GenEng News  May 21  Comment 
The Cleveland Clinic and Brooks Automation say they will launch a 21,000-square-foot biorepository in Cleveland’s Fairfax neighborhood to improve researchers’ study of human tissue samples and advance personalized medicine. The facility will...


General Overview


Brooks Automation was founded in 1978 initially to develop and market automated substrate handling equipment for semiconductor manufacturing and became a publicly traded company in February 1995. Since, BRKS has grown significantly from a niche supplier of wafer handling robot modules for vacuum-based processes into a broader based supplier of products and services most notably through the consolidation with Helix Technology Corporation in 2005.

Business Overview

Brooks Automation is a leading provider of automation, vacuum and instrumentation solutions and is a highly valued business partner to original equipment manufactures (OEM) and equipment users throughout the world. Brooks serves markets where equipment productivity and availability is a critical factor for success, typically in demanding temperature and/or pressure environments. The largest served market is the semiconductor manufacturing industry. Brooks also provides unique solutions to customers in data storage, advanced display, analytical instruments, solar and LED markets. Brooks develops and delivers differentiated solutions that range from proprietary products to highly respected manufacturing services.

Product Segmentation

Brook's products are broken down into critical components, automation systems, and global customer support.

  • Critical Components contributed $286.59M, or 48.33%, to 2010 revenues. Being one of the more profitable segments, critical components contributed $94.34M, or 56.73%, of gross profit for 2010. Critical was responsible for $33.31M, or 63.71%, of operating income for the year 2010.
  • Automation Systems generated $242.24M, or 40.85%, of revenues for the year 2010. Automation produced $57.97M, or 34.86%, of gross profit and gave rise to $21.95M, or 41.98%, to operating income.
  • Global Customer Support conceived $64.15M, or 10.82% of revenues for the year 2010. Global customer support is the only segment where there is both services ($60.80M or 10.25%) and product ($3.35M or 0.56%) sales. Global customer support contributed $13.99M or 8.41% of gross profit and was responsible for a operating loss of -$2.98M.


Geograpic Segmentation

Brook's operations in North America include 94.65% of their assets and account for 54.39% of their revenue. This discrepancy is because the vast majority of Brook's overhead (research & development and corporate headquarters) is located within the United States. The Asia-Pacific region contributes 34.26% ($203.17M) of revenue while only consuming 4.83% ($3.08M) of assets. Lastly, their European geographic segment generates 11.34% ($67.26M) of revenues through consuming an insignificant 0.52% ($330K) of assets. It is important to note that in 2007 (before the economic downturn) North America contributed significantly more revenues (66.77% or $495.25M) while consuming more dollar value of assets ($73.56M), which represented a smaller percentage of assets (91.10%). Their Asian Pacific geographic segment produced much less revenues (19.93% or $148.14M) but consumed approximately double the assets (8.20% or $6.63M). Lastly, Europe created more dollar value revenues ($98.86M) and percentage of revenues (13.30%) before the recession before decreasing to current levels, their consumption of firm assets remains relatively even at $560K or 0.69% of assets.


Semiconductor Markets

The primary market Brooks serves is the global semiconductor industry, a highly cyclical industry which has a long term growth profile, both in terms of unit volumes and device complexity. This growth is increasingly focused in Asia, Brooks currently derives 34.26% of revenues form the Asia-Pacific region. The manufacturing process of semiconductor processes demands extremely precise, clean, and controlled environments.The requirement for efficient, higher throughput and extremely clean manufacturing for semiconductor wafer fabs and other high performance electronic-based products has created a substantial market for substrate handling automation (moving the wafers around and between tools in a semiconductor fab), tool automation (the use of robots and modules used in conjunction with and inside process tools that move wafers from station to station), and vacuum systems technology to create and sustain the environment necessary to fabricate various products. The end products for semiconductor devices include computers, telecommunications equipment, automotive, consumer electronics and wireless communications devices.

Downturn Brooks saw a dramatic decrease in both Revenue and EPS with the economic downturn starting 2008 and reversing March 2009.


Growth Opportunities

Semiconductors have drastically increased in complexity the trend is expected to continue. Current semiconductor production can include up to 70 different types of processes and metrology tools, totaling as many as 500 tools or more. Up to 40% of these tools perform processes in a vacuum, such as removing, depositing, or measuring material on wafer surfaces. As the complexity of semiconductors continues to increase, the number of process steps that occur in a vacuum environment also increases, resulting in a greater need for both automation and vacuum technology solutions due to the sensitive handling requirements and increased number of tools.

Brooks has been increasing their presence in global markets outside of the semiconductor industry, primarily expanding their vacuum-related technologies and services. Much like semiconductors, markets such as data storage, advanced flat panel displays, industrial instruments, solar and LED have begun to experience an increasing need for the technologies and services that Brooks provides.

Analyst Coverage

  • Barclays, CJ Muse (212) 526-8945
  • Brigantine Advisors, Darice Liu (646) 867-2337
  • Caris & Co., Ben Pang (415) 489-2522
  • Citigroup, Tim Arcuri (415) 951-1734
  • Credit Suisse, Satya Kumar (415) 836-6332
  • Deutsche Bank, Hari Chandra (212) 250-8670
  • Needham and Company, Edwin Mok (415) 262-4896
  • Sidoti & Company, LLC, Kelly Anderson (212) 453-7083

Business Analysis


To develop intimate relations with their clients, crucial to brooks because a few customers make up a significant portion of their revenues, brooks offers free training at Brooks University to customers. The first and free class is Safety and Operations offered at brook's corporate headquarters in Chelmsford Mass. Brooks University is a state of the art facility with separate training classrooms for classroom presentations; conducted by Certified Instructors, and an equipment lab for hands on training. In addition to the free training, Brooks Automation offers more in depth courses, including hardware and supplier training, which are priced and scheduled on a customized basis. Brooks hardware training is offered on all Brooks Automation product lines and is offered on a flexible schedule. The formal training programs have been professional designed to provide participants with the theory and hands-on experience to ensure that they are able to confidently work with brooks hardware, software, and controller products. A list of specific training course descriptions is available at Brook's website: http://www.brooks.com/pages/556_course_descriptions.cfm .

Human Resources

Management Team:

  • DR. STEPHEN S. SCHWARTZ - PRESIDENT & CHIEF EXECUTIVE OFFICER (Appointed President of Brooks Automation on April 5, 2010)

Dr. Schwartz is a highly regarded senior executive well known throughout the global semiconductor industry. He began his career at Applied Materials, Inc. in Santa Clara, California and over the course of fourteen years he held a number of senior leadership roles including head of Applied’s Global Service Business Group and President of their first software business unit. Following Applied, Dr. Schwartz was the President, Chief Executive Officer and Chairman of Asyst Technologies, Inc. for eight years.


Martin S. Headley was appointed Executive Vice president and CFO in January 2008.

Serving as a key member of the senior leadership team, Martin plays a central role in developing and implementing the corporate strategic plan, driving operational efficiencies, improving financial performance, and increasing the pace of profitable growth of Brooks. He reports to Stephen S. Schwartz, President and Chief Executive Officer.

Prior to joining Brooks, Mr. Headley was the Executive Vice President and Chief Financial Officer for Teleflex Inc., a $2.6 billion global producer of specialty engineered products. Earlier he was instrumental in the transformation of Roper Industries, Inc. and the North American arm of McKechnie, plc as Chief Financial Officer of each firm. He began his career at Arthur Andersen & Co. serving clients throughout the world for thirteen years.

Mr. Headley is qualified as a Chartered Accountant in the United Kingdom and a Certified Public Accountant in the United States. He has served on various company boards and is a member of American Institute of Certified Public Accountants.


Steven A. Michaud, Senior Vice President & Group General Manager is responsible for all aspects of engineering, product planning, marketing and business operations for Brooks Systems and Components. Michaud reports directly to Stephen S. Schwartz, President & Chief Executive Officer. Mr. Michaud joined Brooks Automation in 2005 when the Company completed its acquisition of Helix Technology. During Mr. Michaud’s seventeen year career at Helix’s CTI-Cryogenics Division he was promoted into positions of increasing responsibility in engineering, manufacturing, and supply chain management including an assignment as General Manager of the Granville-Phillips Vacuum Measurement business where he led the integration after it had been acquired by Helix. Since the acquisition in 2005 Mr. Michaud has served Brooks in a number of senior management positions.

Over the course of his career, Mr. Michaud’s work resulted in two patent awards for linear drive motor and cryogenic water pump technologies. Mr. Michaud holds a Master of Science Degree in Manufacturing Engineering from the University of Massachusetts-Lowell and a Bachelor of Science Degree in Manufacturing Engineering Technology from the Wentworth Institute of Technology


Bill Montone joined Brooks in October 2005 when the company merged with Helix Technology Corporation as Senior Vice President – Human Resources. In this role, he has worldwide responsibility for talent acquisition/retainment; organizational development; employee relations; compensation & benefits; and training. He reports directly to Stephen S. Schwartz, President & Chief Executive Officer. Mr. Montone had served as Vice President of Human Resources at Helix since 1998. During his tenure at Helix, Mr. Montone’s responsibilities included many of the same for which he is responsible in his current position.

Earlier in his career, Mr. Montone spent twelve years at A.T. Cross in Lincoln, Rhode Island in a variety of senior human resource roles. He was also head of compensation, benefits and HRIS at Rogers Corporation in Connecticut, where he worked for 8 years.

Mr. Montone holds a Master of Arts in Industrial Relations from the University of Minnesota and a Bachelor of Science in Business Administration from the University of Rhode Island.


Shaun Wilson, Senior Vice President Customer Satisfaction, is responsible for Global Customer Operations (GCO) at Brooks. GCO provides service and repair support for Brooks’ global installed base of Critical Components and Systems. Mr. Wilson reports directly to Stephen S. Schwartz, CEO. Prior to joining Brooks in 2008, Mr. Wilson worked for Advanced Energy Industries as Senior Vice President Worldwide Operations, Helix Technology Corporation as VP and General Manager of CTI Cryogenics and at Eaton Corporation (now Axcelis) as Director of Marketing.

Mr. Wilson holds a Bachelor of Science in Chemistry from the University of California


Thomas R. Leitzke, Senior Vice President of Supply Chain and Manufacturing Operations, is responsible for developing and executing an integrated supply chain strategy, to build a strong operations talent base and lead daily operations. In this position Tom reports directly to Stephen S. Schwartz, CEO. Mr. Leitzke joined Brooks in July 2010 and brings to Brooks significant global sourcing and international experience. He was previously a senior operations executive for Siemens Information Systems, Applied Materials, Inc., Asyst Technologies and Silicon Graphics, Inc.

Mr. Leitzke holds a Bachelor of Science degree in Mechanical Engineering from Indiana Institute of Technology


Clint Haris, Senior Vice President of the Systems Solutions Group, is responsible for the engineering, marketing and operations of Brooks’ vacuum and atmospheric systems. In this position Mr. Haris reports directly to Stephen S. Schwartz, CEO. Since joining Brooks in 2000, Mr. Haris has served in a variety of executive roles across Brooks' Product as well as Services Groups. Prior to Brooks, Mr. Haris worked for Motorola, Inc. where he was a member of the technical staff. At Motorola, Mr. Haris was part of the team responsible for developing 300mm semiconductor manufacturing technology as well as producing the world's first 300mm wafers.

Mr. Haris has over ten patents granted or pending as well as Bachelor of Science and Master of Science Degrees from Cornell University


Sally White was appointed Senior Vice President Brooks Global Services on November 29, 2010. Over the course of 18 years she held a number of business development and leadership roles at Smiths Group PLC. Prior to joining Brooks she held the position of Vice President Global Service Operations at Smiths where she was responsible for leading a team of over 500 service professionals in delivering critical aftermarket services to military, government and commercial customers. Her experience includes international assignments in Europe, Asia and the Americas. Her career includes a tenure with Prime Computer Inc. and a period spent working for the British Government.

Ms. White holds a MS Degree from Thames Valley University in London as well as a Diploma in Business Administration from Bletchley College UK


Jason W. Joseph joined Brooks Automation in March 2011 as vice president, general counsel and secretary, where he is responsible for the Company’s legal affairs, including corporate governance, securities, commercial contracts, litigation, compliance and regulatory activities. Mr. Joseph reports to Stephen S. Schwartz, President & Chief Executive Officer. From June 2007 until November 2010, Mr. Joseph served as vice president, general counsel and secretary of Unica Corporation, a leading provider of enterprise marketing management software and services, which was acquired by IBM in October 2010. Prior to that, Mr. Joseph was general counsel and secretary of MapInfo Corporation, a global provider of location intelligence solutions, from December 2003 until April 2007 when MapInfo was acquired by Pitney Bowes. Mr. Joseph also practiced law at Wilmer Cutler Pickering Hale and Dorr LLP (formerly Hale and Dorr LLP) in Boston.

Mr. Joseph holds a Juris Doctor degree from Northwestern University School of Law and a Bachelor of Arts degree from Loyola University Chicago

Board of Directors:

  • Joseph R Martin - Chairman of the Board Brooks Automation, Inc.

Mr. Joseph R. Martin is the Chairman of the Board at Brooks Automation and has been a director of the Company since June 2001. In addition to serving as a director of the Company Mr. Martin is also a member of the board of Soitec, Inc., a manufacturer of SOI wafers, since 2004, and SynQor, Incorporated, a manufacture of power solutions, since 2002. In June of 2006, Mr. Martin retired as Vice Chairman of the Board of Directors, and Office of the Chairman of Fairchild Semiconductor Corporation, a global supplier of power semiconductors. In 1997, Mr. Martin was one of the two executives that led the spinout of Fairchild Semiconductor from National Semiconductor Corp, and served as Fairchild's Executive Vice President and Chief Financial Officer from 1997 to 2003. Prior to the Fairchild spinout, Mr. Martin was the Vice President of Finance, Worldwide Operations, for National Semiconductor, from 1989 to 1997, with responsibilities for all operating divisions, manufacturing sites, and corporate financial planning. Previously, Mr. Martin was Senior Vice President and Chief Financial Officer and co-founder of VTC Incorporated from 1984 to 1989. Mr. Martin was also with Fairchild Semiconductor from 1979 to 1984, where he held numerous financial positions. Mr. Martin was a member of the board of directors of ChipPAC, Incorporated, a contract semiconductor assembly and test company, from 1999 to 2001. Mr. Martin also serves on the Board of Trustees of Embry-Riddle Aeronautical University.

  • Dr. Stephen S. Schwartz (Above)
  • A. Clinton Allen

Mr. A. Clinton Allen has been a director of the Company since October 2003. In addition to serving as a director of the Company, Mr. Allen is Chairman and Chief Executive Officer of A.C. Allen & Company, an investment banking consulting firm. From 1989 to 2002, Mr. Allen served as Vice Chairman of the Board of Psychemedics Corporation, Inc., a biotechnology company with a proprietary drug testing product, and as Chairman of the Board of Psychemedics from 2002 to 2003. Mr. Allen was Vice Chairman and a director of the DeWolfe Companies, a real estate firm, until it was acquired by Cendant Corporation in September 2002. Additionally, he was a director and member of the executive committee of Swiss Army Brands, maker of Swiss army knives, until it was acquired by Victorinox Corporation in August 2002. Mr. Allen is currently the non-executive chairman and a director of Collectors Universe, a provider of value added services to dealers and collectors. He also serves as a Lead Director of Steinway Musical Instruments Company, a manufacturer of musical instruments; as a director and member of the Executive Committee of LKQ Corporation, a supplier of recycled OEM automotive parts; and a director of Avantair, a provider of fractional aircraft shares for business and personal use

  • John K. McGillicuddy - Chairman of the Audit Committee Watts Water Technologies

Mr. John K. McGillicuddy has been a director of the Company since October 2003. Mr. McGillicuddy was a partner with the international accounting firm of KPMG LLP, a public accounting firm, from 1975 until his retirement in June 2000. During his tenure with KPMG, he served as an audit partner, SEC reviewing partner and in various management positions. Mr. McGillicuddy is also a member of the board of directors of Watts Water Technologies, Inc., a manufacturer of water safety and flow control products, as well as a member of the board of directors of Cabot Corporation, a chemical manufacturer. He is a former chairman of the Better Business Bureau of Massachusetts

  • Dr. C.S. Park

Dr. C.S. Park has been a director of the Company since April 2008. Prior to joining Brooks’ Board, from September 1996 through February 2000, he served as Chairman, President and CEO of Hyundai Electronics America in San Jose, California. Dr. Park served as President and CEO of Hynix Semiconductor Inc. from March 2000 to May 2002, and from June 2000 to May 2002 he also served as its Chairman. Dr. Park also served as Chairman of Maxtor Corporation from May 1998 until it was acquired by Seagate Technology in 2006. He continues to serve on the Seagate's board of directors. In addition to his corporate experiences, Dr. Park has also served as a Management Consultant at Ernst & Young Consulting Inc. in Seoul, South Korea, as well as a Managing Director, Investment Partner, and Senior Advisor to H&Q Asia Pacific, a private equity firm based in Palo Alto, California. In addition to his current position as a board member at Seagate Technology, Dr. Park also serves on the boards of Computer Sciences Corporation, Ballard Power Systems Inc. and Smart Modular Technologies, Inc

  • Kirk P. Pond - Retired President and Chief Executive Officer of Fairchild Semiconductor International Inc.

Mr. Pond has a great depth of experience in the semiconductor industry, beginning with Texas Instruments, Inc. in 1968. From June 1996 until May 2005, Mr. Pond was the President and Chief Executive Officer of Fairchild Semiconductor International, Inc., one of the largest independent semiconductor companies. He was a director with Fairchild Semiconductor beginning in 1997, and was the Chairman of the Board of Directors of that company from March 1997 until June 2006. He has since retired from the Fairchild Board. Prior to Fairchild Semiconductor’s separation from National Semiconductor, Mr. Pond had held several executive positions with National Semiconductor, including Executive Vice President and Chief Operating Officer. Prior executive management positions were with Fairchild Semiconductor Corporation, Texas Instruments and Timex Corporation. He also served on the Board of the Federal Reserve Bank of Boston from January 2004 until January 2007 and since 2005 has been a director of Wright Express Corporation, a leading provider of payment processing and information management services to the U.S. commercial and government vehicle fleet industry. Mr. Pond has also served on the advisory board of the University of Arkansas Engineering School since 1987

  • Dr. Marvin Schorr - Director Emeritus, Retired Chairman of Helix Technology

Dr. Schorr became a director of the Company on October 26, 2005. He served as Chairman of the Board of Helix Technology Corporation from August 1996 to December 2004. He served as President and Chief Executive Officer of Tech/Ops, Inc., from 1962 to 1987 and Chairman of the Board of that company from 1981 to 1987. In 1987 Tech/Ops was reorganized into three companies: Landauer, Inc., Tech/Ops Sevcon, Inc., and Tech/Ops Corporation, of which the former two are publicly owned manufacturers of technology-based products and services, and the latter was a privately owned consulting business that was dissolved in 1999. Dr. Schorr is a director of Tech/Ops Sevcon, Inc., where he served as Chairman from 1987 to 2004. He was Chairman of the Board of Directors of Landauer, Inc., and Tech/Ops Corporation, Inc., from 1987 to 1999

  • Alfred Woollacott, III - Retired Partner KPMG

Mr. Woollacott became a director of the Company on October 26, 2005. He is a certified public accountant and was a partner with the accounting firm of KPMG from 1979 until his retirement in September 2002. During his final year at KPMG, he was an engagement partner serving primarily the high technology and healthcare companies in the greater Boston area. He also served as an SEC Reviewing Partner and a Due Diligence Assistance Reviewing Partner. He is currently a board member of William Hart Realty Trust and the Hart Haven Community Association. Mr. Woollacott also serves as Director of Greencore Group PLC, an Irish corporation listed on the Irish Stock Exchange which is an international manufacturer of convenience food and ingredients

  • Dr. Mark Stephen Wright - Chancellor, Washington University in St. Louis

Chancellor Wrighton became a director of the Company on October 26, 2005. He has been the Chancellor of Washington University since July 1, 1995. He received his B.S. in chemistry from Florida State University in 1969 and his Ph.D. from the California Institute of Technology in 1972. Prior to becoming chancellor, he was a faculty member at the Massachusetts Institute of Technology for 23 years where he served as head of the chemistry department (1987-90), and as provost (1990-95). Chancellor Wrighton has received many awards for his research and scholarly writing, including the distinguished MacArthur Prize. Recognized widely for his research, he is the holder of 14 patents, author of more than 300 research papers, and co-author of the book, Organometallic Photochemistry. Active in public and professional affairs, he has served on numerous governmental panels, including the National Science Board. He is currently a director of Cabot Corporation, a chemical manufacturer, and Corning Incorporated, a manufacturer of specialty glass and ceramics. Wrighton was elected to membership in the American Academy of Arts and Sciences and the American Philosophical Society and he is a Fellow of the American Association for the Advancement of Science


Liquidity At September 30, 2010, Brooks had cash, cash equivalents and marketable securities aggregating $142.4 million. This amount was comprised of $59.8 million of cash and cash equivalents, $49.0 million of investments in short-term marketable securities and $33.6 million of investments in long-term marketable securities. Marketable securities are generally readily convertible to cash without an adverse impact.

Cash and cash equivalents were $59.8 million at September 30, 2010, a decrease of $0.2 million from September 30, 2009. This decrease was primarily due to $32.9 million of net purchases of marketable securities, capital expenditures of $3.5 million and purchases of intangible assets of $0.9 million. These decreases were partially offset by $27.9 million of cash provided by operating activities, proceeds from the sale of intellectual property of $7.8 million, proceeds from the sale of common stock through the employee stock purchase plan of $1.2 million and other cash items of $0.2 million.

Cash provided by operating activities was $27.9 million for fiscal year 2010, and was comprised of net income of $59.0 million, which includes $18.1 million of net non-cash related charges such as $18.4 million of depreciation and amortization, $6.6 million of stock-based compensation and $0.9 million of amortization of premiums paid on marketable security purchases which were partially offset by $7.8 million from the gain on sale of intellectual property rights. Further, cash provided by operations was reduced by net increases in working capital of $49.2 million, consisting primarily of $53.2 million of increases in accounts receivable, $31.3 million of increases in inventory and $4.1 million of payments related to restructuring programs implemented in prior years. The increases in accounts receivable and inventory were caused by a 171% increase in revenues for fiscal year 2010 as compared to the prior year. These increases in working capital were partially offset by $39.4 million of increases in accounts payable, $2.5 million of increases in accrued warranty and retrofit costs and $1.5 million of higher deferred revenues. The increases in these liabilities are the result of increased business activities.

Cash used in investing activities was $29.2 million for fiscal year 2010 and was attributable to net purchases of marketable securities of $32.9 million, capital expenditures of $3.5 million and intangible assets of $0.9 million. These uses of cash were partially offset by $7.8 million of proceeds from the sale of intellectual property rights and $0.2 million of proceeds from the sale of a minority interest in a closely-held Swiss public company.

Cash provided by financing activities for fiscal year 2010 was $1.2 million, and is comprised entirely of proceeds from the sale of common stock to employees through the employee stock purchase plan.

At September 30, 2009, Brooks had cash, cash equivalents and marketable securities aggregating $110.5 million. This amount was comprised of $60.0 million of cash and cash equivalents, $28.0 million of investments in short-term marketable securities and $22.5 million of investments in long-term marketable securities.

Cash and cash equivalents were $60.0 million at September 30, 2009, a decrease of $50.3 million from September 30, 2008. This decrease was primarily due to $56.5 million of cash used in operating activities and capital expenditures of $11.3 million. These decreases were partially offset by $16.5 million of net maturities of marketable securities.

Cash used in operations was $56.5 million for fiscal year 2009, and was primarily attributable to our net loss of $227.9 million, which included non-cash impairment charges of $107.3 million, depreciation and amortization of $25.9 million, stock-based compensation of $5.8 million, and other non-cash items of $1.6 million. Cash used in operations was partially offset by $30.8 million of changes in working capital which were attributable to our lower revenues, which led to a $30.0 million reduction in accounts receivable and a $21.8 million reduction in inventory. These reductions in working capital were partially offset by lower current liabilities of $25.5 million.

Cash provided by investing activities was $6.3 million for fiscal year 2009 and was attributable to net maturities of marketable securities of $16.5 million and $1.1 million in proceeds from the sale of property, plant and equipment, primarily related to the sale of a vacated manufacturing facility. These sources of cash were partially offset by $11.3 million of capital expenditures, including $7.4 million in expenditures related to our Oracle ERP implementation. We implemented the Oracle ERP system in most of our U.S. operations in July 2009. There will be additional costs to implement this system in Brook's international locations, however, future costs should not significantly impact Brooks financial position or cash flow.

At September 30, 2010, Brooks had approximately $0.3 million of letters of credit outstanding.

On June 21, 2010, Brooks filed a registration statement on Form S-3 with the SEC to sell up to $200 million of securities, before any fees or expenses of the offering. Securities that may be sold include common stock, preferred stock, warrants or debt securities. Any such offering, if it does occur, may happen in one or more transactions. Specific terms of any securities to be sold will be described in supplemental filings with the SEC.

Product Offerings

In the semiconductor industry, wafer handling robotics have emerged as a critical technology in determining the efficacy and productivity of the complex tools which process 300mm wafers. A tool is built around a process chamber using automation technology provided by a company such as Brooks, to move wafers into and out of the chamber. Today, OEMs build their tools using a cluster architecture, whereby several process chambers are mounted to one central frame that processes wafers. Brooks specializes in developing and building the handling system, as well as the vacuum technology used in these tools. Brook's products can be provided as an individual component or as a complete handling system. Automation products are provided to support both atmospheric and vacuum based processes. In order to facilitate the handling and transportation of wafers into a process tool, an equipment front-end module, or EFEM, is utilized. An EFEM serves as an atmospheric interface for wafers being fabricated by tools that use either atmospheric or vacuum processes.

Brooks provides high vacuum pumps and instrumentation which are required in certain process steps to condition the processing environment and to optimize that environment by maintaining pressure consistency of the known process gas. To achieve optimal production yields, semiconductor manufacturers must ensure that each process operates at carefully controlled pressure levels. Impurities or incorrect pressure levels can lower production yields, thereby significantly increasing the cost per useable semiconductor chip produced. This increase in costs could be disastrous due to the highly competitive nature of the semiconductor market and therefore great emphasis is placed on increasing usable semiconductor chips produced per batch/run. Brooks provides various pressure measurement instruments that form part of this pressure control loop on production processing equipment. Some key vacuum processes include: dry etching and dry stripping, chemical vapor deposition, or CVD, physical vapor deposition, or PVD, and ion implantation.

In addition to proprietary products, Brooks also provides “Extended Factory” services to build EFEMs, vacuum transfer modules and other sub-systems for an OEM specified design. These are typically provided to larger semiconductor OEMs. Brooks is the largest worldwide manufacturer of EFEMs through their Gresham, Oregon and Wuxi, China facilities.

Supply Chain

Brook's Automation has realized that an important key to success is good communication with suppliers and offers a supplier training course at Brooks University. They are also showing adaptability and flexibility to customers by offering the new online supplier training. The training program also recognizes the need for critical suppliers to be up to date with the most recent information by requiring that Quality Assurance / Quality Systems, Engineering / Design Control, Manufacturing / Process Controls, and Management / Account Management complete an online training. Brooks has designated two critical employees to run the Brooks Automation Supply Chain Management Team: Douglas W. Funsch, Director of Supplier Quality Assurance (ASG) who can be contacted at douglas.funsch@brooks.com or 978-262-5889 and Robert Dixon, Director of Supplier Chain Management (ASG) who can be contacted at robert.dixon@brooks.com or 978-262-1587.

SWORTS Analysis


Throughout fiscal years 2008 and 2009, Brooks implemented a number of cost reduction programs to improve productivity and align their cost structure with a reduced demand environment. The cost reduction efforts focused on actions that would decrease overhead cost structure for the foreseeable future. Although personnel have been added during fiscal year 2010, including temporary employees, these additions were made primarily to address increased production requirements and to invest in certain product development programs.

Brooks has revamped their manufacturing process during the recent recession including implementing an extended factory mix which leads to lower overhead absorption. Management believes these changes will allow for margins of 31-32% into the foreseeable future. To further improve the manufacturing process Brooks uses a just in time manufacturing strategy. The have outsourced non-critical componets such as machine parts, wire harnesses, and PC boards (helps to reduce fixed operating costs, improves working capital efficency, reduces manufacturing cycle times, and improves the flexibility to rapidly adjust production capacities). Brooks often uses single sourcing (quality contorl and economies of scale) for parts and materials, when they are readily available from other supply sources. They are also increasing the flexibility of their workforce with 17% of their employees part time, and its important to note that only 46 of their employees from a German manufacturing plant have a collective bargaining agreement. Due to these recent improvements management forecasts margins of 31-32% into the foreseeable future, much more optimistic than the 10 year average at 28.9%.


The market Brooks competes is significantly dependent on capital expenditures by semiconductor manufacturers and OEMs that are, in turn, dependent on the current and anticipated market demand for semiconductors. Demand for semiconductors is cyclical and has historically experienced periodic downturns. During economic downturns and periods of uncertainty capital expenditures by semiconductor manufactures decreases significantly.

During economic downturns Brook's must also maintain satisfactory capital expenditures to remain competitive in the future, regardless of the fact that revenues are decreasing while profits are shrinking. The recent reduction in capital expenditures could result in unsatisfactory future patent issuances, and ability to react to the rapidly changing semiconductor market. Brooks spent 23,439 during 2008, 11,339 during 2009, and 3,472 in 2010 on capital expenditures, this decrease of 85% between 2008 and 2010 could negatively impact future product offerings and their ability to remain competitive.


Brooks has seen favorable increases in their margin for Q1 2011 when compared to Q4 2010. For their Critical Solutions Segment their gross margin expanded to 41.7% from 40.5%, while their operating margin also increased to 18.1% from 18%. For Brook's Systems Solutions Segment their gross margin expanded to 23.9% from 22.9% while their operating margin also increased to 11.4% from 11%. These favorable increases in margins, if continued or possibly improved, would have a positive impact on

Risks / Threats:

The cyclical nature of the semiconductor manufacturing industry and the competitive pressure (price pressures may adversely affect sales) are important risks to note just due to the nature of their business.

Another risk is keeping up with the technological advances, a lag in R&D would dramatically impact both Brook's brand name and sales revenue. Brook's United States patents will expire at various times throughout April 2028 However, although R&D sales has been down ($31.2M for 2010, $31.6M for 2009 compared to $42.9M for 2008) management has indicated R&D will likely increase to pre-recession levels going into the future. Additionally, Brooks has recently received several new patents: on March 8th Brooks received patent 7,904,182 for "Scalable Motion Control System", March 3rd received patent 7,899,562 for "Methods and Systems for Controlling a Semiconductor Fabrication Process" and March first received patent 7,891,936 for "High Speed Substrate Aligner Apparatus." To ensure that trade secrets remain within the company Brooks requires all technical and management personnel to enter into proprietary information and nondisclosure agreements.

As with any manufacturing setting there are inherent risks along the lines of quality control. To combat this risk Brooks has adopted quality assurance procedures that include standard design practices, component selection procedures, vendor control procedures and comprehensive reliability testing and analysis to ensure the performance of our products.

Brooks has evolved into an international corporation with manufacturing facilities and customers throughout the world. For the fiscal year ended September 2010 46% of total revenues were derived from sales outside of North America and 47% of 2009 sales were from outside of North America.Brooks expects international sales, including increased sales in Asia, will continue to account for a significant portion of revenues. Additionally Brooks intends to maintain their global footprint in sales, service and repair operations.

An important risk to be noted is the few customers make up a significant portion of their revenues and the trend is expected to continue. Sales to their largest ten customers accounted for 63%, 44%, and 52% of total revenues in the fiscal years ended September 20 2010, 2009, and 2008, respectively. The loss of one or more of these major customers, a significant decrease in orders from one of these customers, or the inability of one or more customers to make payments to Brooks when they are due could materially affect revenue, business, and reputation.

There are also significant deferred tax liabilities which will depress future earnings. Brooks adopted the guidance related to uncertain tax positions on October 1, 2007. As of September 30, 2010, the total amount of net unrecognized tax benefits for uncertain tax positions and the accrual for the related interest was $15.0 million, of which $12.5 million represents a future cash outlay. We are unable to make a reasonably reliable estimate of the timing of the cash settlement for this liability since the timing of future tax examinations by various tax jurisdictions and the related resolution is uncertain.

In connection with the acquisition of Helix Technology Corporation in October 2005, Brooks assumed the responsibility for the Helix Employees’ Pension Plan (the “Plan”). Brooks froze the benefit accruals and future participation in the Plan as of October 31, 2006. currently, there is a liability of $5.9 million recorded on Brook's consolidated balance sheet at September 30, 2010 related to this Plan. The timing of payments for this Plan is impacted by a number of estimates including earnings on Plan assets and the timing of future distributions. Actual results may differ from these estimates, which may materially impact the timing of future payments. During the fourth quarter of fiscal year 2010, Brooks made a voluntary contribution of $3.6 million to this plan, which was in addition to the $0.6 million of required minimum contributions made throughout fiscal year 2010.

Although likely insignificant, Brooks also has locked in future lease payments which could possibly place additional burden on future cash flows. Brooks is a guarantor on a lease in Mexico that expires in January 2013. The remaining payments under this lease at September 30, 2010 are approximately $0.9 million.

Porters Five Forces

Buyer Power

Most of the industry's key segments are dominated by a small number of large players. This means that buyers have little bargaining power. During 2010 Brooks became more dependent upon significant customers. For the period ending September 30, 2008 Brooks had two customers responsible for over 10% of revenues, for 2009 this number decreased to one, and for the period ended September 30, 2010 Brooks had three customers each responsible for over 10% of Brook's revenues. These major customers could use Brook's reliance upon them to continue satisfactory revenues as a weapon in negotiating contracts and the prices for future services.

Supplier Power

For the large semiconductor companies, suppliers have little power - there are many different companies that offer very similar products. This diffusion of risk over many companies allows the chip giant to keep the bargaining power of any one supplier to a minimum. However, with production getting hugely expensive, many smaller chip makers are becoming increasingly dependent on a handful of large foundries. As the suppliers of cutting-edge equipment and production skills, merchant foundries enjoy considerable industry bargaining power. The largest U.S.-based foundry belongs to none other than IBM – which is also a top chip maker in its own right.

Threat of Substitutes

The threat of substitutes in the semiconductors industry really depends on the segment. While intellectual property protection might stop the threat of new substitute chips for a period of time, within a short period of time companies start to produce similar products at lower prices. Copy-cat suppliers are a problem: a company that spends millions, if not billions, of dollars on the creation of a faster, more reliable chip will strive to recoup the R&D costs. But then along comes a player that reverse engineers the system and markets a similar product for a fraction of the price.

Although Brook's has patents, and continues to acquire more, for their major products. These patents will eventually expire, and any competitive advantage Brooks had becomes useless. The products they once offered at premium prices, now become the very substitutes they will have to compete against. So, unless Brook's can continue to patent and protect their intellectual property while also developing newer and better product offerings other companies will be able to produce their products thus increasing competition which will lower margins and destroy any profit for Brooks.

Rivalry amongst Competitors

Although there is significant rivalry amongst competitors in the semiconductor manufacturing industry there are patents, trade secret laws, confidentiality procedures, copyrights, trademarks and licensing agreements to protect technology which ensure that Brooks can maintain their competitive advantage for their specific product offerings.

Brooks is attempting to enter into the LED manufacturing market. Although there are many existing suppliers to LED manufactures, the increasing complexity and demands for more controlled environments (including temp, atmosphere, etc.) will give Brooks a competitive advantage over existing suppliers.

Barriers to Entry

A major barrier to entry are the patents and significant technological innovations required to compete in the semiconductor, flat panel display and related process equipment industries. The 31.2 million dollars spent in 2010, 31.6 million dollars spent in 2009, and 42.9 million dollars spend in 2008 are not to gain a competitive advantage but to remain competitive. For a new company to enter this market they would likely have to spend a significant amount more than Brook's historical average to achieve the many different patents required to play in the semiconductor manufacturing space that Brooks plays in. Additionally, the semiconductor manufacturing industry is cyclical, which would potentially kill new companies if they enter at the wrong time and would likely scare many potential investors or lenders from taking the risks associated with the semiconductor manufacturing industry. lastly, there are significant competitive pressures for Brooks, even with their established brand name and image, so the pressures on a new company without any prior performance to assure quality control would likely be unbearable.









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