BROOKS AUTOMATION INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
[X]		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

		For the quarterly period ended: December 31, 2003


[ ]		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		04-3040660

(State or other jurisdiction of incorporation or organization)		(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 [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [X] No [ ]

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date, January 31, 2004:


Common stock, $0.01 par value		44,445,287 shares

TABLE OF CONTENTS


		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosure About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
EX-31.01 CERTIFICATION OF THE C.E.O.
EX-31.02 CERTIFICATION OF THE C.F.O.
EX-32 SECT. 1350 CERTIFICATION OF C.E.O. & C.F.O.

BROOKS AUTOMATION, INC.

INDEX


			PAGE NUMBER

PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
		Consolidated Balance Sheets as of December 31, 2003 (unaudited) and September 30, 2003		3
		Consolidated Statements of Operations for the three months ended December 31, 2003 and 2002 (unaudited)		4
		Consolidated Statements of Cash Flows for the three months ended December 31, 2003 and 2002 (unaudited)		5
		Notes to Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk			31
Item 4.	Controls and Procedures			32
PART II.	OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8-K			33
Signatures				34

BROOKS AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS


					December 31,			September 30,
					2003			2003

					(unaudited)
					(In thousands, except share and per share data)
Assets
	Current assets
		Cash and cash equivalents			$	212,267		$	124,999
		Marketable securities				3,039			4,481
		Accounts receivable, net				63,965			69,374
		Inventories				63,445			53,212
		Prepaid expenses and other current assets				19,114			17,946

				Total current assets		361,830			270,012
	Property, plant and equipment
		Buildings and land				38,830			38,830
		Computer equipment and software				62,690			60,721
		Machinery and equipment				26,879			27,303
		Furniture and fixtures				14,840			15,983
		Leasehold improvements				26,032			25,982
		Construction in progress				1,574			938

						170,845			169,757
		Less: Accumulated depreciation and amortization				(108,276	)		(104,932	)

						62,569			64,825
	Long-term marketable securities					97,374			69,108
	Goodwill					69,058			68,958
	Intangible assets, net					9,635			10,592
	Other assets					9,278			9,206

				Total assets	$	609,744		$	492,701

Liabilities, minority interests and stockholders’ equity
	Current liabilities
		Current portion of long-term debt			$	68		$	98
		Accounts payable				32,403			26,770
		Deferred revenue				34,254			33,686
		Accrued warranty and retrofit costs				11,942			11,809
		Accrued compensation and benefits				15,843			14,808
		Accrued retirement benefit				9,899			9,899
		Accrued restructuring costs				7,186			10,908
		Accrued income taxes payable				10,505			10,165
		Accrued expenses and other current liabilities				11,979			16,714

			Total current liabilities			134,079			134,857
	Long-term debt					175,022			175,025
	Accrued long-term restructuring					17,070			18,359
	Other long-term liabilities					1,551			1,467

				Total liabilities		327,722			329,708

	Contingencies (Note 10)
	Minority interests					639			707

Stockholders’ equity
		Preferred stock, $0.01 par value, 1,000,000 shares authorized, one share issued and outstanding				—			—
		Common stock, $0.01 par value, 100,000,000 shares authorized, 44,214,293 and 37,266,181 shares issued and outstanding at December 31, 2003 and September 30, 2003, respectively				442			373
		Additional paid-in capital				1,227,239			1,102,215
		Deferred compensation				(56	)		(1,014	)
		Accumulated other comprehensive income				13,761			11,846
		Accumulated deficit				(960,003	)		(951,134	)

				Total stockholders’ equity		281,383			162,286

				Total liabilities, minority interests and stockholders’ equity	$	609,744		$	492,701

The accompanying notes are an integral part of these unaudited consolidated financial statements.

BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)
(In thousands, except per share data)


			Three months ended
			December 31,
			2003			2002

Revenues
	Product		$	55,275		$	54,999
	Services			27,271			29,856

		Total revenues		82,546			84,855

Cost of revenues
	Product			37,130			38,681
	Services			15,171			21,800

		Total cost of revenues		52,301			60,481

Gross profit				30,245			24,374

Operating expenses
	Research and development			16,068			19,674
	Selling, general and administrative			19,767			34,106
	Amortization of acquired intangible assets			943			2,047
	Restructuring and acquisition-related charges			—			21,096

		Total operating expenses		36,778			76,923

Loss from operations				(6,533	)		(52,549	)
Interest income				936			1,753
Interest expense				2,369			2,573
Other (income) expense, net				(42	)		12,712

Loss before income taxes and minority interests				(7,924	)		(66,081	)
Income tax provision				1,013			4,815

Loss before minority interests				(8,937	)		(70,896	)
Minority interests in income (loss) of consolidated subsidiaries				(68	)		90

Net loss			$	(8,869	)	$	(70,986	)

Loss per share
	Basic and diluted		$	(0.23	)	$	(1.95	)
Shares used in computing loss per share
	Basic and diluted			38,484			36,360

The accompanying notes are an integral part of these unaudited consolidated financial statements.

BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


					Three months ended
					December 31,
					2003			2002

					(unaudited)
					(In thousands)
Cash flows from operating activities
	Net loss				$	(8,869	)	$	(70,986	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization				4,558			14,839
		Compensation expense related to common stock options				958			1,978
		Provision for losses on accounts receivable				34			222
		Reserves for excess and obsolete inventories and other inventory adjustments				458			1,309
		Impairment of assets				—			6,045
		Impairment of Shinsung				—			11,543
		Amortization of debt discount and issuance costs				210			210
		Minority interests				(68	)		90
		Loss on disposal of long-lived assets				49			296
		Changes in operating assets and liabilities, net of acquired assets and liabilities:
			Accounts receivable			6,083			12,247
			Inventories			(9,427	)		688
			Prepaid expenses and other current assets			(665	)		(1,448	)
			Accounts payable			5,132			(10,419	)
			Deferred revenue			(611	)		264
			Accrued warranty and retrofit costs			697			(174	)
			Accrued compensation and benefits			763			2,713
			Accrued acquisition-related and restructuring costs			(5,062	)		2,412
			Accrued expenses and other current liabilities			(4,409	)		2,128

				Net cash used in operating activities		(10,169	)		(26,043	)

Cash flows from investing activities
	Purchases of fixed assets					(1,214	)		(4,650	)
	Acquisition of businesses, net of cash acquired					—			(702	)
	Purchases of marketable securities					(104,532	)		(6,967	)
	Sale/maturity of marketable securities					77,936			22,198
	Proceeds from sale of long-lived assets					—			13
	Increase in other assets					(211	)		(370	)

				Net cash provided by (used in) investing activities		(28,021	)		9,522

Cash flows from financing activities
	Payments of long-term debt and capital lease obligations					(33	)		(24	)
	Proceeds from issuance of common stock, net of issuance costs					125,093			2

				Net cash provided by (used in) financing activities		125,060			(22	)

Effects of exchange rate changes on cash and cash equivalents						398			1,010

Net increase (decrease) in cash and cash equivalents						87,268			(15,533	)
Cash and cash equivalents, beginning of period						124,999			125,297

Cash and cash equivalents, end of period					$	212,267		$	109,764

The accompanying notes are an integral part of these unaudited consolidated financial statements.

BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Basis of Presentation

The unaudited 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.

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, 2003.

Certain amounts in previously issued financial statements have been reclassified to conform to current presentation.

In December, 2000 the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46R”), which clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements”, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support and replaces FASB Interpretation No. 46. FIN 46 provides guidance on the identification of entities for which control is achieved through means other than through voting rights (“variable interest entities” or “VIEs”) and how to determine when and which business enterprise should consolidate the VIE. In addition, FIN 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. This interpretation is effective in financial statements of public entities that have interests in variable interest entities or potential variable interest entities commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application of this pronouncement by public entities for all other types of entities, subject to FIN 46R, is required in financial statements for periods ending after March 15, 2004. The adoption of FIN 46R is not expected to have a material impact on the Company’s financial position or results of operations.

In December 2003, the Staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition”, which supercedes SAB 101, “Revenue Recognition in Financial Statements”. The primary purpose of SAB 104 is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” Additionally, SAB 104 rescinds the SEC’s “Revenue Recognition in Financial Statements Frequently Asked Questions and Answers” (the “FAQ”) issued with SAB 101 that had been codified in SEC Topic 13, “Revenue Recognition”. Selected portions of the FAQ have been incorporated into SAB 104. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The adoption of SAB 104 had no impact on the Company’s financial position or results of operations.

BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued

2. Goodwill and Intangible Assets

Components of the Company’s identifiable intangible assets are as follows (in thousands):


	December 31, 2003						September 30, 2003

			Accumulated		Net book				Accumulated		Net book
	Cost		amortization		Value		Cost		amortization		value

Patents	$	7,179	$	6,766	$	413	$	7,179	$	6,743	$	436
Acquired technology		30,385		24,861		5,524		30,385		24,214		6,171
License agreements		305		305		—		305		305		—
Trademarks and trade names		2,532		2,010		522		2,532		1,949		583
Non-competition agreements		1,726		1,605		121		1,726		1,545		181
Customer relationships		6,517		3,462

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