temporary differences will not be realized. We will continue to assess the need for a valuation allowance in future periods. If we continue to generate profits in most of our jurisdictions, it is reasonably possible that there will be a significant reduction in the valuation allowance in the next twelve months. Reduction of the valuation allowance, in whole or in part, would result in a non-cash income tax benefit during the period of reduction.
 
Of the unrecognized tax benefits of $11.0 million at September 30, 2011, we currently anticipate that the statute of limitations is expected to lapse on various uncertain tax positions in the next twelve months and accordingly it is reasonably possible that this will result in a potential decrease of $3.6 million to our unrecognized tax benefits all of which will impact net income.
 
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 $2.3 million for fiscal year 2011 as compared to $0.1 million for fiscal year 2010. Income associated with our 50% interest in Yaskawa Brooks Automation, Inc., a joint venture with Yaskawa Electric Corporation of Japan was $0.5 million for fiscal year 2011 as compared to $0.1 million for fiscal year 2010.
 
Year Ended September 30, 2010, Compared to Year Ended September 30, 2009
 
Revenues
 
We reported revenues of $593.0 million for fiscal year 2010, compared to $218.7 million in the previous year, a 171% increase. The total increase in revenues of $374.3 million arose in all of our operating segments. Our Brooks Product Solutions segment revenues increased by $230.2 million, our Brooks Global Services segment revenues increased by $15.9 million and our Contract Manufacturing segment revenues increased by $128.2 million. These increases were primarily the result of increased volume of shipments in response to increasing demand for semiconductor capital equipment.
 
Our Brooks Product Solutions segment reported revenues of $362.5 million for fiscal year 2010, an increase of 174% from $132.3 million in the prior year. These increases are primarily attributable to higher volumes of shipments to semiconductor capital equipment customers, which increased $187.1 for fiscal year 2010 as compared to the prior year, and an increase of $43.1 million from non-semiconductor customers for fiscal year 2010 as compared to the prior year.
 
Our Brooks Global Services segment reported revenues of $74.9 million for fiscal year 2010, a 27% increase from $59.0 million in the prior year. The increase includes a $6.2 million increase in product revenues, which are comprised mostly of spare part sales to end users, and a $9.7 million increase in revenues from services. These increases are primarily attributable to increased demand from our semiconductor customers. All service revenues included in our consolidated statements of operations, which include service contract and repair services, are related to our Brooks Global Services segment.
 
Our Contract Manufacturing segment reported revenues of $155.5 million for fiscal year 2010, a 468% increase from $27.4 million in the prior year. This increase is related to increased volume of shipments in response to increased demand for semiconductor capital equipment.
 
Revenues from the Brooks Product Solutions segment for the fiscal years 2010 and 2009 include intercompany sales of $62.9 million and $11.2 million, respectively, from this segment to the Contract Manufacturing segment. These intercompany revenues have been eliminated from the revenues of Contract Manufacturing.


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Revenues for the Contract Manufacturing segment for the fiscal years 2010 and 2009 exclude intercompany sales of $12.5 million and $1.6 million, respectively, from this segment to the Brooks Product Solutions segment.
 
Revenues outside the United States were $271.5 million, or 46% of total revenues, and $103.0 million, or 47% of total revenues, for fiscal years 2010 and 2009, respectively.
 
Gross Margin
 
Gross margin dollars increased to $166.3 million for fiscal year 2010 as compared to a loss of $6.0 million in the prior year. This increase was attributable to higher revenues of $374.3 million, an asset impairment charge primarily related to intangible assets of $20.9 million which reduced the prior year gross profit, a $14.2 million reduction in charges for excess and obsolete inventory and $3.7 million of reduced amortization expense for completed technology intangible assets. The decrease in amortization expense is primarily the result of the impairment of these assets recorded in the second quarter of fiscal year 2009.
 
Gross margin percentage increased to 28.0% for fiscal year 2010, compared to (2.7)% for the prior year. This increase is primarily attributable to higher absorption of indirect factory overhead on higher revenues. Other factors that increased gross margin percentage include decreased charges for excess and obsolete inventory which increased gross margin percentage by 6.0% for fiscal year 2010 as compared to the prior year and reduced amortization expense for completed technology intangible assets which increased gross margin percentage by 0.6% for fiscal year 2010 as compared to the prior year. Further, the prior year gross margin percentage was adversely impacted by asset impairment charges which reduced gross margin percentage by 9.6% in fiscal year 2009. The increases in the current year gross margin percentage were partially offset by a less favorable product mix from the growth of our Contract Manufacturing segment, which earns margins that are below those earned by our other operating segments.
 
Gross margin of our Brooks Product Solutions segment increased to $128.5 million for fiscal year 2010 as compared to $15.1 million for the prior year. This increase was attributable to higher revenues of $230.2 million for fiscal year 2010 as compared to the prior year, reduced charges for excess and obsolete inventory of $10.0 million for fiscal year 2010 as compared to the prior year and reduced amortization expense for completed technology intangible assets of $1.2 million for fiscal year 2010 as compared to the prior year. Gross margin percentage for this segment was 35.4% for fiscal year 2010 as compared to 11.4% in the prior year. This increase is primarily the result of higher absorption of indirect factory overhead on higher revenues. Other factors increasing gross margin percentage include decreased charges for excess and obsolete inventory which increased gross margin percentage by 6.6% for fiscal year 2010 as compared to the prior year and reduced amortization expense for completed technology intangible assets which increased gross margin percentage by 0.3% for fiscal year 2010 as compared to the prior year.
 
Gross margin of our Brooks Global Services segment increased to $20.4 million for fiscal year 2010 as compared to $6.5 million in the prior year. The increase was attributable to higher revenues of $15.9 million for fiscal year 2010 as compared to the prior year, $2.2 million of reduced amortization expense for completed technology intangible assets for fiscal year 2010 as compared to the prior year and decreased charges for excess and obsolete inventory of $1.7 million for fiscal year 2010 as compared to the prior year. Gross margin percentage was 27.2% for fiscal year 2010 as compared to 11.0% in the prior year. The increase in gross margin percentage was attributable to higher absorption of indirect service overhead on higher revenues. In addition, decreased charges for excess and obsolete inventory led to an increase in gross margin percentage of 3.1% for fiscal year 2010 as compared to the prior year and decreased amortization expense for completed technology intangible assets led to an increase in gross margin percentage of 2.9% for fiscal year 2010 as compared to the prior year.
 
Gross margin of our Contract Manufacturing segment increased to $17.5 million for fiscal year 2010 as compared to a loss of $6.7 million for the prior year. This increase was attributable to higher revenues of $128.2 million for fiscal year 2010 as compared to the prior year, decreased charges for excess and obsolete inventory of $2.5 million for fiscal year 2010 as compared to the prior year and $0.3 million of reduced amortization expense for completed technology intangible assets for fiscal year 2010 as compared to the prior year. Gross margin percentage for this segment increased to 11.2% for fiscal year 2010 as compared to (24.4)% in the prior year. This increase was primarily attributable to higher absorption of indirect factory overhead on higher revenues. In addition,


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decreased charges for excess and obsolete inventory led to an increase in gross margin percentage of 8.8% for fiscal year 2010 as compared to the prior year and decreased amortization expense for completed technology intangible assets led to an increase in gross margin of 0.2% for fiscal year 2010 as compared to the prior year.
 
Gross margin for fiscal year 2009 was reduced by $20.9 million for the impairment of certain long-lived assets, including a $19.6 million charge for completed technology intangible assets and $1.3 million charge for property and equipment. We did not incur any impairment charges for long-lived assets in fiscal year 2010. The details of our impairment charges are discussed in greater detail under the Impairment Charges caption.
 
Research and Development
 
Research and development, or R&D, expenses for fiscal year 2010 were $31.2 million, a decrease of $0.4 million, compared to $31.6 million in the previous year. This decrease is primarily related to lower labor related costs associated with headcount reductions initiated in fiscal years 2009 and 2008. Our R&D investments increased for each fiscal quarter throughout fiscal year 2010, including $8.0 million of R&D expenses for the fourth quarter of fiscal year 2010, as we increased our investments in certain new product programs.
 
Selling, General and Administrative
 
Selling, general and administrative, or SG&A, expenses were $85.6 million for fiscal year 2010, a decrease of $5.6 million compared to $91.2 million in the prior year. The decrease is primarily attributable to lower litigation costs of $6.2 million. We settled our litigation matters with the SEC during fiscal 2008; however, we continued to incur substantial litigation costs, net of insurance reimbursements, throughout fiscal year 2009 as we indemnified costs incurred by a former executive. We did not incur substantial litigation costs in fiscal year 2010. Other cost decreases in SG&A include $2.7 million of reduced amortization of intangible assets primarily due to the impairment of those assets recorded in the second quarter of fiscal year 2009. These costs decreases were partially offset by $1.5 million of increased depreciation expense for the implementation of the Oracle ERP system during the latter half of fiscal year 2009, with the balance related primarily to higher labor costs. During fiscal year 2009, we capitalized approximately $1.5 million of internal labor costs in connection with the Oracle ERP system implementation. After the implementation was complete, the labor costs for the employees previously assigned to the Oracle implementation was expensed as incurred. This decrease in capitalized labor is the primary cause of the increased labor costs in fiscal year 2010 as compared to fiscal year 2009.
 
Impairment Charges
 
We are required to test our goodwill for impairment at least annually. We conduct this test as of September 30th of each fiscal year. Our test of goodwill at September 30, 2010 and 2009 indicated that goodwill was not impaired. We have not tested other intangible assets since the end of the second quarter of fiscal 2009, since no events have occurred that would require an impairment assessment.
 
We experienced a weakness in demand for our products from the fourth quarter of fiscal year 2007 through the second quarter of fiscal year 2009. In response to this downturn, we restructured our business, which resulted in a change to our reporting units and operating segments. We reallocated goodwill to each of our newly formed reporting units as of March 31, 2009, based on such factors as the relative fair values of each reporting unit. We reallocated goodwill to five of our seven reporting units as of March 31, 2009. This reallocation, in conjunction with the continued downturn in the semiconductor markets indicated that a potential impairment may exist. As such, we tested our goodwill and other long-lived assets for impairment at March 31, 2009.
 
We determined the fair value of each reporting unit as of March 31, 2009 using the Income Approach, specifically the DCF Method. The material assumptions used in the DCF Method include: discount rates and revenue forecasts. Discount rates are based on a weighted average cost of capital (“WACC”), which represents the average rate a business must pay its providers of debt and equity capital. The WACC used to test goodwill is derived from a group of comparable companies. The average WACC used in the March 31, 2009 reallocation of goodwill was 16.2%. Management determines revenue forecasts based on its best estimate of near term revenue expectations which are corroborated by communications with customers, and longer-term projection trends, which are validated by published independent industry analyst reports. Revenue forecasts materially impact the amount of cash flow


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generated during the five year discrete cash flow period, and also impact the terminal value as that value is derived from projected revenue. The revenue forecasts used in the reallocation and assessment of goodwill as of March 31, 2009 were decreased from previously forecasted levels due to further market deterioration.
 
For three of the five reporting units containing goodwill at March 31, 2009, we determined that the carrying amount of their net assets exceeded their respective fair values, indicating that a potential impairment existed for each of those three reporting units. After completing the required steps of the goodwill impairment test, we recorded a goodwill impairment of $71.8 million as of March 31, 2009.
 
Under GAAP, we are required to test certain long-lived assets when indicators of impairment are present. We determined that impairment indicators were present for certain of our long-lived assets as of March 31, 2009. We tested the long-lived assets in question for recoverability by comparing the sum of the undiscounted cash flows attributable to each respective asset group to their carrying amounts, and determined that the carrying amounts were not recoverable. We then evaluated the fair values of each long-lived asset of the potentially impaired long-lived asset group to determine the amount of the impairment, if any. The fair value of each intangible asset was based primarily on an income approach, which is a present value technique used to measure the fair value of future cash flows produced by the asset. We estimated future cash flows over the remaining useful life of each intangible asset, which ranged from approximately 3 to 8 years, and used a discount rate of approximately 16%. As a result of this analysis, we determined that we had incurred an impairment loss of $35.1 million as of March 31, 2009, and we allocated that loss among the long-lived assets of the impaired asset group based on the carrying value of each asset, with no asset reduced below its respective fair value. The impairment charge was allocated as follows: $19.6 million related to completed technology intangible assets; $1.2 million to trade name intangible assets; $13.4 million to customer relationship intangible assets and $0.9 million to property, plant and equipment. Further, during the three months ended June 30, 2009 we recorded an additional impairment charge of $0.4 million for property, plant and equipment related to the closure and outsourcing of a small manufacturing operation located in the United States. The total impairment charges related to long-lived assets for fiscal 2009 are summarized as follows (in thousands):
 
         
    Year Ended
 
    September 30, 2009  
 
Reported as cost of sales:
       
Completed technology intangible asset impairment
  $ 19,608  
Property, plant and equipment impairment
    1,316  
         
Subtotal, reported as cost of sales
    20,924  
         
Reported as operating expense:
       
Trade name intangible asset impairment
    1,145  
Customer relationship intangible asset impairment
    13,443  
         
Subtotal, reported as operating expense
    14,588  
         
    $ 35,512  
         
 
Restructuring Charges
 
We recorded a restructuring charge of $2.5 million for fiscal year 2010. These charges include severance related costs of $0.9 million, and facility related costs of $1.6 million. The severance costs primarily include adjustments for contingent severance arrangements for corporate management positions eliminated in prior periods. The facility costs include $0.4 million to amortize the deferred discount on multi-year facility restructuring liabilities. In addition, we revised the present value discounting of multi-year facility related restructuring liabilities during the first quarter of fiscal year 2010 when certain accounting errors were identified in our prior period financial statements that, individually and in aggregate, are not material to our financial statements taken as a whole for any related prior periods, and recorded a charge of $1.2 million in the first quarter of fiscal year 2010.
 
We recorded charges of $12.8 million for fiscal year 2009 in connection with our fiscal year 2009 restructuring plan. These charges consisted of $11.1 million of severance costs associated with workforce reductions of approximately 450 employees in operations, service and administrative functions across all the main geographies


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in which we operate, facility closure costs of $0.6 million related primarily to the closure of one manufacturing operation located in the United States, and other restructuring costs of $1.1 million. The restructuring charges by segment for fiscal 2009 were: Brooks Product Solutions — $5.6 million, Brooks Global Services — $3.3 million and Contract Manufacturing — $1.4 million. In addition, we incurred $2.5 million of restructuring charges for fiscal 2009 that were related to general corporate functions that support all of our segments.
 
Interest Income and Expense
 
Interest income was $1.1 million for fiscal year 2010 as compared to $2.7 million for the prior year. The decrease is mostly due to lower interest rates on our investments. Interest expense decreased to $0.1 million for fiscal year 2010 from $0.5 million for fiscal year 2009.
 
Gain on sale of Intellectual Property Rights
 
During fiscal year 2010, we sold certain patents and patents pending related to a legacy product line. We recorded a gain of $7.8 million for this sale during the second quarter of 2010. The terms of the sale permit us to continue to use these patents to support our ongoing service and spare parts business included within our Brooks Global Services segment.
 
Loss on Investment
 
During fiscal year 2010, we recorded a charge of $0.2 million for the sale of our minority equity investment in a closely-held Swiss public company. During fiscal year 2009, we recorded a charge of $1.2 million to write down this investment to its market value. As of September 30, 2010, we no longer have an equity investment in this entity.
 
Other Income
 
Other income, net of $0.4 million for fiscal year 2010 consists of joint venture management fee income of $0.7 million which has been partially offset by foreign exchange losses of $0.3 million. Other income, net of $0.0 million for fiscal year 2009 consists of management fee income of $0.6 million which has been fully offset by foreign exchange losses.
 
Income Tax Provision
 
We recorded an income tax benefit of $2.7 million for fiscal year 2010. This benefit includes a $3.9 million refund from the carryback of alternative minimum tax losses as a result of the Worker, Home Ownership and Business Assistance Act of 2009 which provides for 100% (previously 90%) of certain net operating loss carrybacks against alternative minimum taxable income. In addition, we can carryforward our remaining fiscal year 2009 alternative minimum tax net operating loss to future years to offset 100% (previously 90%) of alternative minimum taxes. The tax benefit for fiscal year 2010 was partially offset by U.S. state income taxes and foreign taxes. We recorded a tax provision of $0.6 million for fiscal year 2009 which was principally attributable to foreign income and interest related to unrecognized tax benefits. We continued to provide a full valuation allowance for our net deferred tax assets at September 30, 2010 and 2009, 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 $0.1 million for fiscal year 2010 and 2009. The income (loss) associated with our 50% interest in Yaskawa Brooks Automation, Inc., a joint venture with Yaskawa Electric Corporation of Japan was $0.1 million for fiscal year 2010 as compared to $(0.3) million in the prior year.
 
Liquidity and Capital Resources
 
Our business is significantly dependent on capital expenditures that are dependent on the current and anticipated market demand for the underlying products for which capacity is established. Demand for


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semiconductors is cyclical and has historically experienced periodic downturns. This cyclicality makes estimates of future revenues, results of operations and net cash flows inherently uncertain.
 
At September 30, 2011, we had cash, cash equivalents and marketable securities aggregating $205.8 million. This amount was comprised of $58.8 million of cash and cash equivalents, $65.7 million of investments in short-term marketable securities and $81.3 million of investments in long-term marketable securities. Our marketable securities are generally readily convertible to cash without an adverse impact.
 
Cash and cash equivalents were $58.8 million at September 30, 2011, a decrease of $1.0 million from September 30, 2010. The significant uses of cash during fiscal year 2011 included the acquisitions of RTS and Nexus, which cost $88.3 million, net of cash acquired, net investments in marketable securities of $66.6 million, capital expenditures of $6.5 million and the payment of $5.2 million in dividends. The significant sources of cash include $87.7 million of cash provided by operations and $78.2 million of cash generated from the sale of our Contract Manufacturing segment.
 
Cash provided by operating activities was $87.7 million for fiscal year 2011, and was comprised of net income of $128.4 million, which includes $26.3 million of non-cash related charges such as $17.2 million of depreciation and amortization and $6.8 million of stock-based compensation. Cash provided by operations was partially offset by $21.7 million of increases in working capital. Increases in inventory levels were the primary contributor to increased working capital. Increases in inventory were driven by reductions in demand from our semiconductor equipment customers during our fourth quarter, along with $5.0 million of increased service inventories to improve delivery and service responsiveness. In addition, the gain of $45.0 million from the sale of our Contract Manufacturing segment, which is included in our net income, has been removed from cash provided by operating activities since the cash flow from this transaction is considered to be an investing activity.
 
Cash used in investing activities was $84.3 million for fiscal year 2011 and was attributable to the acquisitions of RTS and Nexus, which cost $88.3 million, net investments in marketable securities of $66.6 million, capital expenditures of $6.5 million and a $1.3 million increase in restricted cash to support certain international letters of credit. These uses of cash were partially offset by $78.2 million of net proceeds from the sale of our Contract Manufacturing segment and $0.2 million from the sale of other assets.
 
Cash used in financing activities was $3.8 million for fiscal year 2011 and includes $5.2 million for our first quarterly cash dividend paid during the fourth quarter, which was partially offset by $1.4 million of cash generated from our employee stock purchase plans. We intend to pay quarterly cash dividends in the future; however, the amount and timing of these dividends may be impacted by the cyclical nature of the semiconductor capital equipment market. We may reduce, delay or cancel a quarterly cash dividend based on the severity of a cyclical downturn.
 
At September 30, 2010, we had cash, cash equivalents and marketable securities aggregating $142.4 million. This amount was comprised of $59.8 million of cash and cash equivalents, $49.0 million of investments in short-term marketable securities and $33.6 million of investments in long-term marketable securities.
 
Cash and cash equivalents were $59.8 million at September 30, 2010, a decrease of $0.2 million from September 30, 2009. This decrease was primarily due to $32.9 million of net purchases of marketable securities, capital expenditures of $3.5 million and purchases of intangible assets of $0.9 million. These decreases were partially offset by $27.9 million of cash provided by operating activities, proceeds from the sale of intellectual property of $7.8 million, proceeds from the sale of common stock through our employee stock purchase plan of $1.2 million and other cash items of $0.2 million.
 
Cash provided by operating activities was $27.9 million for fiscal year 2010, and was comprised of net income of $59.0 million, which includes $18.1 million of net non-cash related charges such as $18.4 million of depreciation and amortization, $6.6 million of stock-based compensation and $0.9 million of amortization of premiums paid on marketable security purchases which were partially offset by $7.8 million from our gain on sale of intellectual property rights. Further, cash provided by operations was reduced by net increases in working capital of $49.2 million, consisting primarily of $53.2 million of increases in accounts receivable, $31.3 million of increases in inventory and $4.1 million of payments related to our restructuring programs implemented in prior years. The increases in accounts receivable and inventory were caused by a 171% increase in revenues for fiscal year 2010 as


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compared to the prior year. These increases in working capital were partially offset by $39.4 million of increases in accounts payable, $2.5 million of increases in accrued warranty and retrofit costs and $1.5 million of higher deferred revenues. The increases in these liabilities are the result of increased business activities.
 
Cash used in investing activities was $29.2 million for fiscal year 2010 and was attributable to net purchases of marketable securities of $32.9 million, capital expenditures of $3.5 million and intangible assets of $0.9 million. These uses of cash were partially offset by $7.8 million of proceeds from the sale of intellectual property rights and $0.2 million of proceeds from the sale of a minority interest in a closely-held Swiss public company.
 
Cash provided by financing activities for fiscal year 2010 was $1.2 million, and is comprised entirely of proceeds from the sale of common stock to employees through our employee stock purchase plan.
 
At September 30, 2011, we had approximately $1.8 million of letters of credit outstanding.
 
Our contractual obligations consist of the following at September 30, 2011 (in thousands):
 
                                         
          Less than
    One to
    Four to
       
    Total     One Year     Three Years     Five Years     Thereafter  
 
Contractual obligations
                                       
Operating leases
  $ 24,628     $ 6,575     $ 13,904     $ 2,137     $ 2,012  
Pension funding
    7,895       734       2,358       1,937       2,866  
Purchase commitments and other
    48,392       47,941       451              
                                         
Total contractual obligations
  $ 80,915     $ 55,250     $ 16,713     $ 4,074     $ 4,878  
                                         
 
As of September 30, 2011, the total amount of net unrecognized tax benefits for uncertain tax positions and the accrual for the related interest was $11.0 million, of which $9.8 million represents a potential future cash outlay. We are unable to make a reasonably reliable estimate of the timing of the cash settlement for this liability since the timing of future tax examinations by various tax jurisdictions and the related resolution is uncertain.
 
In connection with our acquisition of Helix Technology Corporation in October 2005, we assumed the responsibility for the Helix Employees’ Pension Plan (the “Helix Plan”). We froze the benefit accruals and future participation in the Helix Plan as of October 31, 2006. We currently have a liability of $6.3 million recorded on our consolidated balance sheet at September 30, 2011 related to the Helix Plan. The timing of payments we make for the Helix Plan is impacted by a number of estimates including earnings on plan assets and the timing of future distributions. Actual results may differ from these estimates, which may materially impact the timing of future payments. During the fourth quarter of fiscal year 2010, we made a voluntary contribution of $3.6 million to this plan, which was in addition to the $0.6 million of required minimum contributions made throughout fiscal year 2010. During the fourth quarter of fiscal year 2011, we made a voluntary contribution of $0.2 million to this plan, which was in addition to the $0.5 million of required minimum contributions made throughout fiscal year 2011.
 
In connection with our acquisition of Nexus, we assumed responsibility for the Nexus Biosystems AG Pension Plan (the “Nexus Plan”). The timing of payments we make for the Nexus Plan is impacted by a number of estimates including earnings on plan assets and the timing of future distributions. Actual results may differ from these estimates, which may materially impact the timing of future payments. Nexus prepaid contributions to the investment manager of this plan prior to the closing of the acquisition. The investment manager draws on these prepaid contributions to fund contributions to the plan, as required. As of September 30, 2011, we had $0.8 million on deposit for this plan which is expected to cover contribution requirements in the near term.
 
In addition, we are a guarantor on a lease in Mexico that expires in January 2013. The remaining payments under this lease at September 30, 2011 are approximately $0.5 million.
 
On June 21, 2010, we filed a registration statement on Form S-3 with the SEC to sell up to $200 million of securities, before any fees or expenses of the offering. Securities that may be sold include common stock, preferred stock, warrants or debt securities. Any such offering, if it does occur, may happen in one or more transactions. Specific terms of any securities to be sold will be described in supplemental filings with the SEC.


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On August 3, 2011, our Board of Directors approved a cash dividend of $0.08 per share of the Company’s common stock. The total dividend of approximately $5.2 million was paid on September 30, 2011 to shareholders of record at the close of business on September 9, 2011. On November 8, 2011, our Board of Directors approved a cash dividend of $0.08 per share of the Company’s common stock. The total dividend of approximately $5.3 million will be paid on December 30, 2011 to shareholders of record at the close of business on December 9, 2011.
 
Dividends are declared at the discretion of our Board of Directors and depend on actual cash from operations, our financial condition and capital requirements and any other factors our Board of Directors may consider relevant. Future dividend declarations, as well as the record and payment dates for such dividends, will be determined by our Board of Directors on a quarterly basis.
 
We believe that we have adequate resources to fund our currently planned working capital and capital expenditure requirements for the next twelve months. The cyclical nature of our served markets and uncertainty with the current global economic environment makes it difficult for us to predict longer-term liquidity requirements with certainty. We may be unable to obtain any required additional financing on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to successfully develop or enhance products, respond to competitive pressure or take advantage of acquisition opportunities, any of which could have a material adverse effect on our business.
 
Other Key Indicators of Financial Condition and Operating Performance
 
EBITDA and Adjusted EBITDA presented below are supplemental measures of our performance that are not required by, or presented in accordance with GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP.
 
EBITDA represents net income (loss) before interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to give effect to certain non-recurring and/or non-cash items and other adjustments. We believe that the inclusion of EBITDA and Adjusted EBITDA in this Form 10-K is appropriate because we consider it an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors and other interested parties. We use Adjusted EBITDA internally as a critical measurement of operating effectiveness. We believe EBITDA and Adjusted EBITDA facilitates operating performance comparison from period to period and company to company by backing out potential differences caused by variations in capital structures, tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense).
 
In determining Adjusted EBITDA, we eliminate the impact of a number of items. For the reasons indicated herein, you are encouraged to evaluate each adjustment and whether you consider it appropriate. In addition, in evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in the presentation of Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
 
EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
 
  •  they do not reflect our cash expenditures for capital expenditure or contractual commitments;
 
  •  they do not reflect changes in, or cash requirements for, our working capital requirements;
 
  •  other companies, including other companies in our industry, may calculate these measures differently than we do, limiting their usefulness as a comparative measure.
 
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. For these purposes, we rely on our GAAP results. For more information, see our consolidated financial statements and notes thereto appearing elsewhere in this report.


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The following table sets forth a reconciliation of net income (loss) to EBITDA for the years indicated (in thousands):
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
Net income (loss) attributable to Brooks Automation, Inc. 
  $ 128,352     $ 58,982     $ (227,858 )
Interest income, net
    (1,088 )     (1,041 )     (2,265 )
Provision for (benefit from) income taxes
    1,954       (2,746 )     643  
Depreciation and amortization
    17,249       18,420       25,856  
                         
EBITDA
  $ 146,467     $ 73,615     $ (203,624 )
                         
 
The following table sets forth a reconciliation of EBITDA to Adjusted EBITDA for the years indicated (in thousands):
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
EBITDA
  $ 146,467     $ 73,615     $ (203,624 )
Stock-based compensation
    6,752       6,567       5,817  
Impairment of long-lived assets
                35,512  
Impairment of goodwill
                71,800  
Restructuring charges
    1,036       2,529       12,806  
Restructuring and acquisition related inventory charges
    625             3,612  
Purchase accounting impact on contracts acquired
    1,270              
Merger costs
    719              
Gain on sale of Contract Manufacturing business, pre-tax
    (45,009 )            
Litigation settlement
    (664 )            
Sale of intellectual property rights
          (7,840 )      
Loss on investment
          191       1,185  
                         
Adjusted EBITDA
  $ 111,196     $ 75,062     $ (72,892 )
                         
 
The increase in EBITDA from fiscal 2010 to fiscal 2011 is primarily related to increased profits on $95.1 million of higher revenues, and the $45.0 million gain on the sale of our contract manufacturing business. The increase in EBITDA from fiscal 2009 to fiscal 2010 is primarily related to $374.3 million increase in revenues, combined with reduced levels of operating expenses as a result of restructuring actions taken during fiscal years 2008 and 2009.
 
Based on a review of Nexus inventory values performed shortly after the closing of the acquisition, we recorded a charge of $0.6 million for excess and obsolete inventories. In connection with our restructuring programs implemented in fiscal 2009, we took a $3.6 million charge for excess and obsolete inventories.
 
In connection with the acquisitions of RTS and Nexus, we allocated the purchase price to the net assets acquired based on the fair value of each asset and liability. As part of this allocation, we valued certain inventory and deferred revenue balances above and below their pre-acquisition carrying values, respectively. These adjustments will reduce the profit we will record in connection with these transactions. Post acquisition, these adjustments will reduce our net income by $1.9 million. For fiscal year 2011, we reduced our net income by $1.3 million.
 
We received $1.3 million of proceeds from the sale of our stock by a former executive, and will remit half of these proceeds to our insurance providers. We recorded $0.7 million of income from this settlement. For further details on this litigation matter, see Part I, Item 3, Legal Proceedings.
 
For a discussion of our restructuring charges, the sale of intellectual property rights, the sale of the contract manufacturing business and the loss on investment, see the discussion of our results of operations above.


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Recent Accounting Pronouncements
 
In June 2009, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (“VIEs”), which requires a qualitative approach to identifying a controlling financial interest in a VIE, and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. On October 1, 2010 we adopted this standard, which had no impact on our financial position or results of operations.
 
In December 2010, the FASB issued an amendment to the accounting requirements of goodwill, which requires a qualitative approach to considering impairment for a reporting unit with zero or negative carrying value. This guidance is effective for fiscal years beginning after December 15, 2010. We do not believe that the adoption of this standard will have a material impact on our financial position or results of operations.
 
In December 2010, the FASB issued an amendment to the accounting requirements of business combinations, which establishes accounting and reporting standards for pro forma revenue and earnings of the combined entity for the current and comparable reporting periods. This guidance is effective for fiscal years beginning after December 15, 2010. We do not believe that the adoption of this standard will have a material impact on our financial position or results of operations.
 
In May 2011, the FASB issued updated accounting guidance related to fair value measurements and disclosures that result in common fair value measurements and disclosures between GAAP and International Financial Reporting Standards. This guidance includes amendments that clarify the intent about the application of existing fair value measurements and disclosures, and change a principle or requirement for fair value measurements or disclosures. This guidance is effective for interim and annual periods beginning after December 15, 2011. We do not believe that the adoption of this guidance will have a material impact on our financial position or results of operations.
 
In June 2011, the FASB issued an amendment to the accounting guidance for presentation of comprehensive income. Under the amended guidance, a company may present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This authoritative guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholder’s equity. The amendment is effective for interim and annual periods beginning after December 15, 2011. Other than a change in presentation, we do not believe that the adoption of this guidance will have a material impact on our financial position or results of operations.
 
In September 2011, the FASB issued new guidance intended to simplify goodwill impairment testing. Entities will be allowed to perform a qualitative assessment on goodwill impairment to determine whether a quantitative assessment is necessary. This new guidance is effective for goodwill impairment tests performed in interim and annual periods beginning after December 15, 2011. We do not believe that the adoption of this guidance will have a material impact on our financial position or results of operations.
 
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk
 
We are exposed to a variety of market risks, including changes in interest rates affecting the return on our cash and cash equivalents, short-term and long-term investments and fluctuations in foreign currency exchange rates.
 
Interest Rate Exposure
 
As our cash and cash equivalents consist principally of money market securities, which are short-term in nature, our exposure to market risk related to interest rate fluctuations for these investments is not significant. Our short-term and long-term investments consist mostly of highly rated corporate debt securities, and as such, market risk to these investments is not significant. At September 30, 2011, the unrealized loss position on marketable securities was $192,000, which is included in “Accumulated other comprehensive income” in the consolidated balance sheets. We did not have any realized losses on marketable securities for the year ended September 30, 2011. A hypothetical 100 basis point change in interest rates would result in an annual change of approximately $2.1 million in interest income earned.


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Currency Rate Exposure
 
We have transactions and balances denominated in currencies other than the U.S. dollar. Most of these transactions or balances are denominated in Euros, sterling and a variety of Asian currencies. Sales in currencies other than the U.S. dollar were 17% of our total sales for the year ended September 30, 2011. These foreign sales were made primarily by our foreign subsidiaries, which have cost structures that substantially align with the currency of sale.
 
In the normal course of our business, we have short-term advances between our legal entities that are subject to foreign currency exposure. These short-term advances were approximately $16.6 million at September 30, 2011, and relate to the Euro and a variety of Asian currencies. A majority of our foreign currency loss of $0.1 million for fiscal year 2011 relates to the currency fluctuation on these advances between the time the transaction occurs and the ultimate settlement of the transaction. A hypothetical 10% change in foreign exchange rates at September 30, 2011 would result in a $1.7 million change in our net income (loss). We mitigate the impact of potential currency translation losses on these short-term inter company advances by the timely settlement of each transaction, generally within 30 days.


39


 

Item 8.   Financial Statements and Supplementary Data
 
         
    41  
    42  
    43  
    44  
    45  
    46  


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders
of Brooks Automation, Inc.:
 
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Brooks Automation, Inc. and its subsidiaries at September 30, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2011 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
/s/  PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
 
Boston, Massachusetts
November 28, 2011


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BROOKS AUTOMATION, INC.
 
CONSOLIDATED BALANCE SHEETS
 
                 
    September 30,
    September 30,
 
    2011     2010  
    (In thousands, except share and per share data)  
 
ASSETS
Current assets
               
Cash and cash equivalents
  $ 58,833     $ 59,823  
Restricted cash
    1,293        
Marketable securities
    65,695       49,011  
Accounts receivable, net
    76,701       92,273  
Inventories, net
    107,654       115,787  
Prepaid expenses and other current assets
    10,348       10,437  
                 
Total current assets
    320,524       327,331  
Property, plant and equipment, net
    68,596       63,669  
Long-term marketable securities
    81,290       33,593  
Goodwill
    84,727       48,138  
Intangible assets, net
    44,314       11,123  
Equity investment in joint ventures
    34,612       31,746  
Other assets
    2,557       2,624  
                 
Total assets
  $ 636,620     $ 518,224  
                 
 
LIABILITIES AND EQUITY
Current liabilities
               
Accounts payable
  $ 40,199     $ 65,734  
Deferred revenue
    14,073       4,365  
Accrued warranty and retrofit costs
    7,438       8,195  
Accrued compensation and benefits
    17,288       13,677  
Accrued restructuring costs
    293       3,509  
Accrued income taxes payable
    4,015       1,040  
Accrued expenses and other current liabilities
    12,433       11,635  
                 
Total current liabilities
    95,739       108,155  
Income taxes payable
    11,728       12,446  
Long-term pension liability
    7,161       5,466  
Other long-term liabilities
    3,394       2,805  
                 
Total liabilities
    118,022       128,872  
                 
Commitments and contingencies (Note 18)
               
Equity
               
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued and outstanding at September 30, 2011 and 2010
           
Common stock, $0.01 par value, 125,000,000 shares authorized, 79,737,189 shares issued and 66,275,320 shares outstanding at September 30, 2011, 78,869,331 shares issued and 65,407,462 shares outstanding at September 30, 2010
    797       789  
Additional paid-in capital
    1,809,287       1,803,121  
Accumulated other comprehensive income
    19,480       19,510  
Treasury stock at cost, 13,461,869 shares at September 30, 2011 and 2010
    (200,956 )     (200,956 )
Accumulated deficit
    (1,110,599 )     (1,233,649 )
                 
Total Brooks Automation, Inc. stockholders’ equity
    518,009       388,815  
Noncontrolling interests in subsidiaries
    589       537  
                 
Total equity
    518,598       389,352  
                 
Total liabilities and equity
  $ 636,620     $ 518,224  
                 
 
The accompanying notes are an integral part of these consolidated financial statements.


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BROOKS AUTOMATION, INC.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
                         
    Year Ended September 30,  
    2011     2010     2009  
    (In thousands, except per share data)  
 
Revenues
                       
Product
  $ 611,117     $ 531,807     $ 167,259  
Services
    76,988       61,165       51,447  
                         
Total revenues
    688,105       592,972       218,706  
                         
Cost of revenues
                       
Product
    411,610       377,466       155,231  
Services
    53,474       49,211       48,547  
Impairment of long-lived assets
                20,924  
                         
Total cost of revenues
    465,084       426,677       224,702  
                         
Gross profit (loss)
    223,021       166,295       (5,996 )
                         
Operating expenses
                       
Research and development
    39,846       31,162       31,607  
Selling, general and administrative
    102,542       85,597       91,231  
Impairment of goodwill
                71,800  
Impairment of long-lived assets
                14,588  
Restructuring charges
    1,036       2,529       12,806  
                         
Total operating expenses
    143,424       119,288       222,032  
                         
Operating income (loss)
    79,597       47,007       (228,028 )
Interest income
    1,153       1,121       2,719  
Interest expense
    (65 )     (80 )     (454 )
Gain on sale of intellectual property rights
          7,840        
Gain on sale of contract manufacturing business
    45,009              
Loss on investment
          (191 )     (1,185 )
Other income, net
    1,882       367       31  
                         
Income (loss) before income taxes and equity in earnings (losses) of joint ventures
    127,576       56,064       (226,917 )
Income tax provision (benefit)
    1,954       (2,746 )     643  
                         
Income (loss) before equity in earnings (losses) of joint ventures
    125,622       58,810       (227,560 )
Equity in earnings (losses) of joint ventures
    2,782       215       (213 )
                         
Net income (loss)
  $ 128,404     $ 59,025     $ (227,773 )
Net income attributable to noncontrolling interests
    (52 )     (43 )     (85 )
                         
Net income (loss) attributable to Brooks Automation, Inc. 
  $ 128,352     $ 58,982     $ (227,858 )
                         
Basic net income (loss) per share attributable to
Brooks Automation, Inc. common stockholders
  $ 1.99     $ 0.92     $ (3.62 )
                         
Diluted net income (loss) per share attributable
to Brooks Automation, Inc. common stockholders
  $ 1.97     $ 0.92     $ (3.62 )
                         
Shares used in computing earnings (loss) per share
                       
Basic
    64,549       63,777       62,911  
Diluted
    65,003       64,174       62,911  
 
The accompanying notes are an integral part of these consolidated financial statements.


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BROOKS AUTOMATION, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                         
    Year Ended September 30,  
    2011     2010     2009  
    (In thousands)  
 
Cash flows from operating activities
                       
Net income (loss)
  $ 128,404     $ 59,025     $ (227,773 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
                       
Depreciation and amortization
    17,249       18,420       25,856  
Impairment of assets
                107,312  
Gain on sale of intellectual property rights
          (7,840 )      
Stock-based compensation
    6,752       6,567       5,817  
Amortization of premium on marketable securities
    2,283       942       127  
Undistributed (earnings) losses of joint ventures
    (383 )     (215 )     213  
Gain on sale of contract manufacturing business
    (45,009 )            
Loss on disposal of long-lived assets
    10       4       17  
Loss on investment
          191       1,185  
Changes in operating assets and liabilities, net of acquisitions and disposals:
                       
Accounts receivable
    9,916       (53,163 )     29,963  
Inventories
    (19,131 )     (31,341 )     21,779  
Prepaid expenses and other current assets
    1,806       (499 )     4,527  
Accounts payable
    (15,099 )     39,352       (10,947 )
Deferred revenue
    1,841       1,487       (676 )
Accrued warranty and retrofit costs
    (1,420 )     2,483       (2,496 )
Accrued compensation and benefits
    2,036       (913 )     (3,869 )
Accrued restructuring costs
    (3,212 )     (4,123 )     (5,007 )
Accrued expenses and other current liabilities
    1,607       (2,505 )     (2,522 )
                         
Net cash provided by (used in) operating activities
    87,650       27,872       (56,494 )
                         
Cash flows from investing activities
                       
Purchases of property, plant and equipment
    (6,455 )     (3,472 )     (11,339 )
Purchases of marketable securities
    (186,718 )     (117,473 )     (59,091 )
Sale/maturity of marketable securities
    120,095       84,546       75,628  
Increase in restricted cash
    (1,293 )            
Proceeds from the sale of the contract manufacturing business
    78,249              
Acquisitions, net of cash acquired
    (88,309 )            
Proceeds from the sale of intellectual property rights
          7,840        
Purchase of intangible assets
          (892 )      
Other
    181       243       1,055  
                         
Net cash (used in) provided by investing activities
    (84,250 )     (29,208 )     6,253  
                         
Cash flows from financing activities
                       
Proceeds from the issuance of common stock under stock option and stock purchase plans
    1,358       1,245       1,248  
Common stock dividend paid
    (5,180 )            
                         
Net cash (used in) provided by financing activities
    (3,822 )     1,245       1,248  
                         
Effects of exchange rate changes on cash and cash equivalents
    (568 )     (71 )     (1,291 )
                         
Net decrease in cash and cash equivalents
    (990 )     (162 )     (50,284 )
Cash and cash equivalents, beginning of year
    59,823       59,985       110,269  
                         
Cash and cash equivalents, end of year
  $ 58,833     $ 59,823     $ 59,985  
                         
Supplemental disclosures:
                       
Cash paid during the year for interest
  $ 65     $ 80     $ 454  
Cash paid (refunded) during the year for income taxes, net
  $ 1,042     $ (1,866 )   $ 246  
 
The accompanying notes are an integral part of these consolidated financial statements.


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BROOKS AUTOMATION, INC.
 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 
                                                                                 
                                              Total
             
                            Accumulated
                Brooks
             
          Common
                Other
                Automation,
             
    Common
    Stock at
    Additional
    Comprehensive
    Comprehensive
                Inc.
    Noncontrolling
       
    Stock
    Par
    Paid-In
    Income
    Income
    Accumulated
    Treasury
    Stockholders’
    Interests in
    Total
 
    Shares     Value     Capital     (Loss)     (Loss)     Deficit     Stock     Equity     Subsidiaries     Equity  
    (In thousands, except share data)  
 
Balance September 30, 2008
    77,044,737     $ 770     $ 1,788,891             $ 18,063     $ (1,064,773 )   $ (200,956 )   $ 541,995     $ 409     $ 542,404  
Shares issued under stock option, restricted stock and purchase plans, net
    838,436       9       911                                       920               920  
Stock-based compensation
                    5,817                                       5,817               5,817  
Comprehensive income (loss):
                                                                               
Net loss
                          $ (227,773 )             (227,858 )             (227,858 )     85       (227,773 )
Currency translation adjustments
                            4,276       4,276                       4,276               4,276  
Changes in unrealized gain on marketable securities
                            471       471                       471               471  
Actuarial loss arising in the year
                            (6,492 )     (6,492 )                     (6,492 )             (6,492 )
                                                                                 
Comprehensive loss
                          $ (229,518 )                                                
                                                                                 
Balance September 30, 2009
    77,883,173       779       1,795,619               16,318       (1,292,631 )     (200,956 )     319,129       494       319,623  
Shares issued under stock option, restricted stock and purchase plans, net
    986,158       10       935                                       945               945  
Stock-based compensation
                    6,567                                       6,567               6,567  
Comprehensive income (loss):
                                                                               
Net income
                          $ 59,025               58,982               58,982       43       59,025  
Currency translation adjustments
                            4,229       4,229                       4,229               4,229  
Changes in unrealized loss on marketable securities
                            (36 )     (36 )                     (36 )             (36 )
Actuarial loss arising in the year
                            (1,001 )     (1,001 )                     (1,001 )             (1,001 )
                                                                                 
Comprehensive income
                          $ 62,217                                                  
                                                                                 
Balance September 30, 2010
    78,869,331       789       1,803,121               19,510       (1,233,649 )     (200,956 )     388,815       537       389,352  
Shares issued under stock option, restricted stock and purchase plans, net
    867,858       8       (586 )                                     (578 )             (578 )
Stock-based compensation
                    6,752                                       6,752               6,752  
Common stock dividend declared
                                            (5,302 )             (5,302 )             (5,302 )
Comprehensive income (loss):
                                                                               
Net income
                          $ 128,352               128,352               128,352       52       128,404  
Currency translation adjustments
                            1,459       1,459                       1,459               1,459  
Changes in unrealized loss on marketable securities
                            (445 )     (445 )                     (445 )             (445 )
Actuarial loss arising in the year
                            (1,044 )     (1,044 )                     (1,044 )             (1,044 )
                                                                                 
Comprehensive income
                          $ 128,322                                                  
                                                                                 
Balance September 30, 2011
    79,737,189     $ 797     $ 1,809,287             $ 19,480     $ (1,110,599 )   $ (200,956 )   $ 518,009     $ 589     $ 518,598  
                                                                                 
 
The accompanying notes are an integral part of these consolidated financial statements.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.   Nature of the Business
 
Brooks Automation, Inc. (“Brooks” or the “Company”) is a leading worldwide provider of automation, vacuum and instrumentation solutions for multiple markets including semiconductor manufacturing, life sciences, and clean energy. The Company’s technologies, engineering competencies and global service capabilities provide customers speed to market and ensure high uptime and rapid response, which equate to superior value in their mission-critical controlled environments. Since 1978, the Company has been a leading partner to the global semiconductor manufacturing markets and through product development initiatives and strategic business acquisitions Brooks has expanded its reach to meet the needs of customers in life sciences, analytical and research markets, and clean energy solutions.
 
2.   Summary of Significant Accounting Policies
 
Principles of Consolidation and Basis of Presentation
 
The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. All intercompany accounts and transactions are eliminated. Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method.
 
Use of Estimates
 
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates are associated with accounts receivable, inventories, intangible assets, goodwill, deferred income taxes and warranty obligations. Although the Company regularly assesses these estimates, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known.
 
Foreign Currency Translation
 
Some transactions of the Company and its subsidiaries are made in currencies different from their functional currency. Foreign currency gains (losses) on these transactions or balances are recorded in “Other (income) expense, net” when incurred. Net foreign currency transaction losses included in income (loss) before income taxes and equity in earnings (losses) of joint ventures totaled $0.1 million, $0.3 million and $0.6 million for the years ended September 30, 2011, 2010 and 2009, respectively. For non-U.S. subsidiaries, assets and liabilities are translated at period-end exchange rates, and income statement items are translated at the average exchange rates for the period. The local currency for the majority of foreign subsidiaries is considered to be the functional currency and, accordingly, translation adjustments are reported in “Accumulated other comprehensive income”. Foreign currency translation adjustments are one of the components in the calculation of comprehensive net income (loss).
 
Cash and Cash Equivalents
 
Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less. At September 30, 2011 and 2010, cash equivalents were $9.6 million and $21.1 million, respectively. Cash equivalents are held at cost which approximates fair value due to their short-term maturities and varying interest rates.
 
Concentration of Credit Risk
 
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of trade receivables and temporary and long-term cash investments in treasury bills and commercial paper. The


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Company restricts its investments to U.S. government and corporate securities, and mutual funds that invest in U.S. government securities. The Company’s customers are concentrated in the semiconductor industry, and relatively few customers account for a significant portion of the Company’s revenues. The Company’s top ten largest customers account for approximately 55% of revenues for the year ended September 30, 2011. Two of the Company’s customers accounted for 15% and 13%, respectively, of revenues for the year ended September 30, 2011. The Company regularly monitors the creditworthiness of its customers and believes that it has adequately provided for exposure to potential credit losses.
 
Accounts Receivable and Allowance for Doubtful Accounts
 
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company determines the allowance based on historical write-off experience. The Company reviews its allowance for doubtful accounts quarterly. Past due balances are reviewed individually for collectibility. Account balances are charged off against the allowance when the Company feels it is probable the receivable will not be recovered. The Company does not have any off-balance-sheet credit exposure related to its customers.
 
Inventories
 
Inventories are stated at the lower of cost or market, cost being determined using a standard costing system which approximates cost based on a first-in, first-out method. The Company provides inventory reserves for excess, obsolete or damaged inventory based on changes in customer demand, technology and other economic factors.
 
Fixed Assets, Intangible Assets and Impairment of Long-lived Assets
 
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method. Depreciable lives are summarized below:
 
         
Buildings
    20 - 40 years  
Computer equipment and software
    2 - 7 years  
Machinery and equipment
    2 - 10 years  
Furniture and fixtures
    3 - 10 years  
 
Leasehold improvements and equipment held under capital leases are amortized over the shorter of their estimated useful lives or the term of the respective leases. Equipment used for demonstrations to customers is included in machinery and equipment and is depreciated over its estimated useful life. Repair and maintenance costs are expensed as incurred.
 
The Company has developed software for internal use. In accordance with U.S. GAAP, internal and external labor costs incurred during the application development stage are capitalized. Costs incurred prior to application development and post implementation are expensed as incurred. Training and data conversion costs are expensed as incurred.
 
When an asset is retired, the cost of the asset disposed of and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the determination of operating profit (loss).
 
As a result of the Company’s acquisitions, the Company has identified general intangible assets other than goodwill. General intangible assets other than goodwill are valued based on estimates of future cash flows and amortized over their estimated useful life.
 
Patents include capitalized direct costs associated with obtaining patents as well as assets that were acquired as a part of business combinations. Capitalized patent costs are amortized using the straight-line method over the


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
estimated economic life of the patents. As of September 30, 2011 and 2010, the net book value of the Company’s patents was $0.8 million and $0.9 million, respectively.
 
Intangibles assets other than goodwill are tested for impairment when indicators of impairment are present. For purposes of this test, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. When the Company determines that indicators of potential impairment exist, the next step of the impairment test requires that the potentially impaired long-lived asset group is tested for recoverability. The test for recoverability compares the undiscounted future cash flows of the long-lived asset group to its carrying value. The future cash flow period is based on the future service life of the primary asset within the long-lived asset group. If the carrying values of the long-lived asset group exceed the future cash flows, the assets are considered to be potentially impaired. The next step in the impairment process is to determine the fair value of the individual net assets within the long-lived asset group. If the aggregate fair values of the individual net assets of the group are less than their carrying values, an impairment is recorded equal to the excess of the aggregate carrying value of the group over the aggregate fair value. The loss is allocated to each asset within the group based on their relative carrying values, with no asset reduced below its fair value.
 
The amortizable lives of intangible assets, including those identified as a result of purchase accounting, are summarized as follows:
 
         
Patents
    7 - 15 years  
Completed technology
    2 - 10 years  
License agreements
    5 years  
Trademarks and trade names
    2 - 6 years  
Non-competition agreements
    3 - 5 years  
Customer relationships
    4 - 13 years  
 
Goodwill
 
Goodwill represents the excess of purchase price over the fair value of net tangible and identifiable intangible assets of the businesses the Company acquired. The Company performs an annual impairment test of its goodwill on September 30 of each fiscal year unless interim indicators of impairment exist (see Note 7).
 
The testing of goodwill for impairment is performed at a level referred to as a reporting unit. A reporting unit is either the “operating segment level” or one level below, which is referred to as a “component”. The level at which the impairment test is performed requires an assessment as to whether the operations below the operating segment constitute a self-sustaining business, testing is generally required to be performed at this level. The Company currently has three reporting units that have goodwill, including two reporting units that are part of the Brooks Product Solutions operating segment and the sole reporting unit included in the Brooks Life Science Systems operating segment.
 
The Company determines the fair value of its reporting units using the Income Approach, specifically the Discounted Cash Flow Method (“DCF Method”). The DCF Method includes five year future cash flow projections, which are discounted to present value, and an estimate of terminal values, which are also discounted to present value. Terminal values represent the present value an investor would pay today for the rights to the cash flows of the business for the years subsequent to the discrete cash flow projection period. The Company considers the DCF Method to be the most appropriate valuation indicator as the DCF analyses are based on management’s long-term financial projections. Given the dynamic nature of the cyclical semiconductor equipment market, management’s projections as of the valuation date are considered more objective since other market metrics for peer companies fluctuate over the cycle.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Goodwill impairment testing is a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of each reporting unit to its respective carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the reporting unit’s carrying amount exceeds the fair value, the second step of the goodwill impairment test must be completed to measure the amount of the impairment loss, if any. The second step compares the implied fair value of goodwill with the carrying value of goodwill. The implied fair value is determined by allocating the fair value of the reporting unit to all of the assets and liabilities of that unit, the excess of the fair value over amounts assigned to its assets and liabilities is the implied fair value of goodwill. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.
 
Pension Plans
 
The Company sponsors a defined benefit pension plan in the U.S. and two non-U.S. defined benefit pension plans. The cost and obligations of these arrangements are calculated using many assumptions to estimate the benefits that the employee earns while working, the amount of which cannot be completely determined until the benefit payments cease. Major assumptions used in the accounting for these employee benefit plans include the discount rate, expected return on plan assets and rate of increase in employee compensation levels. Assumptions are determined based on Company data and appropriate market indicators in consultation with third-party actuaries, and are evaluated each year as of the plans’ measurement date.
 
Revenue Recognition
 
Product revenues are associated with the sale of hardware systems, components and spare parts as well as product license revenue. Service revenues are associated with service contracts, repairs, upgrades and field service. Shipping and handling fees, if any, billed to customers are recognized as revenue. The related shipping and handling costs are recognized in cost of sales.
 
Revenue from product sales that does not include significant customization is recorded upon delivery and transfer of risk of loss to the customer provided there is evidence of an arrangement, fees are fixed or determinable, collection of the related receivable is reasonably assured and, if applicable, customer acceptance criteria have been successfully demonstrated. Customer acceptance provisions include final testing and acceptance carried out prior to shipment. These pre-shipment testing and acceptance procedures ensure that the product meets the published specification requirements before the product is shipped. When significant on site customer acceptance provisions are present in the arrangement, revenue is recognized upon completion of customer acceptance testing.
 
Revenue from product sales that does include significant customization, which primarily include life science automation systems, is recorded using the percentage of completion method whereby revenue is recorded as work progresses based on a percentage that incurred costs to date bear to total estimated costs. In addition, contracts are reviewed on a regular basis to determine whether a loss exists. A loss will be accrued in the period in which estimated contract revenue is less than the current estimate of total contract costs.
 
Revenue associated with service agreements is generally recognized ratably over the term of the contract. Revenue from repair services or upgrades of customer-owned equipment is recognized upon completion of the repair effort and upon the shipment of the repaired item back to the customer. In instances where the repair or upgrade includes installation, revenue is recognized when the installation is completed.
 
Warranty
 
The Company offers warranties on the sales of certain of its products and records an accrual for estimated future claims. Such accruals are based upon historical experience and management’s estimate of the level of future claims.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Research and Development Expenses
 
Research and development costs are charged to expense when incurred.
 
Stock-Based Compensation
 
The Company measures compensation cost for all employee stock awards at fair value on date of grant and recognizes compensation expense over the service period for awards expected to vest. The fair value of restricted stock is determined based on the number of shares granted and the excess of the quoted price of the Company’s common stock over the exercise price of the restricted stock on the date of grant, if any, and the fair value of stock options is determined using the Black-Scholes valuation model. Such value is recognized as expense over the service period, net of estimated forfeitures. The estimation of stock awards that will ultimately vest requires significant judgment. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. In addition, for stock-based awards where vesting is dependent upon achieving certain operating performance goals, the Company estimates the likelihood of achieving the performance goals. Actual results, and future changes in estimates, may differ substantially from the Company’s current estimates. Restricted stock with market-based vesting criteria is valued using a lattice model.
 
During the year ended September 30, 2011, the Company granted 366,000 shares of restricted stock to members of senior management of which 183,000 shares vest over the service period and the remaining 183,000 shares vest upon the achievement of certain financial performance goals which will be measured at the end of fiscal year 2013. Total compensation on these awards is a maximum of $4.5 million. Awards subject to service criteria are being recorded to expense ratably over the vesting period. Awards subject to performance criteria are expensed over the related service period when attainment of the performance condition is considered probable. The total amount of compensation recorded will depend on the Company’s achievement of performance targets. Changes to the projected attainment of performance targets during the vesting period may result in an adjustment to the amount of cumulative compensation recorded as of the date the estimate is revised.
 
The following table reflects compensation expense recorded during the years ended September 30, 2011, 2010 and 2009 (in thousands):
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
Stock options
  $     $ 170     $ 292  
Restricted stock
    6,248       5,944       5,092  
Employee stock purchase plan
    504       453       433  
                         
    $ 6,752     $ 6,567     $ 5,817  
                         
 
Valuation Assumptions for Stock Options and Employee Stock Purchase Plans
 
No stock options were granted for the years ended September 30, 2011, 2010 and 2009.
 
The fair value of shares issued under the employee stock purchase plan was estimated on the commencement date of each offering period using the Black-Scholes option-pricing model with the following assumptions:
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
Risk-free interest rate
    0.2%       0.2%       0.7 %
Volatility
    50%       58%       70 %
Expected life
    6 months        6 months        6 months  
Dividend yield
    0% - 3%       0%       0 %


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Expected volatilities are based on historical volatilities of the Company’s common stock; the expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and the Company’s historical exercise patterns; and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. Dividend yields are projected based on the Company’s history of dividends declared, and management’s intention for future dividend declarations.
 
Equity Incentive Plans
 
The Company’s equity incentive plans are intended to attract and retain employees and to provide an incentive for them to assist the Company to achieve long-range performance goals and to enable them to participate in the long-term growth of the Company. The equity incentive plans consist of plans under which employees may be granted options to purchase shares of the Company’s stock, restricted stock and other equity incentives. Stock options generally had a vesting period of four years and are exercisable for a period not to exceed seven years from the date of issuance. Restricted stock awards generally vest over two to four years, with certain restricted stock awards vesting immediately. At September 30, 2011, a total of 5,266,210 shares were reserved and available for the issuance of awards under the plans.
 
Income Taxes
 
The Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and operating loss and tax credit carryforwards. The Company’s consolidated financial statements contain certain deferred tax assets which have arisen primarily as a result of operating losses, as well as other temporary differences between financial and tax accounting. A valuation allowance is established if the likelihood of realization of the deferred tax assets is not considered more likely than not based on an evaluation of objective verifiable evidence. Significant management judgment is required in determining the Company’s provision for income taxes, the Company’s deferred tax assets and liabilities and any valuation allowance recorded against those net deferred tax assets. The Company evaluates the weight of all available evidence to determine whether it is more likely than not that some portion or all of the net deferred income tax assets will not be realized.
 
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If we determine that a tax position will more likely than not be sustained on audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of various possible outcomes. We re-evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.
 
Earnings (Loss) Per Share
 
Basic earnings (loss) per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated based on the weighted average number of common shares and dilutive common equivalent shares assumed outstanding during the period. Shares used to


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
compute diluted earnings (loss) per share exclude common share equivalents if their inclusion would have an anti-dilutive effect.
 
Fair Value of Financial Instruments
 
The Company’s financial instruments include cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses. The carrying amounts of these items reported in the balance sheets approximate their fair value at September 30, 2011 and 2010. In the case of marketable securities, measurement is based on quoted market prices.
 
Reclassifications
 
Certain reclassifications have been made in the 2010 and 2009 consolidated financial statements to conform to the 2011 presentation.
 
Recent Accounting Pronouncements
 
In June 2009, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (“VIEs”), which requires a qualitative approach to identifying a controlling financial interest in a VIE, and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. On October 1, 2010 the Company adopted this standard, which had no impact on its financial position or results of operations.
 
In December 2010, the FASB issued an amendment to the accounting requirements of goodwill, which requires a qualitative approach to considering impairment for a reporting unit with zero or negative carrying value. This guidance is effective for fiscal years beginning after December 15, 2010. The Company does not believe that the adoption of this standard will have a material impact on its financial position or results of operations.
 
In December 2010, the FASB issued an amendment to the accounting requirements of business combinations, which establishes accounting and reporting standards for pro forma revenue and earnings of the combined entity for the current and comparable reporting periods. This guidance is effective for fiscal years beginning after December 15, 2010. The Company does not believe that the adoption of this standard will have a material impact on its financial position or results of operations.
 
In May 2011, the FASB issued updated accounting guidance related to fair value measurements and disclosures that result in common fair value measurements and disclosures between GAAP and International Financial Reporting Standards. This guidance includes amendments that clarify the intent about the application of existing fair value measurements and disclosures, and change a principle or requirement for fair value measurements or disclosures. This guidance is effective for interim and annual periods beginning after December 15, 2011. The Company does not believe that the adoption of this guidance will have a material impact on its financial position or results of operations.
 
In June 2011, the FASB issued an amendment to the accounting guidance for presentation of comprehensive income. Under the amended guidance, a company may present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This authoritative guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholder’s equity. The amendment is effective for interim and annual periods beginning after December 15, 2011. Other than a change in presentation, the Company does not believe that the adoption of this guidance will have a material impact on its financial position or results of operations.
 
In September 2011, the FASB issued new guidance intended to simplify goodwill impairment testing. Entities will be allowed to perform a qualitative assessment on goodwill impairment to determine whether a quantitative


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
assessment is necessary. This new guidance is effective for goodwill impairment tests performed in interim and annual periods beginning after December 15, 2011. The Company does not believe that the adoption of this guidance will have a material impact on its financial position or results of operations.
 
3.   Acquisitions and Divestiture
 
Acquisition of RTS
 
On April 1, 2011, the Company acquired all of the outstanding stock of RTS Life Science Limited (“RTS”), a privately held company, for $3.4 million, net of cash acquired. RTS is a provider of automation solutions to the life sciences market, located in Manchester, United Kingdom. The acquisition provides the Company with biobanking and compound sample management, and the ability to leverage the Company’s existing automation technologies with those of RTS.
 
The assets and liabilities of RTS were recorded at their fair values as of the acquisition date as follows (in thousands):
 
         
Accounts receivable
  $ 3,156  
Inventory
    1,668  
Other current assets
    1,008  
Property, plant and equipment
    860  
Completed technology
    1,524  
Customer relationships
    577  
Trademarks and trade names
    64  
Goodwill
    3,556  
Accounts payable
    (1,397 )
Deferred revenue
    (5,232 )
Other current liabilities
    (2,403 )
         
Total purchase price, net of cash acquired
  $ 3,381  
         
 
The completed technology will be amortized to cost of revenue over its estimated useful life of 5 to 7 years, the customer relationships will be amortized to operating expense over 7 years and the trademarks and trade names will be amortized to operating expense over 3 years. Goodwill arising from the acquisition will not be deductible for tax purposes.
 
RTS’s operating results have been included in the Company’s results of operations from the acquisition date, and were not material. Pro forma results are not provided as RTS’s results of operations were not material. Transaction costs related to this acquisition were $188,000 for fiscal year 2011, and are included in selling, general and administrative expense.
 
Acquisition of Nexus
 
On July 25, 2011, the Company acquired all of the outstanding stock of Nexus Biosystems, Inc. (“Nexus”), a privately held company, for $84.9 million, net of cash acquired. Nexus is a U.S. based provider of automation solutions and consumables to the life sciences market, with a product development, service and support operation located in Switzerland, and service and support locations in Japan and Germany. The acquisition significantly enhances the breadth of the Company’s product offering for its main target market within the life sciences industry, specifically biobanking and compound sample management. Shortly after completing the Nexus acquisition, the Company reorganized the management of Nexus and RTS into one operating segment, Brooks Life Science Systems.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The assets and liabilities of Nexus were recorded at their fair values as of the acquisition date as follows (in thousands):
 
         
Accounts receivable
  $ 5,708  
Inventory
    7,481  
Other current assets
    4,522  
Property, plant and equipment
    12,527  
Completed technology
    6,000  
Customer relationships
    31,000  
Trademarks and trade names
    100  
Goodwill
    33,033  
Accounts payable and accrued expenses
    (6,563 )
Deferred revenue
    (3,692 )
Other current liabilities
    (1,534 )
Deferred tax liabilities
    (2,584 )
Other long-term liabilities
    (1,070 )
         
Total purchase price, net of cash acquired
  $ 84,928  
         
 
The estimated fair value attributed to the completed technologies was determined based upon a discounted cash flow forecast utilizing the relief from royalty method. The royalty rate was determined to be 6% based on a review of comparable royalty arrangements. Cash flows were discounted at a rate of 17%. The fair value of the completed technologies will be amortized over a period of 6 years on a straight-line basis, which approximates the pattern in which the economic benefits of the completed technologies are expected to be realized.
 
The estimated fair value attributed to the customer relationships was determined based upon a discounted forecast of estimated net future cash flows to be generated from the relationships discounted at a rate of 17% — 18%. The fair value of customer relationships for systems will be amortized over a period of 6 years, while the estimated fair value of customer relationships for consumables and service are expected to be amortized over a period of 13 years. The amortization will be amortized on a straight-line basis, which approximates the pattern in which the economic benefits of the customer relationships are expected to be realized.
 
The fair value of the trade name will be amortized over 2 years on a straight-line basis, which approximates the pattern in which the economic benefits of the trade names will be realized.
 
Goodwill represents the excess of the purchase price over the fair values of the net tangible and intangible assets acquired. Goodwill arising from the acquisition will not be deductible for tax purposes.
 
Nexus operating results have been included in the Company’s results of operations from the acquisition date. Nexus revenues and net loss for the period from July 26, 2011 to September 30, 2011 was $4.9 million and $(3.2) million, respectively. The net loss includes charges to expense from the step-up of acquired inventories of $0.7 million and $0.6 million of charges for excess and obsolete inventory based on an assessment of inventory performed in the fourth quarter of fiscal year 2011.
 
The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition of Nexus occurred on October 1, 2009 (in thousands):
 
                 
    Year Ended
    September 30,
    2011   2010
 
Revenue
  $ 720,989     $ 625,128  
Net income attributable to Brooks Automation, Inc. 
    124,114       70,205  


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The pro forma net income has been adjusted to reflect additional amortization and depreciation expense from the adjustments to intangible assets and property, plant and equipment as if those adjustments had been applied as of October 1, 2009.
 
Nexus net income for fiscal year 2010 included a $12.0 million gain from the bargain purchase of Nexus Biosystems AG (formerly Remp AG), which is included in the pro forma net income attributable to Brooks Automation, Inc. for fiscal year 2010.
 
Transaction costs related to this acquisition were $719,000 for fiscal year 2011, and are included in selling, general and administrative expense.
 
Divestiture
 
On April 20, 2011, the Company entered into an agreement with affiliates of Celestica Inc. (the “Buyers”) to sell the assets of its extended factory contract manufacturing business (the “Business”). The Buyers also agreed to assume certain liabilities related to the Business (the “Asset Sale”). The Asset Sale was completed on June 28, 2011 (the “Closing”). At the Closing, the Buyers paid the Company a total purchase price of $78.0 million in cash, plus $1.3 million as consideration for cash acquired in the Asset Sale. An additional $2.5 million of proceeds was paid during our fourth quarter of 2011, which represents a working capital normalizing adjustment. The Company paid $2.3 million of transaction expenses. During the three months ended June 30, 2011, the Company recorded a gain on this sale of $45.0 million, before income taxes. Income taxes directly attributable to this gain of $2.4 million were also recorded during the three months ended June 30, 2011.
 
The Company and the Buyers also entered into certain commercial supply and license agreements at the Closing which will govern the ongoing relationship between the Buyers and the Company. Pursuant to those agreements, the Company will supply the Buyers with certain products and has licensed to the Buyers certain intellectual property needed to run the Business and the Buyers will supply certain products to the Company. Due to the significance of these ongoing commercial arrangements, the sale did not qualify for discontinued operations treatment. Therefore, historical financial results of the divested business will not be segregated in the Company’s consolidated financial statements for the historical periods in which this business was part of the Company.
 
4.   Marketable Securities
 
The Company invests its cash in marketable securities and classifies them as available-for-sale. The Company records these securities at fair value. Marketable securities reported as current assets represent investments that mature within one year from the balance sheet date. Long-term marketable securities represent investments with maturity dates greater than one year from the balance sheet date. At the time that the maturity dates of these investments become one year or less, the securities are reclassified to current assets. Unrealized gains and losses are excluded from earnings and reported in a separate component of stockholders’ equity until they are sold or mature. At the time of sale, any gains or losses, calculated by the specific identification method, will be recognized as a component of operating results.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The following is a summary of marketable securities (included in short and long-term marketable securities in the consolidated balance sheets), including accrued interest receivable, as of September 30, 2011 and 2010 (in thousands):
 
                                 
          Gross
    Gross
       
    Amortized
    Unrealized
    Unrealized
       
    Cost     Gains     Losses     Fair Value  
 
September 30, 2011:
                               
U.S. Treasury securities and obligations of U.S. government agencies
  $ 53,342     $ 17     $ (21 )   $ 53,338  
Corporate securities
    66,045       50       (203 )     65,892  
Mortgage-backed securities(1)
    786       26       (3 )     809  
Other debt securities
    434                   434  
Municipal securities
    24,915       9       (67 )     24,857  
Bank certificate of deposits
    1,655                   1,655  
                                 
    $ 147,177     $ 102     $ (294 )   $ 146,985  
                                 
September 30, 2010:
                               
U.S. Treasury securities and obligations of U.S. government agencies
  $ 38,319     $ 62     $ (8 )   $ 38,373  
Corporate securities
    38,617       185       (4 )     38,798  
Mortgage-backed securities(2)
    1,771       23       (4 )     1,790  
Other debt securities
    186                   186  
Municipal securities
    2,405       1       (2 )     2,404  
Bank certificate of deposits
    1,053                   1,053  
                                 
    $ 82,351     $ 271     $ (18 )   $ 82,604  
                                 
 
 
(1) Fair value amounts include approximately $0.7 million of investments in the Federal Home Loan Mortgage and Federal National Mortgage Association.
 
(2) Fair value amounts include approximately $0.8 million of investments in the Federal Home Loan Mortgage and Federal National Mortgage Association.
 
Gross realized gains on sales of available-for-sale marketable securities included in “Other (income) expense” in the Consolidated Statements of Operations was $24,000 and $10,000 for the years ended September 30, 2011 and 2010, respectively. There were no gross realized gains for the year ended September 30, 2009. There were no gross realized losses for the years ended September 30, 2011, 2010 and 2009.
 
The fair value of the marketable securities at September 30, 2011 by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties (in thousands).
 
         
    Fair Value  
 
Due in one year or less
  $ 65,695  
Due after one year through five years
    78,280  
Due after ten years
    3,010  
         
    $ 146,985  
         


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Gain (Loss) on Investment
 
During fiscal 2010 and 2009, the Company recorded a charge of $0.2 million and $1.2 million, respectively, related to its minority equity investment in a Swiss public company. The charges during fiscal year 2009 reflect an other than temporary impairment of this investment. The $0.2 million charge during fiscal 2010 represents the loss on the sale of this investment. As of September 30, 2010, the Company no longer had an equity investment in this entity.
 
5.   Fair Value Measurements
 
The fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
 
Level 1 Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
 
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
Assets and liabilities of the Company measured at fair value on a recurring basis as of September 30, 2011 and 2010 are summarized as follows (in thousands):
 
                                 
          Fair Value Measurements at Reporting Date Using  
          Quoted Prices in
    Significant Other
    Significant
 
          Active Markets for
    Observable
    Unobservable
 
    September 30,
    Identical Assets
    Inputs
    Inputs
 
Description
  2011     (Level 1)     (Level 2)     (Level 3)  
 
Assets
                               
Cash Equivalents
  $ 9,576     $ 9,576     $     $  
Available-for-sale securities
    146,985       63,331       83,654        
                                 
Total Assets
  $ 156,561     $ 72,907     $ 83,654     $  
                                 
 
                                 
          Fair Value Measurements at Reporting Date Using  
          Quoted Prices in
    Significant Other
    Significant
 
          Active Markets for
    Observable
    Unobservable
 
    September 30,
    Identical Assets
    Inputs
    Inputs
 
    2010     (Level 1)     (Level 2)     (Level 3)  
 
Assets
                               
Cash Equivalents
  $ 21,130     $ 21,130     $     $  
Available-for-sale securities
    82,604       38,798       43,806        
                                 
Total Assets
  $ 103,734     $ 59,928     $ 43,806     $  
                                 
 
Cash Equivalents
 
Cash equivalents of $9.6 million and $21.1 million at September 30, 2011 and 2010, respectively, consisting primarily of Money Market Funds, are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Available-For-Sale Securities
 
Available-for-sale securities of $63.3 million and $38.8 million at September 30, 2011 and 2010, respectively, consisting of highly rated Corporate Bonds, are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets of identical assets or liabilities. Available-for-sale securities of $83.7 million and $43.8 million at September 30, 2011 and 2010, respectively, consisting of Mortgage-Backed Securities, Municipal Securities, Bank Certificate of Deposits and U.S. Treasury Securities and Obligations of U.S. Government Agencies are classified within Level 2 of the fair value hierarchy because they are valued using matrix pricing and benchmarking. Matrix pricing is a mathematical technique used to value securities by relying on the securities’ relationship to other benchmark quoted prices.
 
6.   Property, Plant and Equipment
 
Property, plant and equipment as of September 30, 2011 and 2010 were as follows (in thousands):
 
                 
    September 30,  
    2011     2010  
 
Buildings and land
  $ 54,330     $ 43,455  
Computer equipment and software
    68,476       69,278  
Machinery and equipment
    49,105       50,499  
Furniture and fixtures
    10,451       10,817  
Leasehold improvements
    17,301       22,758  
Capital projects in progress
    1,899       1,201  
                 
      201,562       198,008  
Less accumulated depreciation and amortization
    (132,966 )     (134,339 )
                 
Property, plant and equipment, net
  $ 68,596     $ 63,669  
                 
 
Depreciation expense was $12.6 million, $14.6 million and $15.6 million for the years ended September 30, 2011, 2010 and 2009, respectively.
 
The Company recorded an impairment charge of $1.3 million to write-down certain buildings and leasehold improvements to fair value in fiscal 2009, as a result of underlying circumstances discussed in Note 7.
 
7.   Goodwill and Intangible Assets
 
The Company performs an annual impairment test of its goodwill on September 30 of each fiscal year unless interim indicators of impairment exist. Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its estimated fair value. Fair values are estimated using a discounted cash flow methodology. Discounted cash flows are based on the businesses’ strategic plans and management’s best estimate of revenue growth and gross profit by each reporting unit. The Company recorded charges for the impairment of goodwill at March 31, 2009. The Company performed its goodwill impairment test as of September 30, 2011, 2010 and 2009, and determined that no adjustment to goodwill was necessary.
 
The Company experienced a weakness in demand for its products from the fourth quarter of fiscal year 2007 through the second quarter of fiscal year 2009. In response to this downturn, management restructured the business, which resulted in a change in reporting units and operating segments. The Company reallocated goodwill to each of its newly formed reporting units as of March 31, 2009, based on such factors as the relative fair values of each reporting unit. Goodwill was reallocated to five of the Company’s seven reporting units as of March 31, 2009. This reallocation, in conjunction with a continued downturn in the semiconductor markets indicated that a potential impairment may exist. As such, the Company tested goodwill and other long-lived assets for impairment at March 31, 2009.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The Company determined the fair value of each reporting unit as of March 31, 2009 using the Income Approach, specifically the DCF Method. The material assumptions used in the DCF Method include: discount rates and revenue forecasts. Discount rates are based on a weighted average cost of capital (“WACC”), which represents the average rate a business must pay its providers of debt and equity capital. The WACC used to test goodwill is derived from a group of comparable companies. The average WACC used in the March 31, 2009 reallocation of goodwill was 16.2%. Management determines revenue forecasts based on its best estimate of near term revenue expectations which are corroborated by communications with customers, and longer-term projection trends, which are validated by published independent industry analyst reports. Revenue forecasts materially impact the amount of cash flow generated during the five year discrete cash flow period, and also impact the terminal value as that value is derived from projected revenue. The revenue forecasts used in the reallocation and assessment of goodwill as of March 31, 2009 were decreased from previously forecasted levels due to further market deterioration.
 
For three of the five reporting units containing goodwill at March 31, 2009, the Company determined that the carrying amount of their net assets exceeded their respective fair values, indicating that a potential impairment existed for each of those three reporting units. After completing the required steps of the goodwill impairment test, a goodwill impairment of $71.8 million was recorded as of March 31, 2009.
 
Under GAAP, the Company is required to test certain long-lived assets when indicators of impairment are present. The Company determined that impairment indicators were present for certain of our long-lived assets as of March 31, 2009. The long-lived assets in question were tested for recoverability by comparing the sum of the undiscounted cash flows attributable to each respective asset group to their carrying amounts, which resulted in the determination that the carrying amounts were not recoverable. The fair values of each potentially impaired long-lived asset group were then evaluated to determine the amount of the impairment, if any. The fair value of each intangible asset was based primarily on an income approach, which is a present value technique used to measure the fair value of future cash flows produced by the asset. The Company estimated future cash flows over the remaining useful life of each intangible asset, which ranged from approximately 3 to 8 years, and used a discount rate of approximately 16%. As a result of this analysis, management determined that an impairment loss of $35.1 million had occurred as of March 31, 2009, and allocated that loss among the long-lived assets of the impaired asset group based on the carrying value of each asset, with no asset reduced below its respective fair value. The impairment charge was allocated as follows: $19.6 million related to completed technology intangible assets; $1.2 million to trade name intangible assets; $13.4 million to customer relationship intangible assets and $0.9 million to property, plant and equipment. Further, during the three months ended June 30, 2009, the Company recorded an additional impairment charge of $0.4 million for property, plant and equipment related to the closure and outsourcing of a small manufacturing operation located in the United States. The total impairment charges related to long-lived assets for fiscal 2009 are summarized as follows (in thousands):
 
         
    Year Ended
 
    September 30,
 
    2009  
 
Reported as cost of sales:
       
Completed technology intangible asset impairment
  $ 19,608  
Property, plant and equipment impairment
    1,316  
         
Subtotal, reported as cost of sales
    20,924  
         
Reported as operating expense:
       
Trade name intangible asset impairment
    1,145  
Customer relationship intangible asset impairment
    13,443  
         
Subtotal, reported as operating expense
    14,588  
         
    $ 35,512  
         


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The components of the Company’s goodwill by business segment at September 30, 2011 and 2010 are as follows (in thousands):
 
                                                 
    Brooks
    Brooks
    Brooks
                   
    Products
    Global
    Life Science
    Contract
             
    Solutions     Services     Systems     Manufacturing     Other     Total  
 
Gross goodwill at September 30, 2009
  $ 485,844     $ 151,238     $     $ 18,593     $ 7,421     $ 663,096  
Acquisitions and adjustments during fiscal 2010
                                   
                                                 
Gross goodwill at September 30, 2010
    485,844       151,238             18,593       7,421       663,096  
Acquisitions and adjustments during fiscal 2011
                36,589                   36,589  
                                                 
Gross goodwill at September 30, 2011
  $ 485,844     $ 151,238     $ 36,589     $ 18,593     $ 7,421     $ 699,685  
                                                 
Accumulated goodwill impairments at September 30, 2009
  $ (437,706 )   $ (151,238 )   $     $ (18,593 )   $ (7,421 )   $ (614,958 )
Impairments recorded during fiscal 2010
                                   
                                                 
Accumulated goodwill impairments at September 30, 2010
    (437,706 )     (151,238 )           (18,593 )     (7,421 )     (614,958 )
Impairments recorded during fiscal 2011
                                   
                                                 
Accumulated goodwill impairments at September 30, 2011
  $ (437,706 )   $ (151,238 )   $     $ (18,593 )   $ (7,421 )   $ (614,958 )
                                                 
Goodwill, less accumulated impairments at September 30, 2010
  $ 48,138     $     $     $     $     $ 48,138  
                                                 
Goodwill, less accumulated impairments at September 30, 2011
  $ 48,138     $     $ 36,589     $     $     $ 84,727  
                                                 
 
Components of the Company’s identifiable intangible assets are as follows (in thousands):
 
                                                 
    September 30, 2011     September 30, 2010  
          Accumulated
    Net Book
          Accumulated
    Net Book
 
    Cost     Amortization     Value     Cost     Amortization     Value  
 
Patents
  $ 7,808     $ 6,989     $ 819     $ 7,808     $ 6,886     $ 922  
Completed technology
    50,975       39,235       11,740       43,502       37,108       6,394  
Trademarks and trade names
    3,941       3,719       222       3,779       3,379       400  
Customer relationships
    49,029       17,496       31,533       18,860       15,453       3,407  
                                                 
    $ 111,753     $ 67,439     $ 44,314     $ 73,949     $ 62,826     $ 11,123  
                                                 
 
In connection with the acquisitions of Nexus and RTS during fiscal year 2011, the Company allocated a portion of the purchase price to the following intangible assets: Completed Technology — $7.5 million, Customer Relationships - $31.6 million and Trademarks and Trade Names — $0.2 million. For details regarding these


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
intangible assets see Note 3. These intangible assets will support the products and services provided by the Brooks Life Science Systems segment.
 
During fiscal year 2010, the Company acquired certain patents and other intellectual property from an entity that had ceased operations. This intellectual property supports certain products in the Company’s Brooks Product Solutions segment. The total cost of this property was $0.9 million, and this cost will be amortized to cost of sales over a ten year life.
 
Amortization expense for intangible assets was $4.6 million, $3.9 million and $10.2 million for the years ended September 30, 2011, 2010 and 2009, respectively.
 
Estimated future amortization expense for the intangible assets recorded by the Company as of September 30, 2011 is as follows (in millions):
 
         
Year ended September 30,
       
2012
  $ 7.8  
2013
    5.9  
2014
    5.2  
2015
    5.1  
2016
    4.5  
Thereafter
    15.8  
         
    $ 44.3  
         
 
8.   Investment in Affiliates
 
Joint Ventures
 
The Company participates in a 50% joint venture, ULVAC Cryogenics, Inc. (“UCI”) with ULVAC Corporation of Chigasaki, Japan. UCI manufactures and sells cryogenic vacuum pumps, principally to ULVAC Corporation. For the years ended September 30, 2011, 2010 and 2009, the Company recorded income associated with UCI of $2.3 million, $0.1 million and $0.1 million, respectively. For the years ended September 30, 2011, 2010 and 2009, management fee payments received by the Company from UCI were $1.1 million, $0.7 million and $0.6 million, respectively. For the years ended September 30, 2011, 2010 and 2009, the Company incurred charges from UCI for products or services of $0.4 million, $0.3 million and $0.4 million, respectively. At September 30, 2011 and 2010 the Company owed UCI $0.1 million and $0.0 million, respectively, in connection with accounts payable for unpaid products and services. During the fiscal year ended September 30, 2011, the Company received $2.4 million as a cash dividend from UCI.
 
The Company participates in a 50% joint venture with Yaskawa Electric Corporation (“Yaskawa”) called Yaskawa Brooks Automation, Inc. (“YBA”) to exclusively market and sell Yaskawa’s semiconductor robotics products and Brooks’ automation hardware products to semiconductor customers in Japan. For the years ended September 30, 2011, 2010 and 2009, the Company recorded income (loss) associated with YBA of $0.5 million, $0.1 million and $(0.4) million, respectively. For the years ended September 30, 2011, 2010 and 2009, the Company earned revenues for sales to YBA of $9.6 million, $13.5 million and $6.7 million, respectively. The amount due from YBA included in accounts receivable at September 30, 2011 and 2010 was $2.2 million and $4.5 million, respectively. For the years ended September 30, 2011, 2010 and 2009, the Company incurred charges from YBA for products and services of $0.3 million, $0.2 million and $0.6 million, respectively. At September 30, 2011 and 2010 the Company owed YBA $0.1 million in connection with accounts payable for unpaid products and services.
 
These investments are accounted for using the equity method. Under this method of accounting, the Company records in income its proportionate share of the earnings of the joint ventures with a corresponding increase in the carrying value of the investment.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
9.   Earnings (Loss) Per Share
 
Below is a reconciliation of weighted average common shares outstanding for purposes of calculating basic and diluted earnings (loss) per share (in thousands, except per share data):
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
Net income (loss) attributable to Brooks Automation, Inc. 
  $ 128,352     $ 58,982     $ (227,858 )
                         
Weighted average common shares outstanding used in computing basic earnings (loss) per share
    64,549       63,777       62,911  
Dilutive common stock options and restricted stock awards
    454       397        
                         
Weighted average common shares outstanding for purposes of computing diluted earnings (loss) per share
    65,003       64,174       62,911  
                         
Basic net income (loss) per share attributable to Brooks Automation, Inc. common stockholders
  $ 1.99     $ 0.92     $ (3.62 )
                         
Diluted net income (loss) per share attributable to Brooks Automation, Inc. common stockholders
  $ 1.97     $ 0.92     $ (3.62 )
                         
 
Approximately 387,000, 888,000 and 1,456,000 options to purchase common stock and 413,000, 187,000 and 1,101,000 shares of restricted stock were excluded from the computation of diluted earnings (loss) per share attributable to Brooks Automation, Inc. common stockholders for the years ended September 30, 2011, 2010 and 2009, respectively, as their effect would be anti-dilutive.
 
10.   Income Taxes
 
The components of the income tax provision (benefit) are as follows (in thousands):
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
Current:
                       
Federal
  $ 16     $ (3,883 )   $ 16  
State
    1,356       616       13  
Foreign
    858       521       614  
                         
      2,230       (2,746 )     643  
                         
Deferred:
                       
Federal
                 
State
                 
Foreign
    (276 )            
                         
    $ 1,954     $ (2,746 )   $ 643  
                         


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The components of income (loss) before income taxes and equity in earnings (losses) of joint ventures are as follows (in thousands):
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
Domestic
  $ 111,053     $ 44,956     $ (213,687 )
Foreign
    16,523       11,108       (13,230 )
                         
    $ 127,576     $ 56,064     $ (226,917 )
                         
 
The differences between the income tax provision and income taxes computed using the applicable U.S. statutory federal tax rate is as follows (in thousands):
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
Income tax provision (benefit) computed at federal statutory rate
  $ 45,736     $ 19,622     $ (79,420 )
State income taxes, net of federal benefit
    1,848       699       (1,308 )
Net operating loss carryback refund
          (3,899 )      
Impairments
                25,130  
Foreign income taxed at different rates
    (1,546 )     (1,650 )     (1,233 )
Dividends
    (219 )     1,006       1,362  
Change in deferred tax asset valuation allowance
    (42,608 )     (18,423 )     55,211  
Reduction in uncertain tax positions
    (3,719 )     (609 )     (712 )
Other
    2,462       508       1,613  
                         
Income tax provision (benefit)
  $ 1,954     $ (2,746 )   $ 643  
                         
 
The Company does not provide for U.S. income taxes applicable to undistributed earnings of its foreign subsidiaries since these earnings are indefinitely reinvested.
 
The significant components of the net deferred tax assets and liabilities are as follows (in thousands):
 
                 
    Year Ended September 30,  
    2011     2010  
 
Accruals and reserves not currently deductible
  $ 10,357     $ 9,739  
Federal, state and foreign tax credits
    22,673       18,178  
Depreciation
    527       7,946  
Amortization
          4,406  
Other assets
    3,304       7,463  
Net operating loss carryforwards
    119,167       139,464  
Inventory reserves and valuation
    11,650       12,284  
                 
Deferred tax assets
    167,678       199,480  
                 
Intangible amortization
    7,378        
Other liabilities
          540  
                 
Deferred tax liabilities
    7,378       540  
                 
Valuation allowance
    162,208       198,940  
                 
Net deferred tax liabilities
  $ (1,908 )   $  
                 


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Management has considered the weight of all available evidence in determining whether a valuation allowance remains to be required against its deferred tax assets at September 30, 2011. Given the significant losses incurred in fiscal 2009 and the overall cumulative loss history combined with uncertainties in the global economic environment, the Company has determined that it is more likely than not that the net deferred tax assets will not be realized. The amount of the deferred tax asset considered realizable is subject to change based on future events, including generating taxable income in future periods. The Company continues to assess the need for the valuation allowance at each balance sheet date based on all available evidence. If the Company continues to generate profits in most jurisdictions, it is reasonably possible that there will be a significant reduction in the valuation allowance in the next twelve months. Reduction of the valuation allowance, in whole or in part, would result in a non-cash income tax benefit during the period of reduction.
 
As of September 30, 2011, the Company had federal, state and foreign net operating loss carryforwards from continuing and discontinued operations of approximately $433.0 million and federal and state research and development tax credit carryforwards of approximately $22.7 million available to reduce future tax liabilities, which expire at various dates through 2031. Included in the net operating loss carryforwards are stock option deductions of approximately $19.5 million. The benefits of these tax deductions approximate $7.0 million of which approximately $4.0 million will be credited to additional paid-in capital upon being realized or recognized.
 
As a result of ownership changes in previous years, the Company performed a study and determined there was an annual limitation on the federal net operating losses under section 382 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). However, the Company’s utilization of those losses did not exceed the annual limitation amount. Since any unused annual limitation may be carried over to later years, there is no future limitation under section 382 of the Internal Revenue Code on the utilization of the federal net operating loss carryforwards as of September 30, 2011. The Company’s U.S. net operating losses expire at various dates through 2029.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the fiscal years ended September 30, 2011, 2010 and 2009 is as follows (in thousands):
 
                         
    Unrecognized
    Interest and
       
    Tax Benefit     Penalties     Total  
 
Balance at October 1, 2008
  $ 10,463     $ 1,452     $ 11,915  
Additions for tax positions of prior years
    43       483       526  
Additions for tax positions related to current year
    228       5       233  
Reduction for tax positions related to acquired entities in prior years, offset to goodwill
    (41 )           (41 )
Reductions for tax positions of prior years
    (133 )     (169 )     (302 )
Reductions from lapses in statutes of limitations
    (223 )           (223 )
Reductions from settlements with taxing authorities
    (426 )     (102 )     (528 )
Foreign exchange rate adjustment
    (117 )           (117 )
                         
Balance at September 30, 2009
    9,794       1,669       11,463  
Additions for tax positions of prior years
    3,287       506       3,793  
Additions for tax positions related to current year
    468             468  
Reductions for tax positions of prior years
    (40 )     (19 )     (59 )
Reductions from lapses in statutes of limitations
    (413 )           (413 )
Reductions from settlements with taxing authorities
    (193 )     (4 )     (197 )
Foreign exchange rate adjustment
    (87 )           (87 )
                         
Balance at September 30, 2010
    12,816       2,152       14,968  
Additions for tax positions of prior years
    184       447       631  
Additions for tax positions related to current year
    242             242  
Reductions from lapses in statutes of limitations
    (961 )           (961 )
Reductions from settlements with taxing authorities
    (3,392 )     (610 )     (4,002 )
Foreign exchange rate adjustment
    122             122  
                         
Balance at September 30, 2011
  $ 9,011     $ 1,989     $ 11,000  
                         
 
As of September 30, 2011, 2010 and 2009, the Company had approximately $9.8 million, $12.5 million and $11.5 million, respectively, of unrecognized tax benefits, which if recognized, would affect the effective tax rate. As of September 30, 2011 and 2010, the additional $1.2 million and $2.5 million of unrecognized tax benefits would not impact the Company’s effective rate since they are offset by valuation allowances. The Company recognizes interest related to unrecognized benefits as a component of tax expense, of which $0.4 million, $0.4 million and $0.3 million was recognized for the years ended September 30, 2011, 2010 and 2009, respectively.
 
The Company is subject to U.S. federal income tax and various state, local and international income taxes in various jurisdictions. The amount of income taxes paid is subject to the Company’s interpretation of applicable tax laws in the jurisdictions in which it files. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company settled an income tax audit during the year that resulted in a $4.0 million reduction in gross unrecognized tax benefits, including $2.8 million that impacted the effective tax rate. The Company has income tax audits in progress in various global jurisdictions in which it operates. In the Company’s U.S. and international jurisdictions, the years that may be examined vary, with the earliest tax year being 2006. Based on the outcome of these examinations, or the expiration of statutes of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in the Company’s statement of financial position. The Company currently anticipates that it is reasonably possible that the unrecognized tax benefit will be reduced by approximately $3.6 million during the next twelve months primarily as the result of statutes of limitations expiring.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
11.   Postretirement Benefits
 
Defined Benefit Pension Plans
 
On October 26, 2005, the Company purchased Helix Technology Corporation and assumed responsibility for the liabilities and assets of the Helix Employees’ Pension Plan (the “Helix Plan”). The Plan is a final average pay pension plan. In May 2006, the Company’s Board of Directors approved the freezing of benefit accruals and future participation in the Plan effective October 31, 2006.
 
The Company acquired Nexus on July 25, 2011, and in connection with this acquisition, assumed responsibility for the liabilities of the Nexus Biosystems AG Pension Plan (the “Nexus Plan”). The Nexus Plan covers substantially all employees of the Company’s Swiss subsidiary. Admittance for risk benefits (disability and death) is as of January 1 for employees who are 17 or older. Admittance into the pension plan with retirement pension occurs as of January 1 for employees who are age 24 or older. Pension benefits are based on the accumulated savings capital that comprises the sum of all savings credits, plus the credited interest, plus the vested benefits brought in. The amount of the savings credit is based on the employee’s age.
 
The Company also has a pension plan covering certain employees of its Taiwan subsidiary that were employed by this entity on or before July 1, 2005 (the “Taiwan Plan”). After July 1, 2005, most participants of this plan decided to join a defined contribution plan and as a result, their service earned under the Taiwan Plan was frozen.
 
The Company uses a September 30th measurement date in the determination of net periodic benefit costs, benefit obligations and the value of plan assets for all plans. The following tables set forth the funded status and amounts recognized in the Company’s consolidated balance sheets at September 30, 2011 and 2010 for the Plan (in thousands):
 
                 
    Year Ended September 30,  
    2011     2010  
 
Benefit obligation at beginning of year
  $ 15,914     $ 14,390  
Acquisition date benefit obligations from entities acquired during the fiscal year
    10,354        
Service cost
    216       100  
Interest cost
    796       775  
Actuarial loss
    2,138       1,380  
Benefits paid
    (356 )     (731 )
Foreign currency translation
    (994 )      
                 
Benefit obligation at end of year
  $ 28,068     $ 15,914  
                 
 


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
                 
    Year Ended
 
    September 30,  
    2011     2010  
 
Fair value of assets at beginning of year
  $ 9,990     $ 5,860  
Acquisition date fair value of assets for entities acquired during the fiscal year
    9,226        
Actual return (loss) on plan assets
    1,322       657  
Disbursements
    (356 )     (731 )
Employer contributions
    778       4,204  
Employee contributions
    76        
Foreign currency translation
    (863 )      
                 
Fair value of assets at end of year
  $ 20,173     $ 9,990  
                 
 
                 
    September 30,  
    2011     2010  
 
Funded status/accrued benefit liability
  $ (7,895 )   $ (5,924 )
                 
 
The following table provides pension amounts recorded within the account line items of the Company’s consolidated balance sheets (in thousands):
 
                 
    September 30,
    2011   2010
 
Accrued compensation and benefits
  $ 734     $ 458  
Long-term pension liability
    7,161       5,466  
 
In addition, accumulated other comprehensive income at September 30, 2011 and 2010 includes unrecognized net actuarial losses of $8.9 million and $8.4 million, respectively. The estimated portion of net actuarial loss remaining in accumulated other comprehensive income that is expected to be recognized as a component of net periodic pension cost for the year ended September 30, 2012 is $0.6 million.
 
Net periodic pension cost consisted of the following (in thousands):
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
Service cost
  $ 216     $ 100     $ 100  
Interest cost
    796       775       702  
Expected return on assets
    (764 )     (604 )     (709 )
Amortization of losses
    458       327       89  
Settlement loss
                888  
                         
Net periodic pension cost
  $ 706     $ 598     $ 1,070  
                         

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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Other changes in Plan assets and benefit obligations recognized in other comprehensive loss:
 
                 
    September 30,  
    2011     2010  
 
Net loss
  $ 1,502     $ 1,328  
Amortization of net loss
    (458 )     (327 )
                 
Total recognized in other comprehensive income
    1,044       1,001  
                 
Total recognized in net periodic benefit cost and other comprehensive income
  $ 1,750     $ 1,599  
                 
 
Certain information for the Plan with respect to accumulated benefit obligations follows (in thousands):
 
                 
    September 30,  
    2011     2010  
 
Projected benefit obligation
  $ 28,068     $ 15,914  
Accumulated benefit obligation
    26,663       15,914  
Fair value of plan assets
    20,173       9,990  
 
Weighted-average assumptions used to determine net cost at September 30, 2011, 2010 and 2009 follows:
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
Discount rate
    3.99 %     5.50 %     7.12 %
Expected return on plan assets
    4.68 %     8.00 %     8.00 %
Rate of compensation increase
    1.79 %     N/A       N/A  
 
Weighted-average assumptions used to determine the pension obligation at September 30, 2011, 2010 and 2009 follows:
 
                         
    Year Ended September 30,  
    2011     2010     2009  
 
Discount rate
    3.76 %     4.75 %     5.50 %
Rate of compensation increase
    1.79 %     N/A       N/A  
 
Compensation increase assumptions for the periodic pension cost and pension obligation apply to the Nexus Plan and Taiwan Plan only.
 
The Company bases its determination of pension expense or benefit on a market-related valuation of assets, which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return on assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recognized. As of September 30, 2011, under the plans, the Company had cumulative investment losses of approximately $0.2 million, which remain to be recognized in the calculation of the market-related value of assets. The Company also had cumulative other actuarial losses of $9.2 million at September 30, 2011, which are amortized into net periodic benefit costs over the average remaining service period of active participants in the plans.
 
The discount rate utilized for determining future pension obligations for the Helix Plan is based on the Citigroup Pension Index adjusted for the Plan’s expected cash flows and was 4.38% at September 30, 2011, down from 4.75% at September 30, 2010.
 
The discount rate utilized for determining the future pension obligations for the Nexus Plan is based on corporate bonds yields for bonds denominated in Swiss francs. This discount rate was 2.30% at September 30, 2011.


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The expected long term rate of return on Plan assets used to determine future pension obligations was 4.68% and 6.50% as of September 30, 2011 and 2010, respectively. In developing the expected return on plan assets assumption, the Company evaluated fixed income yield curve data and equity return assumption studies, and applied this data to the expected asset allocation to develop an appropriate projected return on Plan assets.
 
Helix Plan Assets
 
The fair value of the Helix Plan assets was $11.6 million, or 58% of total pension plan assets at September 30, 2011. The assets of this plan are invested primarily in debt and equity securities. The investments of this plan are managed by a third party investment manager. The performance of the investment manager is reviewed regularly by an Investment Committee that is comprised of members of senior management. Results for the total portfolio and for each major category of assets are evaluated in comparison with appropriate market indices. The investment portfolio does not, at any time, have a direct investment in Company stock. It may have indirect investment in Company stock, if one of the funds selected by the investment manager invests in Company stock. The investment manager periodically recommends asset allocation changes to the Investment Committee. Due to the frozen status of the plan, the investment return objectives for that plan are to match the investment returns with the timing of future pension liability payments, which recently has led to increased investments in debt securities.
 
The Helix Plan asset allocation at September 30, 2011 and target allocation at September 30, 2012, by asset category is as follows:
 
             
    Percentage of
    Target
    Plan Assets at
    Allocation at
    September 30,
    September 30,
    2011     2012
 
Equity securities
    17 %   15% - 30%
Debt securities
    67     50% - 70%
Other
    4     0% - 10%
Cash
    12     0% - 20%
             
      100 %    
             
 
Plan Assets of Non-U.S. Plans
 
The fair value of plan assets for the Nexus Plan and Taiwan Plan were $8.1 million and $0.5 million, respectively, at September 30, 2011. As is customary with Swiss pension plans, the assets of the Nexus Plan are invested in a collective fund with multiple employers through a Swiss insurance company. Investment holdings are primarily in highly rated debt securities. The assets of the Taiwan Plan are invested with a trustee that has been selected by the Taiwan government. The Company has no investment authority over the assets of either the Nexus Plan or the Taiwan Plan. The asset allocation of the plan assets of the non-U.S. plans at September 30, 2011 was as follows:
 
         
    Percentage of
 
    Plan Assets at
 
    September 30,
 
    2011  
 
Equity securities
    5 %
Debt securities
    79  
Other
    15  
Cash
    1  
         
      100 %
         


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BROOKS AUTOMATION, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The fair value of pension assets by asset category and by level at September 30, 2011 were as follows (in thousands):
 
                                 
    As of September 30, 2011  
    Level 1     Level 2     Level 3     Total  
 
Fixed income securities:
                               
Short duration bond mutual funds
  $ 468                 $ 468  
Intermediate duration bond mutual funds
    1,761                   1,761  
Long-term duration bond mutual funds
    5,414                   5,414  
Other investments:
                               
Global allocation mutual funds
    2,929                   2,929  
Swiss Life collective foundation
          8,046             8,046  
Taiwan collective trust
          483             483  
Cash and cash equivalents
    1,072                   1,072  
                                 
Total
  $ 11,644     $ 8,529     $     $ 20,173