e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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| þ |
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended: March 31, 2008
OR
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| o |
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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)
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| Delaware
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04-3040660 |
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|
(State or other jurisdiction of
incorporation or organization)
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|
(I.R.S. Employer
Identification No.) |
15 Elizabeth Drive
Chelmsford, Massachusetts
(Address of principal executive offices)
01824
(Zip Code)
Registrant’s telephone number, including area code: (978) 262-2400
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 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 Rule 12b-2 of the
Exchange Act).
Yes o No þ
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes o No o
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as
of the latest practical date, April 30, 2008:
Common stock, $0.01 par value 63,488,429 shares
BROOKS AUTOMATION, INC.
INDEX
2
BROOKS AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except share and per share data)
| |
|
|
|
|
|
|
|
|
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|
March 31, |
|
|
September 30, |
|
| |
|
2008 |
|
|
2007 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
113,267 |
|
|
$ |
168,232 |
|
Marketable securities |
|
|
42,029 |
|
|
|
80,102 |
|
Accounts receivable, net |
|
|
92,566 |
|
|
|
105,904 |
|
Inventories, net |
|
|
113,304 |
|
|
|
104,794 |
|
Prepaid expenses and other current assets |
|
|
17,604 |
|
|
|
20,489 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
378,770 |
|
|
|
479,521 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
82,588 |
|
|
|
80,747 |
|
Long-term marketable securities |
|
|
27,795 |
|
|
|
26,283 |
|
Goodwill |
|
|
318,745 |
|
|
|
319,302 |
|
Intangible assets, net |
|
|
68,907 |
|
|
|
76,964 |
|
Equity investment in joint ventures |
|
|
26,223 |
|
|
|
24,007 |
|
Other assets |
|
|
6,775 |
|
|
|
8,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
909,803 |
|
|
$ |
1,014,838 |
|
|
|
|
|
|
|
|
Liabilities, minority interests and stockholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
47,482 |
|
|
$ |
57,758 |
|
Deferred revenue |
|
|
8,666 |
|
|
|
5,424 |
|
Accrued warranty and retrofit costs |
|
|
9,564 |
|
|
|
10,986 |
|
Accrued compensation and benefits |
|
|
18,741 |
|
|
|
23,850 |
|
Accrued restructuring costs |
|
|
7,006 |
|
|
|
6,778 |
|
Accrued income taxes payable |
|
|
4,629 |
|
|
|
5,934 |
|
Accrued expenses and other current liabilities |
|
|
19,385 |
|
|
|
21,908 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
115,473 |
|
|
|
132,638 |
|
Accrued long-term restructuring |
|
|
7,378 |
|
|
|
8,933 |
|
Income taxes payable |
|
|
10,649 |
|
|
|
10,159 |
|
Other long-term liabilities |
|
|
2,516 |
|
|
|
2,866 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
136,016 |
|
|
|
154,596 |
|
|
|
|
|
|
|
|
Contingencies (Note 13) |
|
|
|
|
|
|
|
|
Minority interests |
|
|
471 |
|
|
|
463 |
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 1,000,000 shares authorized,
no shares issued and outstanding |
|
|
— |
|
|
|
— |
|
Common stock, $0.01 par value, 125,000,000 shares authorized,
76,966,916 shares
issued and 63,505,047 shares outstanding at
March 31, 2008, 76,483,603 shares
issued and 70,423,603 shares
outstanding at September 30, 2007 |
|
|
770 |
|
|
|
765 |
|
Additional paid-in capital |
|
|
1,785,731 |
|
|
|
1,780,401 |
|
Accumulated other comprehensive income |
|
|
26,310 |
|
|
|
18,202 |
|
Treasury stock at cost, 13,461,869 shares and 6,060,000 shares
at March 31, 2008 and September 30, 2007, respectively |
|
|
(200,956 |
) |
|
|
(110,762 |
) |
Accumulated deficit |
|
|
(838,539 |
) |
|
|
(828,827 |
) |
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
773,316 |
|
|
|
859,779 |
|
|
|
|
|
|
|
|
Total liabilities, minority interests and stockholders’ equity |
|
$ |
909,803 |
|
|
$ |
1,014,838 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
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Three months ended |
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Six months ended |
|
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|
March 31, |
|
|
March 31, |
|
| |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
$ |
118,503 |
|
|
$ |
162,999 |
|
|
$ |
238,573 |
|
|
$ |
325,140 |
|
Services |
|
|
29,144 |
|
|
|
31,927 |
|
|
|
56,907 |
|
|
|
61,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
147,647 |
|
|
|
194,926 |
|
|
|
295,480 |
|
|
|
386,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
|
87,407 |
|
|
|
109,519 |
|
|
|
173,667 |
|
|
|
217,646 |
|
Services |
|
|
23,801 |
|
|
|
22,917 |
|
|
|
46,925 |
|
|
|
46,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues |
|
|
111,208 |
|
|
|
132,436 |
|
|
|
220,592 |
|
|
|
264,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
36,439 |
|
|
|
62,490 |
|
|
|
74,888 |
|
|
|
122,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
11,553 |
|
|
|
13,278 |
|
|
|
23,985 |
|
|
|
26,368 |
|
Selling, general and administrative |
|
|
29,896 |
|
|
|
30,562 |
|
|
|
58,999 |
|
|
|
61,558 |
|
Restructuring charges |
|
|
2,506 |
|
|
|
3,040 |
|
|
|
3,106 |
|
|
|
3,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
43,955 |
|
|
|
46,880 |
|
|
|
86,090 |
|
|
|
90,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) from continuing operations |
|
|
(7,516 |
) |
|
|
15,610 |
|
|
|
(11,202 |
) |
|
|
31,206 |
|
Interest income |
|
|
1,806 |
|
|
|
2,355 |
|
|
|
5,015 |
|
|
|
4,530 |
|
Interest expense |
|
|
310 |
|
|
|
314 |
|
|
|
443 |
|
|
|
455 |
|
Loss on investment |
|
|
2,931 |
|
|
|
— |
|
|
|
2,931 |
|
|
|
— |
|
Other (income) expense, net |
|
|
(1,161 |
) |
|
|
383 |
|
|
|
(818 |
) |
|
|
925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income
taxes and minority interests |
|
|
(7,790 |
) |
|
|
17,268 |
|
|
|
(8,743 |
) |
|
|
34,356 |
|
Income tax provision |
|
|
885 |
|
|
|
1,480 |
|
|
|
1,555 |
|
|
|
2,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before minority
interests |
|
|
(8,675 |
) |
|
|
15,788 |
|
|
|
(10,298 |
) |
|
|
32,232 |
|
Minority interests in income of consolidated subsidiaries |
|
|
35 |
|
|
|
216 |
|
|
|
8 |
|
|
|
52 |
|
Equity in earnings of joint ventures |
|
|
46 |
|
|
|
179 |
|
|
|
223 |
|
|
|
550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(8,664 |
) |
|
|
15,751 |
|
|
|
(10,083 |
) |
|
|
32,730 |
|
Income from discontinued operations, net of income taxes |
|
|
— |
|
|
|
8,138 |
|
|
|
— |
|
|
|
13,298 |
|
Gain on sale of discontinued operations, net of income
taxes |
|
|
371 |
|
|
|
83,898 |
|
|
|
371 |
|
|
|
83,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of income taxes |
|
|
371 |
|
|
|
92,036 |
|
|
|
371 |
|
|
|
97,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(8,293 |
) |
|
$ |
107,787 |
|
|
$ |
(9,712 |
) |
|
$ |
129,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share from continuing operations |
|
$ |
(0.14 |
) |
|
$ |
0.21 |
|
|
$ |
(0.15 |
) |
|
$ |
0.44 |
|
Basic income per share from discontinued operations |
|
|
0.01 |
|
|
|
1.23 |
|
|
|
0.01 |
|
|
|
1.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share |
|
$ |
(0.13 |
) |
|
$ |
1.44 |
|
|
$ |
(0.15 |
) |
|
$ |
1.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share from continuing
operations |
|
$ |
(0.14 |
) |
|
$ |
0.21 |
|
|
$ |
(0.15 |
) |
|
$ |
0.44 |
|
Diluted income per share from discontinued operations |
|
|
0.01 |
|
|
|
1.22 |
|
|
|
0.01 |
|
|
|
1.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share |
|
$ |
(0.13 |
) |
|
$ |
1.43 |
|
|
$ |
(0.15 |
) |
|
$ |
1.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
63,859 |
|
|
|
74,766 |
|
|
|
66,494 |
|
|
|
74,680 |
|
Diluted |
|
|
63,859 |
|
|
|
75,327 |
|
|
|
66,494 |
|
|
|
75,173 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
| |
|
|
|
|
|
|
|
|
| |
|
Six months ended |
|
| |
|
March 31, |
|
| |
|
2008 |
|
|
2007 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(9,712 |
) |
|
$ |
129,926 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
17,032 |
|
|
|
16,242 |
|
Stock-based compensation |
|
|
4,543 |
|
|
|
4,070 |
|
Discount on marketable securities |
|
|
(669 |
) |
|
|
(571 |
) |
Undistributed earnings of joint ventures |
|
|
(223 |
) |
|
|
(550 |
) |
Minority interests |
|
|
8 |
|
|
|
52 |
|
Loss on disposal of long-lived assets |
|
|
289 |
|
|
|
476 |
|
Gain on sale of software division, net |
|
|
(371 |
) |
|
|
(81,813 |
) |
Loss on investment |
|
|
2,931 |
|
|
|
— |
|
Changes in operating assets and liabilities, net of acquisitions and disposals: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
15,152 |
|
|
|
(21,725 |
) |
Inventories |
|
|
(6,830 |
) |
|
|
(6,092 |
) |
Prepaid expenses and other current assets |
|
|
3,213 |
|
|
|
(8,110 |
) |
Accounts payable |
|
|
(10,469 |
) |
|
|
(14,999 |
) |
Deferred revenue |
|
|
3,132 |
|
|
|
4,434 |
|
Accrued warranty and retrofit costs |
|
|
(1,145 |
) |
|
|
590 |
|
Accrued compensation and benefits |
|
|
(5,432 |
) |
|
|
(938 |
) |
Accrued restructuring costs |
|
|
(1,378 |
) |
|
|
(1,474 |
) |
Accrued expenses and other current liabilities |
|
|
(4,867 |
) |
|
|
(1,480 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
5,204 |
|
|
|
18,038 |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(10,746 |
) |
|
|
(12,180 |
) |
Proceeds from the sale of software division |
|
|
— |
|
|
|
119,090 |
|
Purchases of marketable securities |
|
|
(106,944 |
) |
|
|
(128,221 |
) |
Sale/maturity of marketable securities |
|
|
143,805 |
|
|
|
136,055 |
|
Other |
|
|
(75 |
) |
|
|
(23 |
) |
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
26,040 |
|
|
|
114,721 |
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Treasury stock purchases |
|
|
(90,194 |
) |
|
|
— |
|
Proceeds from issuance of common stock, net of issuance costs |
|
|
1,473 |
|
|
|
3,530 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(88,721 |
) |
|
|
3,530 |
|
|
|
|
|
|
|
|
Effects of exchange rate changes on cash and cash equivalents |
|
|
2,512 |
|
|
|
619 |
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(54,965 |
) |
|
|
136,908 |
|
Cash and cash equivalents, beginning of period |
|
|
168,232 |
|
|
|
115,773 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
113,267 |
|
|
$ |
252,681 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Basis of Presentation
The unaudited condensed consolidated financial statements of Brooks Automation, Inc. and its
subsidiaries (“Brooks” or the “Company”) included herein have been prepared in accordance with
generally accepted accounting principles. In the opinion of management, all material adjustments
which are of a normal and recurring nature necessary for a fair presentation of the results for the
periods presented have been reflected.
Certain information and footnote disclosures normally included in the Company’s annual
consolidated financial statements have been condensed or omitted and, accordingly, the accompanying
financial information should be read in conjunction with the consolidated financial statements and
notes thereto contained in the Company’s Annual Report on Form 10-K, filed with the United States
Securities and Exchange Commission for the year ended September 30, 2007. Certain reclassifications
have been made in the prior period consolidated financial statements to conform to the current
presentation.
Recently Enacted Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board (“FASB”) issued FIN No. 48. FIN No. 48
clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial
statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN No. 48
prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN
No. 48 also provides guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure, and transition. The Company adopted FIN No. 48 on October 1, 2007.
The effect of the adoption did not materially affect the Company’s financial position or results of
operations.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS
157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. SFAS 157 applies under
other accounting pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is the relevant measurement
attribute. Accordingly, SFAS 157 does not require any new fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years, with earlier adoption permitted. The provisions of SFAS 157 will be applied
prospectively as of the beginning of the fiscal year in which it is initially applied. The Company
does not believe that the adoption of SFAS 157 will have a material impact on its financial
position or results of operations.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets
and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS
159 permits entities to choose to measure many financial instruments and certain other items at
fair value and is effective as of the beginning of the Company’s fiscal year beginning after
November 15, 2007. The Company does not believe that the adoption of SFAS 159 will have a material
impact on its financial position or results of operations.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS
141R”). SFAS 141R significantly changes the accounting for business combinations in a number of
areas including the treatment of contingent consideration, pre-acquisition contingencies,
transaction costs, restructuring costs and income taxes. Statement 141 applies prospectively to
business combinations for which the acquisition date is on or after the beginning of the fiscal
year beginning after December 15, 2008. The Company is currently evaluating the potential impact of
SFAS 141R on its financial position and results of operations.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements — An amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB 51 to
establish accounting and reporting standards for the noncontrolling interest in a subsidiary and
for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should
6
be reported as equity in
the consolidated financial statements. The amount of net income attributable to the noncontrolling
interest will be included in consolidated net income on the face of the income statement. Statement
160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in
deconsolidation are equity transactions if the parent retains its controlling financial interest.
In addition, this Statement requires that a parent recognize a gain or loss in net income when a
subsidiary is deconsolidated. SFAS 160 is effective for fiscal years beginning after December 15,
2008. At this point in time, the Company believes that there will not be a material impact in
connection with SFAS 160 on its financial position or results of operations.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities — An amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 amends and
expands the disclosure requirements of SFAS 133 with the intent to provide users of financial
statements with an enhanced understanding of (a) how and why an entity uses derivative instruments,
(b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its
related interpretations, and (c) how derivative instruments and related hedged items affect an
entity’s financial position, financial performance and cash flows. SFAS 161 is effective for fiscal
years and interim periods beginning after November 15, 2008. The Company does not believe that the
adoption of SFAS 161 will have a material impact on its financial position or results of
operations.
2. Stock Based Compensation
The following table reflects compensation expense recorded during the three and six months
ended March 31, 2008 and 2007 in accordance with SFAS 123R (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
March 31, |
|
|
March 31, |
|
| |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Stock options |
|
$ |
321 |
|
|
$ |
640 |
|
|
$ |
510 |
|
|
$ |
1,441 |
|
Restricted stock |
|
|
2,049 |
|
|
|
1,059 |
|
|
|
3,708 |
|
|
|
2,177 |
|
Employee stock purchase plan |
|
|
164 |
|
|
|
228 |
|
|
|
325 |
|
|
|
452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,534 |
|
|
$ |
1,927 |
|
|
$ |
4,543 |
|
|
$ |
4,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Activity
The following table summarizes stock option activity for the six months ended March 31, 2008:
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Weighted |
|
| |
|
Number of |
|
|
Average |
|
| |
|
Options |
|
|
Exercise Price |
|
Outstanding at September 30, 2007 |
|
|
2,512,059 |
|
|
$ |
20.11 |
|
Exercised |
|
|
(41,277 |
) |
|
|
9.39 |
|
Forfeited/expired |
|
|
(464,980 |
) |
|
|
21.06 |
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008 |
|
|
2,005,802 |
|
|
$ |
20.11 |
|
Options exercisable at March 31, 2008 |
|
|
1,819,530 |
|
|
$ |
20.73 |
|
The weighted average remaining contractual life of options exercisable at March 31, 2008 was
2.2 years.
The aggregate intrinsic value of options outstanding was $65,000 and the options exercisable
was $61,000 at March 31, 2008 which represents the total intrinsic value, based on the Company’s
closing stock price of $9.72 as of March 31, 2008, which would have been received by the option
holders had all option holders exercised their options as of that date.
No stock options were granted during the three and six months ended March 31, 2008 and 2007.
The total intrinsic value of options exercised during the three month period ended March 31, 2008
and 2007 was $32,000 and $690,000, respectively. The total intrinsic value of options exercised
during the six month period ended March 31, 2008 and 2007 was $32,000 and $743,000, respectively.
The total cash received from employees as a result of employee stock option exercises during the
three months ended March 31, 2008 and 2007 was $388,000 and $1,762,000, respectively. The total
cash received from employees as a result of employee stock option exercises during the six months
ended March 31, 2008 and 2007 was $388,000 and $2,129,000, respectively.
7
As of March 31, 2008 future compensation cost related to nonvested stock options is
approximately $1.6 million and will be recognized over an estimated weighted average period of 1.6
years.
Restricted Stock Activity
A summary of the status of the Company’s restricted stock as of March 31, 2008 and changes
during the six months ended March 31, 2008 is as follows:
| |
|
|
|
|
|
|
|
|
| |
|
Six months ended |
|
| |
|
March 31, 2008 |
|
| |
|
|
|
|
|
Weighted |
|
| |
|
|
|
|
|
Average |
|
| |
|
|
|
|
|
Grant-Date |
|
| |
|
Shares |
|
|
Fair Value |
|
Outstanding at September 30, 2007 |
|
|
961,875 |
|
|
$ |
14.42 |
|
Awards granted |
|
|
582,000 |
|
|
|
12.21 |
|
Awards vested |
|
|
(288,657 |
) |
|
|
13.32 |
|
Awards canceled |
|
|
(183,468 |
) |
|
|
13.90 |
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008 |
|
|
1,071,750 |
|
|
$ |
13.61 |
|
The fair value of restricted stock awards vested during the three months ended March 31, 2008
and 2007 was $2.0 million and $0.1 million, respectively. The fair value of restricted stock awards
vested during the six months ended March 31, 2008 and 2007 was $3.8 million and $1.3 million,
respectively.
As of March 31, 2008, the unrecognized compensation cost related to nonvested restricted stock
is $12.2 million and will be recognized over an estimated weighted average amortization period of
2.1 years.
Employee Stock Purchase Plan
There were 106,200 shares purchased under the employee stock purchase plan during the three
and six months ended March 31, 2008 for aggregate proceeds of $1.1 million.
Stock Repurchase Plan
On November 9, 2007 the Company announced that its Board of Directors authorized a stock
repurchase plan to buy up to $200 million of the Company’s outstanding common stock. During the
three and six months ended March 31, 2008, the Company purchased 5,143,683 shares and 7,401,869
shares, respectively, of its common stock for a total of $61.0 million and $90.2 million,
respectively, in connection with the stock repurchase plan.
3. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by reportable segment for the six months ended
March 31, 2008 is as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Global |
|
|
|
|
| |
|
Automation |
|
|
Critical |
|
|
Customer |
|
|
|
|
| |
|
Systems |
|
|
Components |
|
|
Support |
|
|
Total |
|
Balance at September 30, 2007 |
|
$ |
43,544 |
|
|
$ |
124,091 |
|
|
$ |
151,667 |
|
|
$ |
319,302 |
|
Adjustments to goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resolution of tax contingencies |
|
|
(463 |
) |
|
|
(42 |
) |
|
|
(52 |
) |
|
|
(557 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2008 |
|
$ |
43,081 |
|
|
$ |
124,049 |
|
|
$ |
151,615 |
|
|
$ |
318,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of the Company’s identifiable intangible assets are as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
March 31, 2008 |
|
|
September 30, 2007 |
|
| |
|
|
|
|
|
Accumulated |
|
|
Net book |
|
|
|
|
|
|
Accumulated |
|
|
Net book |
|
| |
|
Cost |
|
|
Amortization |
|
|
value |
|
|
Cost |
|
|
Amortization |
|
|
Value |
|
Patents |
|
$ |
9,877 |
|
|
$ |
7,313 |
|
|
$ |
2,564 |
|
|
$ |
9,802 |
|
|
$ |
7,093 |
|
|
$ |
2,709 |
|
Completed technology |
|
|
64,761 |
|
|
|
26,695 |
|
|
|
38,066 |
|
|
|
64,761 |
|
|
|
22,033 |
|
|
|
42,728 |
|
Trademark and trade names |
|
|
4,925 |
|
|
|
2,117 |
|
|
|
2,808 |
|
|
|
4,925 |
|
|
|
1,726 |
|
|
|
3,199 |
|
Non-competition agreements |
|
|
50 |
|
|
|
50 |
|
|
|
— |
|
|
|
50 |
|
|
|
50 |
|
|
|
— |
|
Customer relationships |
|
|
36,500 |
|
|
|
11,031 |
|
|
|
25,469 |
|
|
|
36,500 |
|
|
|
8,172 |
|
|
|
28,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
116,113 |
|
|
$ |
47,206 |
|
|
$ |
68,907 |
|
|
$ |
116,038 |
|
|
$ |
39,074 |
|
|
$ |
76,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
Amortization expense for intangible assets was $4.1 million and $3.8 million for the three
months ended March 31, 2008 and 2007, respectively, and $8.1 million and $7.6 million for the six
months ended March 31, 2008 and 2007, respectively.
4. Property, Plant and Equipment
Property, plant and equipment as of March 31, 2008 and September 30, 2007 were as follows (in
thousands):
| |
|
|
|
|
|
|
|
|
| |
|
March 31, |
|
|
September 30, |
|
| |
|
2008 |
|
|
2007 |
|
Buildings and land |
|
$ |
44,716 |
|
|
$ |
44,678 |
|
Computer equipment and software |
|
|
37,788 |
|
|
|
37,680 |
|
Machinery and equipment |
|
|
47,512 |
|
|
|
45,082 |
|
Furniture and fixtures |
|
|
12,212 |
|
|
|
11,986 |
|
Leasehold improvements |
|
|
29,821 |
|
|
|
28,951 |
|
Construction in progress |
|
|
16,528 |
|
|
|
10,295 |
|
|
|
|
|
|
|
|
|
|
|
188,577 |
|
|
|
178,672 |
|
Less accumulated depreciation and amortization |
|
|
(105,989 |
) |
|
|
(97,925 |
) |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
$ |
82,588 |
|
|
$ |
80,747 |
|
|
|
|
|
|
|
|
Depreciation expense was $4.4 million and $4.2 million for the three months ended March 31,
2008 and 2007, respectively and $8.9 million and $8.5 million for the six months ended March 31,
2008 and 2007, respectively.
5. Income Taxes
In July 2006, the FASB issued FIN No. 48. FIN No. 48 clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements in accordance with FASB
Statement No. 109, “Accounting for Income Taxes”. FIN No. 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition.
The Company adopted the provisions of FIN No. 48 on October 1, 2007. The implementation of FIN
No. 48 did not materially affect the Company’s financial position or results of operations. As of
the adoption date, October 1, 2007, the Company had $14.5 million of unrecognized tax benefits, of
which $12.3 million, if recognized, would affect the effective tax rate and the remaining $2.2
million, if recognized, would decrease goodwill. As of the adoption date the Company had accrued
interest expense related to the unrecognized tax benefits of $1.4 million, which is included in the
$14.5 million of
unrecognized tax benefits. The Company recognizes interest related to unrecognized benefits as
a component of tax expense.
Prior to the adoption of FIN No. 48, the Company’s policy was to classify accruals for
uncertain positions as a current liability unless it was highly probable that there would not be a
payment or settlement for such identified risks for a period of at least a year. On October 1,
2007, the Company reclassified $10.2 million of income tax liabilities from current to long-term
liabilities because a cash settlement of these liabilities is not anticipated to be highly probable
within one year of the balance sheet date.
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 has income tax audits in progress in various state and international jurisdictions in which
it operates. In the Company’s U.S. and international jurisdictions, the years that
9
may be examined
vary, with the earliest tax year being 2001. Based on the outcome of these examinations, or the
result of 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 anticipates that several of these audits may
be finalized within the next 12 months. However, based on the status of these examinations, and the
protocol of finalizing such audits, it is not possible to estimate the impact of the amount of such
changes, if any, to the Company’s previously recorded uncertain tax positions.
6. 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):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
March 31, |
|
|
March 31, |
|
| |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Weighted average
common shares
outstanding used in
computing basic
earnings (loss) per
share |
|
|
63,859 |
|
|
|
74,766 |
|
|
|
66,494 |
|
|
|
74,680 |
|
Dilutive common
stock options and
restricted stock
awards |
|
|
— |
|
|
|
561 |
|
|
|
— |
|
|
|
493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares
outstanding for
purposes of
computing diluted
earnings (loss) per
share |
|
|
63,859 |
|
|
|
75,327 |
|
|
|
66,494 |
|
|
|
75,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximately 2,181,000 and 3,297,000 options to purchase common stock and 530,000 and 0
shares of restricted stock were excluded from the computation of diluted earnings (loss) per share
attributable to common stockholders for the three months ended March 31, 2008 and 2007,
respectively, as their effect would be anti-dilutive. The 3,297,000 options for the three months
ended March 31, 2007 had an exercise price greater than the average market price of the common
stock. In addition, approximately 2,275,000 and 3,555,000 options to purchase common stock and
496,000 and 0 shares of restricted stock were excluded from the computation of diluted earnings
(loss) per share attributable to common stockholders for the six months ended March 31, 2008 and
2007, respectively, as their effect would be anti-dilutive. The 3,555,000 options for the six
months ended March 31, 2007 had an exercise price greater than the average market price of the
common stock. These options and restricted stock could, however, become dilutive in future periods.
7. Discontinued Operations
On March 30, 2007, the Company completed the sale of its software division, Brooks Software,
to Applied Materials, Inc., a Delaware corporation (“Applied”) for cash consideration and the
assumption of certain liabilities related to Brooks Software. Brooks Software provided real-time
applications for greater efficiency and productivity in collaborative, complex manufacturing
environments. The Company transferred to Applied substantially all of its assets primarily related
to Brooks Software, including the
stock of several subsidiaries engaged only in the business of Brooks Software, and Applied
assumed certain liabilities related to Brooks Software.
The Company recorded a gain of $83.9 million in the second quarter of fiscal year 2007 on the
sale of its discontinued software business. This gain reflects the proceeds of $132.5 million of
cash consideration, offset by expenses of $7.7 million, a tax provision of $1.9 million, and the
write-off of net assets totaling $39.0 million. In the second quarter of fiscal year 2008, the
Company recorded an additional gain of $0.4 million, net of tax of $0, related to the resolution of
certain contingencies arising from the sale of our software division.
Effective October 1, 2006, the Company’s consolidated financial statements and notes have been
reclassified to reflect this business as a discontinued operation in accordance with SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets.”
There were no operating results from discontinued operations of the software division for the
three and six months ended March 31, 2008. The summary of operating results from discontinued
operations of the software division for the three and six months ended March 31, 2007 is as follows
(in thousands):
10
| |
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
Six months ended |
| |
|
March 31, 2007 |
|
March 31, 2007 |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
26,178 |
|
|
$ |
47,712 |
|
Gross profit |
|
|
19,426 |
|
|
|
34,048 |
|
Income from discontinued operations before income taxes |
|
|
8,932 |
|
|
|
12,673 |
|
Income from discontinued operations, net of tax |
|
|
8,138 |
|
|
|
13,298 |
|
The income of $13,298,000 for the six months ended March 31, 2007 includes the recognition of
a tax benefit resulting from the reversal of tax reserves due to an audit settlement of $2,100,000.
There were no assets and liabilities from discontinued operations of the software division as
of March 31, 2008 or September 30, 2007.
8. Comprehensive Income (Loss)
The calculation of the Company’s comprehensive income (loss) for the three and six months
ended March 31, 2008 and 2007 is as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
March 31, |
|
|
March 31, |
|
| |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Net income (loss) |
|
$ |
(8,293 |
) |
|
$ |
107,787 |
|
|
$ |
(9,712 |
) |
|
$ |
129,926 |
|
Change in cumulative translation adjustment |
|
|
4,347 |
|
|
|
379 |
|
|
|
6,760 |
|
|
|
1,724 |
|
Cumulative translation adjustment on sale of
software division |
|
|
— |
|
|
|
(2,085 |
) |
|
|
— |
|
|
|
(2,085 |
) |
Unrealized gain (loss) on marketable securities |
|
|
202 |
|
|
|
45 |
|
|
|
(630 |
) |
|
|
180 |
|
Recapture of temporary impairment loss |
|
|
1,978 |
|
|
|
— |
|
|
|
1,978 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,766 |
) |
|
$ |
106,126 |
|
|
$ |
(1,604 |
) |
|
$ |
129,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9. Segment Information
In the fourth quarter of fiscal 2007 the Company made changes to its internal reporting
structure and began reporting results in three segments: Automation Systems; Critical Components;
and Global Customer Support. In the second quarter of fiscal 2008 these segment disclosures were
refined to reflect the results of a comprehensive review of operations conducted subsequent to the
appointment of a new CEO and CFO. These refinements resulted in minor changes to the previously
disclosed split of revenues and gross margins among segments and between products and services.
The Automation Systems segment consists of a range of wafer handling products and systems that
support both atmospheric and vacuum process technology used by the Company’s customers.
The Critical Components segment includes cryogenic vacuum pumping, thermal management and
vacuum measurement solutions used to create, measure and control critical process vacuum
applications. The pump, gauge and chiller products serve various markets that use vacuum as a
critical enabler to overall system performance.
The Global Customer Support segment consists of the Company’s after market activities
including an extensive range of service support to its customers to address their on-site needs,
spare parts and repair services, and support of legacy product lines.
The Company evaluates performance and allocates resources based on revenues, operating income
(loss) and returns on invested assets. Operating income (loss) for each segment includes selling,
general and administrative expenses directly attributable to the segment. Amortization of acquired
intangible assets (excluding completed technology) and restructuring charges are excluded from the
segments’ operating income (loss). The Company’s non-allocable overhead costs, which include
corporate general and administrative expenses, are allocated among the segments based upon segment
revenues. Segment assets exclude acquired intangible assets, goodwill, investments in joint
ventures, marketable securities and cash equivalents.
11
The Company has reclassified prior year data due to the changes made in its reportable
segments.
Financial information for the Company’s business segments is as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Global |
|
|
|
|
| |
|
Automation |
|
|
Critical |
|
|
Customer |
|
|
|
|
| |
|
Systems |
|
|
Components |
|
|
Support |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
$ |
81,527 |
|
|
$ |
35,136 |
|
|
$ |
1,840 |
|
|
$ |
118,503 |
|
Services |
|
|
— |
|
|
|
— |
|
|
|
29,144 |
|
|
|
29,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
81,527 |
|
|
$ |
35,136 |
|
|
$ |
30,984 |
|
|
$ |
147,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
$ |
16,997 |
|
|
$ |
13,286 |
|
|
$ |
6,156 |
|
|
$ |
36,439 |
|
Segment operating income (loss). |
|
$ |
(7,094 |
) |
|
$ |
3,682 |
|
|
$ |
189 |
|
|
$ |
(3,223 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
$ |
118,658 |
|
|
$ |
41,121 |
|
|
$ |
3,220 |
|
|
$ |
162,999 |
|
Services |
|
|
— |
|
|
|
— |
|
|
|
31,927 |
|
|
|
31,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
118,658 |
|
|
$ |
41,121 |
|
|
$ |
35,147 |
|
|
$ |
194,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
$ |
36,407 |
|
|
$ |
15,767 |
|
|
$ |
10,316 |
|
|
$ |
62,490 |
|
Segment operating income |
|
$ |
9,353 |
|
|
$ |
6,717 |
|
|
$ |
4,062 |
|
|
$ |
20,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
$ |
164,597 |
|
|
$ |
69,832 |
|
|
$ |
4,144 |
|
|
$ |
238,573 |
|
Services |
|
|
— |
|
|
|
— |
|
|
|
56,907 |
|
|
|
56,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
164,597 |
|
|
$ |
69,832 |
|
|
$ |
61,051 |
|
|
$ |
295,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
$ |
36,776 |
|
|
$ |
26,129 |
|
|
$ |
11,983 |
|
|
$ |
74,888 |
|
Segment operating income (loss) |
|
$ |
(11,958 |
) |
|
$ |
7,829 |
|
|
$ |
(495 |
) |
|
$ |
(4,624 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
$ |
235,166 |
|
|
$ |
79,200 |
|
|
$ |
10,774 |
|
|
$ |
325,140 |
|
Services |
|
|
— |
|
|
|
— |
|
|
|
61,154 |
|
|
|
61,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
235,166 |
|
|
$ |
79,200 |
|
|
$ |
71,928 |
|
|
$ |
386,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
$ |
72,635 |
|
|
$ |
29,806 |
|
|
$ |
19,731 |
|
|
$ |
122,172 |
|
Segment operating income |
|
$ |
18,545 |
|
|
$ |
12,017 |
|
|
$ |
6,660 |
|
|
$ |
37,222 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008 |
|
$ |
234,512 |
|
|
$ |
69,163 |
|
|
$ |
83,799 |
|
|
$ |
387,474 |
|
September 30, 2007 |
|
$ |
270,401 |
|
|
$ |
72,771 |
|
|
$ |
82,020 |
|
|
$ |
425,192 |
|
A reconciliation of the Company’s reportable segment operating income (loss) to the
corresponding consolidated amounts for the three and six month periods ended March 31, 2008 and
2007 is as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
March 31, |
|
|
March 31, |
|
| |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Segment operating income (loss) from
continuing operations |
|
$ |
(3,223 |
) |
|
$ |
20,132 |
|
|
$ |
(4,624 |
) |
|
$ |
37,222 |
|
Amortization of acquired intangible assets |
|
|
1,787 |
|
|
|
1,482 |
|
|
|
3,472 |
|
|
|
2,976 |
|
Restructuring charges |
|
|
2,506 |
|
|
|
3,040 |
|
|
|
3,106 |
|
|
|
3,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income (loss) from continuing
operations |
|
$ |
(7,516 |
) |
|
$ |
15,610 |
|
|
$ |
(11,202 |
) |
|
$ |
31,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
A reconciliation of the Company’s reportable segment assets to the corresponding consolidated
amounts as of March 31, 2008 and September 30, 2007 is as follows (in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
March 31, |
|
|
September 30, |
|
| |
|
2008 |
|
|
2007 |
|
Segment assets |
|
$ |
387,474 |
|
|
$ |
425,192 |
|
Goodwill |
|
|
318,745 |
|
|
|
319,302 |
|
Intangible assets |
|
|
68,907 |
|
|
|
76,964 |
|
Investments in cash equivalents, marketable securities and joint ventures |
|
|
134,677 |
|
|
|
193,380 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
909,803 |
|
|
$ |
1,014,838 |
|
|
|
|
|
|
|
|
10. Restructuring-Related Charges and Accruals
The Company recorded a charge to continuing operations of $2,506,000 in the three months ended
March 31, 2008 which primarily relates to severance costs of $2,000,000 for workforce reductions of
approximately 50 employees in operations, service and administrative functions primarily in the
United States and Mexico, along with a charge of $506,000 for excess facilities costs related to
the Company’s San Jose, California facility. The Company recorded a charge to continuing operations
of $3,106,000 in the six months ended March 31, 2008 which primarily relates to severance costs of
$2,592,000 for workforce reductions and $514,000 for excess facilities costs. The Company recorded
a charge to continuing operations of $3,040,000 in the three and six months ended March 31, 2007.
This charge primarily relates to a vacant leased facility in Billerica, Massachusetts and fully
recognized the Company’s remaining obligation on this lease and assumes that the Company will be
unable to sublease any portion of the facility over the remainder of the lease.
The activity for the three and six months ended March 31, 2008 and 2007 related to the
Company’s restructuring-related accruals is summarized below (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Activity — Three Months Ended March 31, 2008 |
|
| |
|
Balance |
|
|
|
|
|
|
|
|
|
|
Balance |
|
| |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
March 31, |
|
| |
|
2007 |
|
|
Expense |
|
|
Utilization |
|
|
2008 |
|
Facilities |
|
$ |
11,907 |
|
|
$ |
506 |
|
|
$ |
(894 |
) |
|
$ |
11,519 |
|
Workforce-related |
|
|
2,135 |
|
|
|
2,000 |
|
|
|
(1,270 |
) |
|
|
2,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,042 |
|
|
$ |
2,506 |
|
|
$ |
(2,164 |
) |
|
$ |
14,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Activity — Three Months Ended March 31, 2007 |
|
| |
|
Balance |
|
|
|
|
|
|
|
|
|
|
Balance |
|
| |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
March 31, |
|
| |
|
2006 |
|
|
Expense |
|
|
Utilization |
|
|
2007 |
|
Facilities |
|
$ |
12,486 |
|
|
$ |
2,990 |
|
|
$ |
(998 |
) |
|
$ |
14,478 |
|
Workforce-related |
|
|
1,865 |
|
|
|
8 |
|
|
|
(1,278 |
) |
|
|
595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,351 |
|
|
$ |
2,998 |
|
|
$ |
(2,276 |
) |
|
$ |
15,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Activity — Six Months Ended March 31, 2008 |
|
| |
|
Balance |
|
|
|
|
|
|
|
|
|
|
Balance |
|
| |
|
September 30, |
|
|
|
|
|
|
|
|
|
|
March 31, |
|
| |
|
2007 |
|
|
Expense |
|
|
Utilization |
|
|
2008 |
|
Facilities |
|
$ |
12,804 |
|
|
$ |
514 |
|
|
$ |
(1,799 |
) |
|
$ |
11,519 |
|
Workforce-related |
|
|
2,907 |
|
|
|
2,592 |
|
|
|
(2,634 |
) |
|
|
2,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
15,711 |
|
|
$ |
3,106 |
|
|
$ |
(4,433 |
) |
|
$ |
14,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Activity — Six Months Ended March 31, 2007 |
|
| |
|
Balance |
|
|
|
|
|
|
|
|
|
|
Balance |
|
| |
|
September 30, |
|
|
|
|
|
|
|
|
|
|
March 31, |
|
| |
|
2006 |
|
|
Expense |
|
|
Utilization |
|
|
2007 |
|
Facilities |
|
$ |
13,697 |
|
|
$ |
2,990 |
|
|
$ |
(2,209 |
) |
|
$ |
14,478 |
|
Workforce-related |
|
|
2,846 |
|
|
|
28 |
|
|
|
(2,279 |
) |
|
|
595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
16,543 |
|
|
$ |
3,018 |
|
|
$ |
(4,488 |
) |
|
$ |
15,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
The Company expects the majority of the remaining severance costs totaling $2,865,000 will be
paid over the next twelve months. The expected facilities costs, totaling $11,519,000, net of
estimated sub-rental income, will be paid on leases that expire through September 2011.
11. Loss on Investment
During the three months ended March 31, 2008, the Company recorded a charge of $2.9 million to
write-down its minority equity investment in a closely-held Swiss public company to its fair value
as of the balance sheet date. This write-down reflects an other than temporary impairment of this
investment. The remaining balance of this investment at March 31, 2008 was $3.0 million.
12. Other Balance Sheet Information
Components of other selected captions in the Consolidated Balance Sheets are as follows (in
thousands):
| |
|
|
|
|
|
|
|
|
| |
|
March 31, |
|
|
September 30, |
|
| |
|
2008 |
|
|
2007 |
|
Accounts receivable |
|
$ |
93,891 |
|
|
$ |
107,373 |
|
Less allowances |
|
|
1,325 |
|
|
|
1,469 |
|
|
|
|
|
|
|
|
|
|
$ |
92,566 |
|
|
$ |
105,904 |
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
|
|
Raw materials and purchased parts |
|
$ |
44,956 |
|
|
$ |
50,304 |
|
Work-in-process |
|
|
38,869 |
|
|
|
31,555 |
|
Finished goods |
|
|
29,479 |
|
|
|
22,935 |
|
|
|
|
|
|
|
|
|
|
$ |
113,304 |
|
|
$ |
104,794 |
|
|
|
|
|
|
|
|
The Company provides for the estimated cost of product warranties, primarily from historical
information, at the time product revenue is recognized and retrofit accruals at the time retrofit
programs are established. The Company’s warranty obligation is affected by product failure rates,
utilization levels, material usage, service delivery costs incurred in correcting a product
failure, and supplier warranties on parts delivered to the Company. Product warranty and retrofit
activity on a gross basis for the three and six months ended March 31, 2008 and 2007 is as follows
(in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Activity — Three Months Ended March 31, 2008 |
Balance |
|
|
|
|
|
|
|
|
|
Balance |
| December 31, |
|
|
|
|
|
|
|
|
|
March 31, |
2007 |
|
Accruals |
|
Settlements |
|
2008 |
$9,569 |
|
$ |
2,748 |
|
|
$ |
(2,753 |
) |
|
$ |
9,564 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Activity — Three Months Ended March 31, 2007 |
Balance |
|
|
|
|
|
|
|
|
|
Balance |
| December 31, |
|
|
|
|
|
|
|
|
|
March 31, |
2006 |
|
Accruals |
|
Settlements |
|
2007 |
$11,895 |
|
$ |
3,681 |
|
|
$ |
(3,372 |
) |
|
$ |
12,204 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Activity — Six Months Ended March 31, 2008 |
Balance |
|
|
|
|
|
|
|
|
|
Balance |
| September 30, |
|
|
|
|
|
|
|
|
|
March 31, |
2007 |
|
Accruals |
|
Settlements |
|
2008 |
$10,986 |
|
$ |
4,046 |
|
|
$ |
(5,468 |
) |
|
$ |
9,564 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Activity — Six Months Ended March 31, 2007 |
Balance |
|
|
|
|
|
|
|
|
|
Balance |
| September 30, |
|
|
|
|
|
|
|
|
|
March 31, |
2006 |
|
Accruals |
|
Settlements |
|
2007 |
$11,608 |
|
$ |
6,961 |
|
|
$ |
(6,365 |
) |
|
$ |
12,204 |
|
14
13. Contingencies
The Company has been involved in various regulatory proceedings and private litigation matters
involving equity incentive practices. A description of this litigation is included in the Company’s
annual report on Form 10-K for the fiscal year ended September 30, 2007, and in the Company’s
quarterly report on Form 10-Q for the quarterly period ended December 31, 2007. In furtherance of
the Company’s cooperation with the Securities and Exchange Commission (“SEC”), on April 30, 2008,
the Company entered into an agreement with the SEC tolling any statute of limitations applicable to
any action or proceeding brought by the SEC against Brooks from December 12, 2007 to June 15, 2008.
With respect to the federal derivative action captioned as In re Brooks Automation, Inc. Derivative
Litigation pending in the United States District Court for the District of Massachusetts, the court
has scheduled a hearing on defendants’ motions to dismiss for June 4, 2008.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this Quarterly Report on Form 10-Q 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 factors
include the Risk Factors which are set forth in our Annual Report on Form 10-K and which are
incorporated herein by reference. Precautionary statements made in our Annual Report on Form 10-K
should be read as being applicable to all related forward-looking statements whenever they appear
in this report.
Overview
We are a leading supplier of technology products and solutions primarily serving the worldwide
semiconductor market. We principally supply hardware and services to both original equipment
manufacturers, or OEMs, who make semiconductor device manufacturing equipment, and chip
manufacturers. We are a technology and market leader with offerings ranging from individual
hardware modules to fully integrated systems as well as services to install and support our
products worldwide.
We report results in three segments: Automation Systems, Critical Components and Global
Customer Support. Our Automation Systems segment consists of a range of wafer handling products and
systems that support both atmospheric and vacuum process technology used by our customers. Our
Critical Components segment includes cryogenic vacuum pumping, thermal management and vacuum
measurement products used to create, measure and control critical process vacuum applications. Our
Global Customer Support segment consists of our after market activities including an extensive
range of service support to our customers to address their on-site needs, spare parts and repair
services, and support of legacy product lines.
On October 1, 2007, the Board of Directors appointed a new President and Chief Executive
Officer, Robert J. Lepofsky. Subsequent to that appointment, we have embarked on a significant
review and restructuring of our organizational structure and resource requirements. While this
review is ongoing, we took significant restructuring actions in the second quarter. Further actions
are likely in the future as this review is completed.
The semiconductor capital equipment market is highly cyclical as semiconductor chip
manufacturers flex capital spending commitments in response to factors such as their capacity
utilization, pricing environments and enhanced technologies required to remain competitive. Recent
months have seen significant declines in semiconductor capital equipment demand.
Recent Developments
On November 9, 2007 we announced that our Board of Directors authorized a stock repurchase
plan to buy up to $200 million of our outstanding common stock. Stock repurchase transactions
authorized under the plan have occurred and will occur from time to time in the open market.
Management and the Board of Directors exercise discretion with respect to the timing and amount of
any shares repurchased, based on their evaluation of a variety of factors, including current market
conditions. Repurchases may be commenced or suspended at any time without prior notice.
Additionally, we have initiated and may in the future initiate repurchases under a Rule 10b5-1
plan,
15
which would permit shares to be repurchased when we would otherwise be precluded from doing so
under insider-trading laws. Any repurchased shares are available for use in connection with our
stock plans and for other corporate purposes. The repurchase program is being funded using the
Company’s available cash resources.
In the fourth quarter of fiscal 2007 we made changes to our internal reporting structure and
began reporting results in three segments: Automation Systems; Critical Components; and Global
Customer Support. In the second quarter of fiscal 2008 these segment disclosures were refined to
reflect the results of a comprehensive review of operations conducted subsequent to the appointment
of a new CEO and CFO. These refinements resulted in minor changes to the previously disclosed split
of revenues and gross margins among segments and between products and services.
Three and Six Months Ended March 31, 2008, Compared to Three and Six Months Ended March 31, 2007
Revenues
We reported revenues of $147.6 million for the three months ended March 31, 2008, compared to
$194.9 million in the three months ended March 31, 2007, a 24.3% decrease. This decrease reflects
lower revenues related to our Automation Systems segment of $37.1 million, lower revenues
associated with our Critical Components segment of $6.0 million, and lower revenues associated with
our Global Customer Support segment of $4.2 million due primarily to lower demand for semiconductor
capital equipment primarily from large OEM equipment suppliers. Our revenues for the six months
ended March 31, 2008 were $295.5 million, compared to $386.3 million in the six months ended March
31, 2007, a 23.5% decrease. This decrease reflects lower revenues related to our Automation Systems
segment of $70.5 million, lower revenues associated with our Critical Components segment of $9.4
million, and lower revenues associated with our Global Customer Support segment of $10.9 million
due primarily to lower demand for semiconductor capital equipment primarily from large OEM
equipment suppliers.
Our Automation Systems segment reported revenues of $81.5 million in the three months ended
March 31, 2008, a decrease of 31.3% from $118.7 million reported in the three months ended March
31, 2007. This decrease reflects lower revenues across all product lines with the industry
conditions previously noted. The largest reduction of $19.1 million arose from sales of tool
automation systems. Revenues for the six months ended March 31, 2008 were $164.6 million, compared
to $235.2 million in the six months ended March 31, 2007, a 30.0% decrease. This decrease reflects
lower revenues across all product lines with the industry conditions previously noted. The largest
reduction of $30.5 million arose from sales of tool automation systems.
Our Critical Components segment reported revenues of $35.1 million in the three months ended
March 31, 2008, a 14.6% decrease from $41.1 million in the three months ended March 31, 2007. The
largest component of this decrease was a reduction of $4.7 million of sales of pressure management
and control products, principally due to lower demand for semiconductor capital equipment. Revenues
for the six months ended March 31, 2008 were $69.8 million, compared to $79.2 million in the six
months ended March 31, 2007, a 11.9% decrease. The largest component of this decrease was a
reduction of $7.9 million in sales of pressure management and control products.
Our Global Customer Support segment reported revenues of $31.0 million in the three months
ended March 31, 2008, a 11.7% decrease from $35.1 million in the three months ended March 31, 2007.
Revenues for the six months ended March 31, 2008 were $61.1 million, compared to $71.9 million in
the six months ended March 31, 2007, a 15.0% decrease. These decreases are primarily attributable
to lower repairs and spares volumes as customers extend preventative maintenance cycles and
eliminate discretionary spares spending during the downturn.
Product revenues decreased $44.5 million, or 27.3%, to $118.5 million, in the three months
ended March 31, 2008, from $163.0 million in the three months ended March 31, 2007. This decrease
is attributable to lower revenues of $37.1 million associated with our Automation Systems segment,
lower revenues associated with our Critical Components segment of $6.0 million, and lower revenues
associated with our Global Customer Support segment of $1.4 million, all primarily due to lower
demand for semiconductor capital equipment. Product revenues decreased $86.5 million, or 26.6%, to
$238.6 million, in the six months ended March 31, 2008, from $325.1 million in the six months ended
March 31, 2007. This decrease is attributable to lower revenues of $70.5 million associated with
our Automation Systems segment, lower revenues associated with our Critical Components segment of
$9.4
16
million, and lower revenues associated with our Global Customer support segment of $6.6
million, all primarily due to lower demand for semiconductor capital equipment.
Service revenues decreased $2.8 million, or 8.8%, to $29.1 million, in the three months ended
March 31, 2008, from $31.9 million in the three months ended March 31, 2007. Service revenues
decreased $4.3 million, or 7.0%, to $56.9 million, in the six months ended March 31, 2008, from
$61.2 million in the six months ended March 31, 2007. These decreases are primarily attributable to
changes in our customer’s preventative maintenance and spending behaviors noted above.
Backlog for our products and services as of March 31, 2008, totaled approximately $91.5
million compared to approximately $136.0 million as of March 31, 2007.
Gross Profit
Gross profit decreased to $36.4 million for the three months ended March 31, 2008 compared to
$62.5 million for the three months ended March 31, 2007. The decrease in gross profit reflects the
lower margin associated with our Automation Systems segment of $19.4 million, lower profit
associated with our Critical Components segment of $2.5 million, and lower profit associated with
our Global Customer Support segment of $4.2 million, due primarily to the lower revenues
experienced in the three months ended March 31, 2008 compared to the three months ended March 31,
2007. Gross profit as a percent of revenue decreased to 24.7% in the three months ended March 31,
2008 compared to 32.1% for the three months ended March 31, 2007, due to unfavorable product mix
and the lower absorption of factory overhead on lower revenues.
Gross profit decreased to $74.9 million for the six months ended March 31, 2008 compared to
$122.2 million for the six months ended March 31, 2007. The decrease in gross profit reflects the
lower margin associated with our Automation Systems segment of $35.9 million, lower margin
associated with our Critical Components segment of $3.7 million, and lower margin associated with
our Global Customer Support segment of $7.7 million, due primarily to the lower revenues
experienced in the six months ended March 31, 2008 compared to the six months ended March 31, 2007.
Gross profit as a percent of revenue decreased to 25.3% in the six months ended March 31, 2008
compared to 31.6% for the six months ended March 31, 2007, due to unfavorable product mix and the
lower absorption of factory overhead on lower revenues.
Gross profit of our Automation Systems segment decreased to $17.0 million in the three months
ended March 31, 2008 compared to $36.4 million in the three months ended March 31, 2007. This
decrease reflects lower margin on lower revenues, along with unfavorable factory overhead
absorption and higher product warranty costs. Gross profit in the six months ended March 31, 2008
decreased to $36.8 million compared to $72.6 million in the six months ended March 31, 2007. Gross
profit as a percent of revenue decreased to 20.9% and 22.4% in the three and six months ended March
31, 2008 respectively compared to 30.7% and 30.9% in the three and six months ended March 31, 2007
respectively primarily due to the higher contribution from the lower margin on customer designed
automation systems.
Gross profit of our Critical Components segment decreased to $13.3 million and $26.1 million
in the three and six months ended March 31, 2008 respectively compared to $15.8 million and $29.8
million in the three and six months ended March 31, 2007. This decrease is consistent with the
decrease in revenues described above. Gross profit as a percent of revenue declined from 38.4% in
the three months ended March 31, 2007 to 37.9% in the three months ended March 31, 2008 from the
lower absorption of factory overhead on lower revenues. Gross profit as a percent of revenue
remained relatively flat at 37.4% in the six months ended March 31, 2008 as compared to 37.6% in
the six months ended March 31, 2007.
Gross profit of our Global Customer Support segment decreased to $6.2 million and $12.0
million in the three and six months ended March 31, 2008 respectively compared to $10.3 million and
$19.7 million in the three and six months ended March 31, 2007 respectively. These decreases are
due to lower activity levels and a high cost base in the business. Gross profit as a percent of
revenues decreased to 20.0% and 19.6% in the three and six months ended March 31, 2008 respectively
compared to 29.3% and 27.4% for the three and six months ended March 31, 2007 respectively.
17
Gross profit on product revenues decreased to $31.1 million for the three months ended March
31, 2008 compared to $53.5 million in the three months ended March 31, 2007. The decrease in
product margins is primarily attributable to lower profit of $19.4 million related to our
Automation Systems products, lower profit of $2.5 million associated with our Critical Components
products, and lower profit of $0.5 million related to legacy hardware products. Gross profit on
product revenues for the six months ended March 31, 2008 decreased to $64.9 million compared to
$107.5 million in the six months ended March 31, 2007. The decrease in product margins is
attributable to lower profit of $35.8 million related to our Automation Systems products, lower
profit of $3.7 million associated with our Critical Components products, and lower profit of $3.1
million related to legacy hardware products. Gross profit percentage on product revenues decreased
to 26.2% and 27.2% for the three and six months ended March 31, 2008 respectively compared to 32.8%
and 33.1% for the three and six months ended March 31, 2007, primarily due to the relative growth
of our lower margin on customer designed automation systems, higher product warranty costs for
Automation Systems products and the lower absorption of factory overheads at lower revenue levels.
Gross profit on service revenues was $5.3 million or 18.2% for the three months ended March
31, 2008, compared to $9.0 million or 28.2% in the three months ended March 31, 2007. Gross profit
on service revenues for the six months ended March 31, 2008 was $10.0 million or 17.6%, compared to
$14.7 million or 24.0% in the six months ended March 31, 2007. The decrease in service profits is
primarily attributable to under absorption of fixed service delivery-related costs.
Research and Development
Research and development expenses for the three months ended March 31, 2008, were $11.6
million, compared to $13.3 million in the three months ended March 31, 2007. The decrease primarily
reflects lower spending of $1.5 million associated with the Automation Systems product development.
Research and development expenses for the six months ended March 31, 2008, were $24.0 million,
compared to $26.4 million in the six months ended March 31, 2007. The decrease primarily reflects
lower spending of $1.9 million associated with the Automation Systems product development.
Selling, General and Administrative
Selling, general and administrative expenses declined slightly to $29.9 million for the three
months ended March 31, 2008 compared to $30.6 million in the three months ended March 31, 2007.
Selling, general and administrative expenses were $59.0 million for the six months ended March 31,
2008 compared to $61.6 million in the six months ended March 31, 2007. The decrease for the six
months is primarily attributable to the lower management incentive costs of $3.5 million, partially
offset by $0.6 million of costs incurred in recovering VAT tax receivables.
Restructuring Charges
We recorded a charge to continuing operations of $2.5 million in the three months ended March
31, 2008 which consists of severance costs of $2.0 million for workforce reductions of
approximately 50 employees in operations, service and administrative functions primarily in the
United States and Mexico, along with a charge of $0.5 million for excess facilities costs related
to our San Jose, California facility. For the six months ended March 31, 2008, we recorded
restructuring charges of $3.1 million which consists of severance costs of $2.6 million for
workforce reductions and the $0.5 million charge for excess facilities costs. The impact of these
cost reductions on our liquidity is not significant, as these cost savings are expected to yield
actual cash savings within twelve months.
We recorded a charge to continuing operations of $3.0 million in the three and six months
ended March 31, 2007 which relates to a vacant leased facility in Billerica, Massachusetts and
fully recognized our remaining obligation on this lease and assumes that we will be unable to
sublease any portion of the facility over the remainder of the lease.
Interest Income and Expense
Interest income decreased by $0.6 million to $1.8 million, in the three months ended March 31,
2008, from $2.4 million in the three months ended March 31, 2007. This decrease primarily reflects
lower average investment balances. Interest income increased by $0.5 million to $5.0 million, in
the six months ended March 31, 2008, from
18
$4.5 million in the six months ended March 31, 2007. This increase is due primarily to higher
average investment balances and higher average interest rates.
Loss on Investment
During the three months ended March 31, 2008, we recorded a charge of $2.9 million to
write-down our minority equity investment in a closely-held Swiss public company to its fair value
as of the balance sheet date. This write-down reflects an other than temporary impairment of this
investment. The remaining balance of this investment at March 31, 2008 was $3.0 million.
Other (Income) Expense
We recorded other income, net of $1.2 million for the three months ended March 31, 2008
compared to other expense, net of $0.4 million for the three months ended March 31, 2007. This
increase is primarily due to favorable foreign exchange activity of $1.0 million. We recorded other
income, net of $0.8 million for the six months ended March 31, 2008 compared to other expense, net
of $0.9 million for the six months ended March 31, 2007. This increase is primarily due to
favorable foreign exchange activity of $1.7 million.
Income Tax Provision
We recorded an income tax provision of $0.9 million and $1.6 million in the three and six
months ended March 31, 2008 respectively, compared to a provision of $1.5 million and $2.1 million
in the three and six months ended March 31, 2007. The tax provision recorded for both periods is
principally attributable to alternative minimum taxes along with foreign income and interest
related to unrecognized tax benefits. We continued to provide a full valuation allowance for our
net deferred tax assets at March 31, 2008, as we believe it is more likely than not that the future
tax benefits from accumulated net operating losses and deferred taxes will not be realized.
However, it is possible that the “more likely than not” criterion could be met in fiscal 2008 or a
future period, which could result in the reversal of a significant portion or all of the valuation
allowance, which, at that time, would be recorded as a tax benefit in the consolidated statements
of operations.
Discontinued Operations
We recognized an additional gain of $0.4 million, net of tax of $0, in the three months ended
March 31, 2008 related to the resolution of certain contingencies arising from the sale of our
software division to Applied Materials which was completed on March 30, 2007. We recorded income
from the operation of our discontinued software business of $8.1 million and $13.3 million for the
three and six months ended March 31, 2007. There was no operating activity associated with this
discontinued business in the three and six months ended March 31, 2008.
Liquidity and Capital Resources
We operate in a highly cyclical market and a current economic environment that makes
estimation of future revenues, results of operations and net cash flows highly uncertain.
At March 31, 2008, we had cash, cash equivalents and marketable securities aggregating $183.1
million. This amount was comprised of $113.3 million of cash and cash equivalents, $42.0 million of
investments in short-term marketable securities and $27.8 million of investments in long-term
marketable securities. At September 30, 2007, we had cash, cash equivalents and marketable
securities aggregating $274.6 million. This amount was comprised of $168.2 million of cash and cash
equivalents, $80.1 million of investments in short-term marketable securities and $26.3 million of
investments in long-term marketable securities.
Cash provided by operations was $5.2 million for the six months ended March 31, 2008, and was
primarily attributable to our non-cash depreciation and amortization of $17.0 million and
compensation expense related to common stock and options of $4.5 million, partially offset by our
net loss of $9.7 million and a reduction of $8.6 million in our net working capital. The $8.6
million change in working capital was primarily the result of decreased accrued expenses of $12.8
million, decreased accounts payable levels of $10.5 million and an increased inventory balance of
$6.8 million. Other changes in working capital included decreased accounts receivable balances of
$15.2
19
million due to the reduced level of business, a decrease in prepaid expenses and other current
assets of $3.2 million and an increase in deferred revenue of $3.1 million.
Cash provided by investing activities was $26.0 million for the six months ended March 31,
2008, and is principally comprised of net sales of marketable securities of $36.9 million,
partially offset by $10.7 million used for capital additions. The largest capital addition is $6.6
million of capitalized costs associated with our ongoing project to integrate the company on a
single Oracle ERP system.
While we have no significant firm capital commitments, the Oracle ERP system is expected to
cost approximately $22.0 million when fully implemented, of which $13.9 million has been incurred
through March 31, 2008 and is included in construction in progress within property, plant and
equipment. We will continue to make capital expenditures to support our business, and may also use
our resources to acquire companies, technologies or products that complement our business.
Cash used in financing activities was $88.7 million for the six months ended March 31, 2008,
and is primarily due to the share repurchase program. During six months ended March 31, 2008, we
purchased 7,401,869 shares of our common stock for a total of $90.2 million in connection with the
share repurchase program.
At March 31, 2008, we had approximately $0.7 million of an uncommitted demand promissory note
facility still in use, all of it for letters of credit.
We believe that we have adequate resources to fund our currently planned working capital and
capital expenditure requirements for both the short and long-term as well as our stock repurchase
plan announced on November 9, 2007. However, the cyclical nature of the semiconductor industry
makes it difficult for us to predict future liquidity requirements with certainty. We may be unable
to obtain any required additional financing on terms favorable to us, if at all. If adequate funds
are not available on acceptable terms, we may be unable to fund our expansion, successfully develop
or enhance products, respond to competitive pressure or take advantage of acquisition
opportunities, any of which could have a material adverse effect on our business. In addition, we
are subject to litigation related to our stock-based compensation restatement which could have an
adverse affect on our existing resources.
Recently Enacted Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No.
48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN
No. 48”). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income
Taxes”. FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN No. 48 also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. We adopted FIN No. 48 on
October 1, 2007. The effect of the adoption did not materially affect our financial position or
results of operations.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS
157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. SFAS 157 applies under
other accounting pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is the relevant measurement
attribute. Accordingly, SFAS 157 does not require any new fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years, with earlier adoption permitted. The provisions of SFAS 157 will be applied
prospectively as of the beginning of the fiscal year in which it is initially applied. We do not
believe that the adoption of SFAS 157 will have a material impact on our financial position or
results of operations.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets
and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS
159 permits entities to choose to measure many financial instruments and certain other items at
fair value and is effective as of the
20
beginning of the Company’s fiscal year beginning after November 15, 2007. We do not believe
that the adoption of SFAS 159 will have a material impact on our financial position or results of
operations.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS
141R”). SFAS 141R significantly changes the accounting for business combinations in a number of
areas including the treatment of contingent consideration, pre-acquisition contingencies,
transaction costs, restructuring costs and income taxes. Statement 141 applies prospectively to
business combinations for which the acquisition date is on or after the beginning of the fiscal
year beginning after December 15, 2008. We are currently evaluating the potential impact of SFAS
141R on our financial position and results of operations.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements — An amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB 51 to
establish accounting and reporting standards for the noncontrolling interest in a subsidiary and
for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be reported as equity in
the consolidated financial statements. The amount of net income attributable to the noncontrolling
interest will be included in consolidated net income on the face of the income statement. Statement
160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in
deconsolidation are equity transactions if the parent retains its controlling financial interest.
In addition, this Statement requires that a parent recognize a gain or loss in net income when a
subsidiary is deconsolidated. SFAS 160 is effective for fiscal years beginning after December 15,
2008. At this point in time, we believe that there will not be a material impact in connection with
SFAS 160 on our financial position or results of operations.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities — An amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 amends and
expands the disclosure requirements of SFAS 133 with the intent to provide users of financial
statements with an enhanced understanding of (a) how and why an entity uses derivative instruments,
(b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its
related interpretations, and (c) how derivative instruments and related hedged items affect an
entity’s financial position, financial performance and cash flows. SFAS 161 is effective for fiscal
years and interim periods beginning after November 15, 2008. We do not believe that the adoption of
SFAS 161 will have a material impact on our financial position or results of operations.
Item 3. Quantitative and Qualitative Disclosure 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 March 31, 2008, the unrealized gain on marketable securities, excluding our investment in a
closely-held Swiss public company, was $202,000 and the change in this amount for the six months
ended March 31, 2008 was an unrealized loss of $630,000. A hypothetical 100 basis point change in
interest rates would result in an annual change of approximately $2.7 million in interest income
earned.
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 and a variety of Asian currencies. Sales
in currencies other than the U.S. dollar were 14.5% of our total sales for the three months ended
March 31, 2008. We also purchase materials from some suppliers outside of the United States that is
transacted in currencies other than the U.S. dollar. In the six months ended March 31, 2008, we
recorded foreign exchange gains related to receivables of $0.1 million, and foreign exchange losses
of $0.5 million related to payables due to the general weakening of the U.S. dollar in this period.
The changes in currency exchange rates relative to the U.S. dollar during the six months ended
March 31, 2008 compared to the currency exchange rates at September 30, 2007 resulted in an
increase in net assets of $6.8
21
million that we reported as a separate component of comprehensive income. The impact of a
hypothetical 10% change in foreign exchange rates at March 31, 2008 is not considered material. If
currency exchange rates had been 10% different throughout the three months ended March 31, 2008
compared to the currency exchange rates actually experienced, the impact on our net earnings would
have been approximately $0.3 million.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this
report, and pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
our chief executive officer and chief financial officer and have concluded that our disclosure
controls and procedures are effective to ensure that information required to be disclosed by us in
the reports that we file under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported in accordance with the time specified by the SEC’s rules and forms.
Change in Internal Controls. There were no changes in our internal control over financial
reporting that occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Brooks has been involved in various regulatory proceedings and private litigation matters
involving equity incentive practices. A description of this litigation is included in our annual
report on Form 10-K for the fiscal year ended September 30, 2007, and in our quarterly report on
Form 10-Q for the quarterly period ended December 31, 2007. In furtherance of our cooperation with
the Securities and Exchange Commission (“SEC”), on April 30, 2008, we entered into an agreement
with the SEC tolling any statute of limitations applicable to any action or proceeding brought by
the SEC against Brooks from December 12, 2007 to June 15, 2008. With respect to the federal
derivative action captioned as In re Brooks Automation, Inc. Derivative Litigation pending in the
United States District Court for the District of Massachusetts, the court has scheduled a hearing
on defendants’ motions to dismiss for June 4, 2008.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On November 9, 2007, we announced that our Board of Directors authorized a stock repurchase
plan to buy up to $200,000,000 of our outstanding common stock. The following table provides
information concerning shares of the Company’s Common Stock $0.01 par value purchased in connection
with the stock repurchase plan during the three months ended March 31, 2008.
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Maximum |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number (or |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate |
|
| |
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Dollar Value) of |
|
| |
|
Total |
|
|
|
|
|
|
Shares Purchased as |
|
|
Shares that May Yet |
|
| |
|
Number |
|
|
|
|
|
|
Part of Publicly |
|
|
be Purchased Under |
|
| |
|
of Shares |
|
|
Average Price Paid |
|
|
Announced Plans |
|
|
the Plans or |
|
| Period |
|
Purchased |
|
|
per Share |
|
|
or Programs |
|
|
Programs |
|
January 1 — 31, 2008 |
|
|
3,005,400 |
|
|
$ |
11.87 |
|
|
|
3,005,400 |
|
|
$ |
135,112,937 |
|
February 1 — 29, 2008 |
|
|
1,724,838 |
|
|
|
12.33 |
|
|
|
1,724,838 |
|
|
|
113,843,420 |
|
March 1 — 31, 2008 |
|
|
413,445 |
|
|
|
9.77 |
|
|
|
413,445 |
|
|
|
109,806,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
5,143,683 |
|
|
$ |
11.86 |
|
|
|
5,143,683 |
|
|
$ |
109,806,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides information concerning shares of the Company’s 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 shares of
restricted stock during the three months ended March 31, 2008.
22
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number (or |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate |
|
| |
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Dollar Value) of |
|
| |
|
Total |
|
|
|
|
|
|
Shares Purchased as |
|
|
Shares that May Yet |
|
| |
|
Number |
|
|
|
|
|
|
Part of Publicly |
|
|
be Purchased Under |
|
| |
|
of Shares |
|
|
Average Price Paid |
|
|
Announced Plans |
|
|
the Plans or |
|
| Period |
|
Purchased |
|
|
per Share |
|
|
or Programs |
|
|
Programs |
|
January 1 — 31, 2008 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
February 1 — 29, 2008 |
|
|
6,073 |
|
|
|
10.08 |
|
|
|
6,073 |
|
|
|
— |
|
March 1 — 31, 2008 |
|
|
20,671 |
|
|
|
9.69 |
|
|
|
20,671 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
26,744 |
|
|
$ |
9.78 |
|
|
|
26,744 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the stockholders of the Company was held on February 8, 2008. At this
meeting, the stockholders were asked to and did vote on the following proposals:
| |
1. |
|
To elect eight directors to serve for the ensuing year and until their successors are
duly elected. |
| |
|
|
|
|
|
|
|
|
| |
|
Votes For |
|
Withhold |
A. Clinton Allen |
|
|
58,708,421 |
|
|
|
6,647,771 |
|
Robert J. Lepofsky |
|
|
64,538,233 |
|
|
|
817,959 |
|
Joseph R. Martin |
|
|
64,368,654 |
|
|
|
987,538 |
|
John K. McGillicuddy |
|
|
64,026,561 |
|
|
|
1,329,631 |
|
Krishna G. Palepu |
|
|
64,643,128 |
|
|
|
713,064 |
|
Kirk P. Pond |
|
|
64,693,904 |
|
|
|
662,288 |
|
Alfred Woollacott, III |
|
|
64,032,410 |
|
|
|
1,323,782 |
|
Mark S. Wrighton |
|
|
64,029,605 |
|
|
|
1,326,587 |
|
| |
2. |
|
To ratify the selection of PricewaterhouseCoopers LLP as our independent registered
accounting firm for the 2008 fiscal year. |
| |
|
|
|
|
|
|
|
|
| Votes For |
|
Votes Against |
|
Abstentions |
63,417,939 |
|
|
1,908,530 |
|
|
|
29,723 |
|
Item 6. Exhibits
The following exhibits are included herein:
| |
|
|
| Exhibit No. |
|
Description |
10.01
|
|
Employment Agreement, dated as of January 28, 2008, by and
between the Company and Martin S. Headley (incorporated
herein by reference to Exhibit 10.1 of the Company’s current
report on Form 8-K, filed on January 31, 2008). |
|
|
|
31.01
|
|
Rule 13a-14(a), 15d-14(a) Certification |
|
|
|
31.02
|
|
Rule 13a-14(a), 15d-14(a) Certification |
|
|
|
32
|
|
Section 1350 Certifications |
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
|
|
|
|
| |
BROOKS AUTOMATION, INC.
|
|
| DATE: May 8, 2008 |
/s/ Robert J. Lepofsky
|
|
| |
Robert J. Lepofsky |
|
| |
Director, President and Chief Executive Officer
(Principal Executive Officer) |
|
| |
| |
|
|
| DATE: May 8, 2008 |
/s/ Martin S. Headley
|
|
| |
Martin S. Headley |
|
| |
Executive Vice President and Chief Financial Officer
(Acting Principal Accounting Officer) |
|
25
EXHIBIT INDEX
| |
|
|
| Exhibit No. |
|
Description |
10.01
|
|
Employment Agreement, dated as of January 28, 2008, by and
between the Company and Martin S. Headley (incorporated
herein by reference to Exhibit 10.1 of the Company’s current
report on Form 8-K, filed on January 31, 2008). |
|
|
|
31.01
|
|
Rule 13a-14(a), 15d-14(a) Certification |
|
|
|
31.02
|
|
Rule 13a-14(a), 15d-14(a) Certification |
|
|
|
32
|
|
Section 1350 Certifications |
26