Edgar Filing: BROOKS AUTOMATION INC

e10vq

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: March 31, 2007


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ___________ to ___________

Commission File Number 0-25434

BROOKS AUTOMATION, INC.

(Exact name of registrant as specified in its charter)


Delaware		04-3040660

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.


		Large Accelerated Filer þ		Accelerated Filer o		Non-Accelerated Filer 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, 2007:


Common stock, $0.01 par value		75,821,598 shares

BROOKS AUTOMATION, INC.

INDEX


	PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2007 (unaudited) and September 30, 2006		3
Consolidated Statements of Operations for the three and six months ended March 31, 2007 and 2006 (unaudited)		4
Consolidated Statements of Cash Flows for the six months ended March 31, 2007 and 2006 (unaudited)		5
Notes to Consolidated Financial Statements (unaudited)		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures about Market Risk		26
Item 4. Controls and Procedures		26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		26
Item 1A. Risk Factors		29
Item 4. Submission of Matters to a Vote of Security Holders		31
Item 6. Exhibits		31
Signatures		32
EX-31.01 SECTION 302 CERTIFICATION OF CEO
EX-31.02 SECTION 302 CERTIFICATION OF CFO
EX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO

BROOKS AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except share and per share data)


	March 31,			September 30,
	2007			2006
Assets
Current assets
Cash and cash equivalents	$	252,681		$	115,773
Marketable securities		60,477			68,280
Accounts receivable, net		137,548			113,440
Inventories, net		104,820			99,854
Current assets from discontinued operations		—			15,277
Prepaid expenses and other current assets		22,501			20,188

Total current assets		578,027			432,812

Property, plant and equipment, net		79,523			76,667
Long-term marketable securities		7,634			7,307
Goodwill		315,547			314,452
Intangible assets, net		84,590			92,213
Non-current assets from discontinued operations		—			42,047
Equity investment in Ulvac Cryogenics, Inc.		21,546			21,489
Other assets		5,747			5,590


Total assets	$	1,092,614		$	992,577

Liabilities, minority interests and stockholders’ equity
Current liabilities
Current portion of long-term debt	$	6		$	11
Accounts payable		54,455			69,270
Deferred revenue		7,524			8,261
Accrued warranty and retrofit costs		12,204			11,608
Accrued compensation and benefits		25,519			25,999
Accrued restructuring costs		4,637			7,254
Accrued income taxes payable		19,496			17,773
Current liabilities from discontinued operations		—			21,223
Accrued expenses and other current liabilities		18,496			18,780

Total current liabilities		142,337			180,179

Long-term debt		—			2
Accrued long-term restructuring		10,436			9,289
Non-current liabilities from discontinued operations		—			963
Other long-term liabilities		3,202			2,616

Total liabilities		155,975			193,049


Contingencies (Note 12)
Minority interests		446			394


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, 75,786,372 and 75,431,592 shares issued and outstanding at March 31, 2007 and September 30, 2006, respectively		758			754
Additional paid-in capital		1,770,557			1,763,247
Accumulated other comprehensive income		15,251			15,432
Accumulated deficit		(850,373	)		(980,299	)

Total stockholders’ equity		936,193			799,134

Total liabilities, minority interests and stockholders’ equity	$	1,092,614		$	992,577

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					Six months ended
	March 31,					March 31,
	2007		2006			2007		2006
Revenues
Product	$	160,623	$	120,359		$	320,948	$	205,170
Services		34,303		28,413			65,346		52,097

Total revenues		194,926		148,772			386,294		257,267

Cost of revenues
Product		109,665		85,779			218,089		155,048
Services		22,771		17,110			46,033		30,873

Total cost of revenues		132,436		102,889			264,122		185,921

Gross profit		62,490		45,883			122,172		71,346

Operating expenses
Research and development		13,278		10,908			26,368		20,116
Selling, general and administrative		30,562		27,701			61,558		53,328
Restructuring and acquisition-related charges		3,040		1,947			3,040		2,856

Total operating expenses		46,880		40,556			90,966		76,300

Operating income (loss) from continuing operations		15,610		5,327			31,206		(4,954	)
Interest income		2,355		3,570			4,530		7,098
Interest expense		314		2,388			455		4,746
Equity in earnings of Ulvac Cryogenics, Inc.		179		250			550		472
Other (income) expense, net		383		(654	)		925		(243	)

Income (loss) from continuing operations before income taxes and minority interests		17,447		7,413			34,906		(1,887	)
Income tax provision		1,480		868			2,124		1,192

Income (loss) from continuing operations before minority interests		15,967		6,545			32,782		(3,079	)
Minority interests in income (loss) of consolidated subsidiaries		216		(568	)		52		(766	)

Income (loss) from continuing operations		15,751		7,113			32,730		(2,313	)
Income (loss) from discontinued operations, net of income taxes		8,138		(2,761	)		13,298		(5,035	)
Gain on sale of discontinued operations, net of income taxes		83,898		—			83,898		—

Income (loss) from discontinued operations, net of income taxes		92,036		(2,761	)		97,196		(5,035	)

Net income (loss)	$	107,787	$	4,352		$	129,926	$	(7,348	)

Basic income (loss) per share from continuing operations	$	0.21	$	0.10		$	0.44	$	(0.03	)
Basic income (loss) per share from discontinued operations		1.23		(0.04	)		1.30		(0.07	)

Basic net income (loss) per share	$	1.44	$	0.06		$	1.74	$	(0.10	)

Diluted income (loss) per share from continuing operations	$	0.21	$	0.10		$	0.44	$	(0.03	)
Diluted income (loss) per share from discontinued operations		1.22		(0.04	)		1.29		(0.07	)

Diluted net income (loss) per share	$	1.43	$	0.06		$	1.73	$	(0.10	)

Shares used in computing income (loss) per share
Basic		74,766		74,371			74,680		70,174
Diluted		75,327		74,595			75,173		70,174

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

BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)


	Six months ended
	March 31,
	2007			2006
Cash flows from operating activities
Net income (loss)	$	129,926		$	(7,348	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		16,242			15,474
Stock-based compensation		4,070			4,112
Discount on marketable securities		(571	)		(1,745	)
Amortization of debt issuance costs		—			419
Undistributed earnings of joint venture		(550	)		(472	)
Minority interests		52			(766	)
Loss on disposal of long-lived assets		476			190
Gain on sale of software division, net		(81,813	)		—
Changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable		(21,725	)		(17,649	)
Inventories		(6,092	)		3,511
Prepaid expenses and other current assets		(8,110	)		(8,738	)
Accounts payable		(14,999	)		13,805
Deferred revenue		4,434			5,045
Accrued warranty and retrofit costs		590			(387	)
Accrued compensation and benefits		(938	)		2,251
Accrued restructuring costs		(1,474	)		(5,140	)
Accrued expenses and other current liabilities		(1,478	)		4,944

Net cash provided by operating activities		18,040			7,506

Cash flows from investing activities
Purchases of property, plant and equipment		(12,180	)		(5,320	)
Proceeds from the sale of software division		119,090			—
Acquisition of Helix Technology, cash acquired net of expenses		—			8,886
Acquisition of Synetics Solutions, net of cash acquired		(38	)		—
Purchases of marketable securities		(128,221	)		(545,883	)
Sale/maturity of marketable securities		136,055			509,974
Purchases of intangibles		15			—

Net cash provided by (used in) investing activities		114,721			(32,343	)

Cash flows from financing activities
Payments of long-term debt and capital lease obligations		(2	)		(3	)
Proceeds from issuance of common stock, net of issuance costs		3,530			2,274

Net cash provided by financing activities		3,528			2,271

Effects of exchange rate changes on cash and cash equivalents		619			647

Net increase (decrease) in cash and cash equivalents		136,908			(21,919	)
Cash and cash equivalents, beginning of period		115,773			202,462

Cash and cash equivalents, end of period	$	252,681		$	180,543


Supplemental cash flow information
Non-cash transactions:
Acquisition of Helix Technology, net of transaction costs	$	—		$	447,949

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 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 our 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, 2006. Certain reclassifications have been made in the prior period consolidated financial statements to conform to the current presentation.

Recently Enacted Accounting Pronouncements

In May 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements” (“SFAS 154”). SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. On October 1, 2006, the Company adopted SFAS 154 and did not realize a material impact on its financial position or results of operations.

In June 2006, the 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 FAS No. 109, “Accounting for Income Taxes.” FIN No. 48 prescribes a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The guidance will become effective as of the beginning of the Company’s fiscal year beginning after December 15, 2006. The Company is currently evaluating the potential impact of FIN No. 48 on its financial position and results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”) expressing the Staff’s views regarding the process of quantifying financial statement misstatements. There have been two widely-recognized methods for quantifying the effects of financial statement errors: the “roll-over” method and the “iron curtain” method. The roll-over method focuses primarily on the impact of a misstatement on the income statement, including the reversing effect of prior year misstatements, but its use can lead to the accumulation of misstatements in the balance sheet. The iron-curtain method, on the other hand, focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of the error on each of the Company’s financial statements and the related financial statement disclosures. This model is commonly referred to as a “dual approach” because it essentially requires quantification of errors under both the iron-curtain and the roll-over methods. The provisions of SAB 108 should be applied to annual financial statements covering the first fiscal year ending after November 15, 2006. The Company is currently evaluating the provisions of SAB 108.

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 (“GAAP”) 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 should be applied prospectively as of the beginning of the fiscal year in which it is initially applied, with limited exceptions. The Company is currently evaluating the provisions of SFAS 157.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”). SFAS 158 requires an employer that is a business entity and sponsors one or more single-employer defined benefit plans to:

a. Recognize the funded status of a benefit plan, measured as the difference between plan assets at fair value and the benefit obligation, in its statement of financial position. For a pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated postretirement benefit obligation.

b. Recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to SFAS No. 87, “Employers’ Accounting for Pensions”, or SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”. Amounts recognized in accumulated other comprehensive income, including the gains or losses, prior service costs or credits, and the transition asset or obligation remaining from the initial application of SFAS No. 87 and SFAS No. 106, are adjusted as they are subsequently recognized as components of net periodic benefit cost pursuant to the recognition and amortization provisions of those Statements.

c. Measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions).

d. Disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation.

An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the first fiscal year ending after December 15, 2006. Retrospective application is not permitted. The Company is currently evaluating the provisions of SFAS 158.

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 No. 159”). SFAS No. 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 is currently evaluating the potential impact of SFAS No. 159 on its financial position and results of operations.

2. Stock Based Compensation

As of October 1, 2005, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) using the modified prospective method, which requires measurement of compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest.

The following table reflects compensation expense recorded during the three and six months ended March 31, 2007 and 2006 in accordance with SFAS 123R (in thousands):


	Three months ended				Six months ended
	March 31,				March 31,
	2007		2006		2007		2006
Stock options	$	640	$	968	$	1,441	$	2,876
Restricted stock		1,059		477		2,177		861
Employee stock purchase plan		228		193		452		375

	$	1,927	$	1,638	$	4,070	$	4,112

Equity Incentive Plans

The Company’s equity incentive plans are intended to attract and retain employees and to provide an incentive for them to assist the Company to achieve long-range performance goals and to enable them to participate in the long-term growth of the Company. The equity incentive plans consist of plans under which employees may be granted options to purchase shares of the Company’s stock, restricted stock and other equity incentives. Under the equity incentive plans, stock options generally have a vesting period of 4 years and are exercisable for a period not to exceed 7 years from the date of issuance. Restricted stock awards generally vest over one to four years. At March 31, 2007, a total of 6,465,658 shares were reserved and available for the issuance of stock and restricted stock.

Stock Option Activity

The following table summarizes stock option activity for the six months ended March 31, 2007:


	Number of			Weighted Average
	Options			Exercise Price
Outstanding at September 30, 2006		4,790,477		$	21.51
Granted		—			—
Exercised		(183,288	)		11.61
Forfeited/expired		(684,709	)		23.52

Outstanding at March 31, 2007		3,922,480		$	21.63
Options exercisable at March 31, 2007		3,471,992		$	22.50

The options outstanding and exercisable at March 31, 2007 were in the following exercise price ranges:


	Options Outstanding								Options Exercisable
			Weighted-
			Average
			Remaining				Aggregate						Aggregate
			Contractual		Weighted-		Intrinsic				Weighted-		Intrinsic
Range of			Life		Average		Value (in				Average		Value (in
Exercise Prices	Shares		(Years)		Exercise Price		Thousands)		Shares		Exercise Price		Thousands)
$3.62 — $17.15		1,135,767		4.41	$	11.97	$	5,883		842,198	$	11.60	$	4,673
$17.22 — $24.02		714,928		3.79	$	19.31	$	—		563,644	$	19.62	$	—
$24.30 — $24.30		1,144,798		2.57	$	24.30	$	—		1,139,163	$	24.30	$	—
$24.91 — $59.44		926,987		1.44	$	31.94	$	—		926,987	$	31.94	$	—

$3.62 — $59.44		3,922,480		3.06	$	21.63	$	5,883		3,471,992	$	22.50	$	4,673

The weighted average remaining contractual life of options exercisable at March 31, 2007 was 2.7 years.

The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $17.15 as of March 31, 2007, 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 months ended March 31, 2007 and 2006. The weighted average grant date fair value of options, as determined under SFAS 123R, granted during the six months ended March 31, 2006 was $6.61 per share. No stock options were granted during the six months ended March 31, 2007. The total intrinsic value of options exercised during the three month period ended March 31, 2007 and 2006 was $690,000 and $124,000, respectively. The total intrinsic value of options exercised during the six month period ended March 31, 2007 and 2006 was $743,000 and $336,000, respectively. The total cash received from employees as a result of employee stock option exercises during the three months ended March 31, 2007 and 2006 was $1,762,000 and

$436,000, respectively. The total cash received from employees as a result of employee stock option exercises during the six months ended March 31, 2007 and 2006 was $2,129,000 and $1,062,000, respectively.

As of March 31, 2007 future compensation cost related to nonvested stock options is approximately $4.1 million and will be recognized over an estimated weighted average period of 2.1 years.

The Company settles employee stock option exercises with newly issued common shares.

Restricted Stock Activity

Restricted stock for the six months ended March 31, 2007 was determined using the fair value method. A summary of the status of the Company’s restricted stock as of March 31, 2007 and changes during the six months ended March 31, 2007 is as follows:


	Six months ended
	March 31, 2007
				Weighted
				Average
				Grant-Date
	Shares			Fair Value
Outstanding at beginning of year		895,750		$	13.79
Awards granted		125,000			14.31
Awards vested		(84,681	)		15.62
Awards canceled		(78,307	)		14.61

Outstanding at end of period		857,762		$	13.64

The fair value of restricted stock awards vested during the three months ended March 31, 2007 and 2006 was $0.1 million for each quarter. The fair value of restricted stock awards vested during the six months ended March 31, 2007 and 2006 was $1.3 million for each period.

As of March 31, 2007, the unrecognized compensation cost related to nonvested restricted stock is $8.3 million and will be recognized over an estimated weighted average amortization period of 2.4 years.

Employee Stock Purchase Plan

The Company’s employee stock purchase plan enables eligible employees to purchase shares of the Company’s common stock. Under this plan, eligible employees may purchase shares during six-month offering periods commencing on February 1 and August 1 of each year at a price per share of 85% of the lower of the fair market value price per share on the first or last day of each six-month offering period. Participating employees may elect to have up to 10% of their base pay withheld and applied toward the purchase of such shares. The rights of participating employees under this plan terminate upon voluntary withdrawal from the plan at any time or upon termination of employment. There were 118,073 shares purchased under the employee stock purchase plan during the three and six months ended March 31, 2007. At March 31, 2007, a total of 1,330,165 shares were reserved and available for issuance under this plan, which reflects an increase of 750,000 shares approved by the shareholders in March 2006.

3. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the six months ended March 31, 2007 is as follows (in thousands):


	Total
Balance at September 30, 2006	$	314,452
Adjustments to goodwill:
Acquisition of Helix Technology		(833	)
Acquisition of Synetics Solutions		1,928

Balance at March 31, 2007	$	315,547

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


	March 31, 2007						September 30, 2006
			Accumulated		Net book				Accumulated		Net book
	Cost		Amortization		value		Cost		Amortization		Value
Patents	$	9,802	$	6,878	$	2,924	$	9,787	$	6,662	$	3,125
Completed technology		66,846		19,455		47,391		66,846		14,793		52,053
License agreements		305		305		—		305		305		—
Trademark and trade names		4,962		1,371		3,591		4,962		980		3,982
Non-competition agreements		50		50		—		50		50		—
Customer relationships		36,500		5,816		30,684		36,500		3,447		33,053

	$	118,465	$	33,875	$	84,590	$	118,450	$	26,237	$	92,213

Amortization expense for intangible assets was $3.8 million and $3.2 million for the three months ended March 31, 2007 and 2006, respectively, and $7.6 million and $5.3 million for the six months ended March 31, 2007 and 2006, respectively.

4. Business Acquisitions

Helix Technology Corporation

On October 26, 2005, the Company acquired all the issued and outstanding stock of Helix Technology Corporation (“Helix”). Helix develops and manufactures vacuum technology solutions for the semiconductor, data storage, and flat panel display markets. The Company believes that the acquisition of Helix enables it to better serve its current market, increase its addressable market, reduce the volatility that both businesses have historically faced and positions the Company to enhance its financial performance. The aggregate purchase price, net of cash acquired, was approximately $458.1 million, consisting of 29.0 million shares of common stock valued at $444.6 million, the fair value of assumed Helix options of $3.3 million and transaction costs of $10.2 million. The market price used to value the Brooks’ shares issued as consideration for Helix was $15.32, which represents the average of the closing market price of Brooks common stock for the period beginning two trading days before and ending two trading days after the merger agreement was announced. The actual number of shares of Brooks common stock issued was determined based on the actual number of shares of Helix common stock outstanding immediately prior to the completion of the merger, based on an exchange ratio of 1.11 shares of Brooks common stock for each outstanding share of Helix common stock. This transaction qualified as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended.

The consolidated financial statements include the results of Helix from the date of acquisition.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition based upon a third-party valuation (in millions):


Current assets	$	79.9
Property, plant and equipment		15.4
Intangible assets		84.4
Goodwill		276.0
Other assets		20.8

Total assets acquired		476.5

Current liabilities		17.3
Other liabilities		1.1

Total liabilities assumed		18.4

Total purchase price including acquisition costs	$	458.1

Of the $84.4 million of acquired intangible assets, the following table reflects the allocation of the acquired intangible assets and related estimates of useful lives (in millions):


Completed and core technology	$	56.4	6.9 years weighted average estimated useful life
Customer and contract relationships		23.3	6.9 years weighted average estimated economic consumption life
Trade names and trademarks		4.7	6 years weighted average estimated useful life

	$	84.4

Synetics Solutions, Inc.

On May 8, 2006, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Synetics Solutions Inc. (“Synetics”). Brooks completed its acquisition of Synetics from Yaskawa Electric Corporation (“Yaskawa”), a corporation duly organized and existing under the laws of Japan, through a merger that became effective as of June 30, 2006. Synetics provides customized manufactured solutions for the North American semiconductor equipment industry. Pursuant to the merger agreement, Synetics became a wholly owned subsidiary of Brooks. The aggregate purchase price of Synetics, net of cash acquired, was approximately $50.2 million consisting of a $28.6 million cash payment to Yaskawa, repayment of outstanding debt of $19.9 million and transaction costs of $1.7 million. The acquisition of Synetics will provide the Company with the opportunity to enhance its existing capabilities with respect to manufacturing customer designed automation systems.

Also on May 8, 2006, the Company agreed to enter into a Joint Venture Agreement (the “Agreement”) with Yaskawa to form a 50/50 joint venture called Yaskawa Brooks Automation, Inc. (“YBA”) to exclusively market and sell Yaskawa’s semiconductor robotics products and Brooks’ automation hardware products to semiconductor customers in Japan. This Agreement was executed on June 30, 2006.

The consolidated financial statements include the results of Synetics from the date of acquisition and recognize the Company’s equity investment in YBA which began operations on September 21, 2006.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition based upon a third-party valuation (in millions):


Current assets	$	17.9
Property, plant and equipment		8.6
Intangible assets		17.4
Goodwill		14.5
Other assets		0.1

Total assets acquired		58.5

Current liabilities		8.3

Total purchase price including acquisition costs	$	50.2

Of the $17.4 million of acquired intangible assets, the following table reflects the allocation of the acquired intangible assets and related estimates of useful lives (in millions):


Core technology	$	4.2	7 years weighted average estimated useful life
Customer and contract relationships		4.8	7 years weighted average estimated economic consumption life
Customer supply agreement		8.4	10 years weighted average estimated useful life

	$	17.4

5. Property, Plant and Equipment

Property, plant and equipment as of March 31, 2007 and September 30, 2006 were as follows (in thousands):


	March 31,			September 30,
	2007			2006
Buildings and land	$	45,329		$	45,421
Computer equipment and software		40,310			48,476
Machinery and equipment		42,603			40,475
Furniture and fixtures		11,564			12,078
Leasehold improvements		23,058			22,873
Construction in progress		12,630			5,380

		175,494			174,703
Less accumulated depreciation and amortization		(95,971	)		(98,036	)

Property, plant and equipment, net	$	79,523		$	76,667

Depreciation expense was $4.2 million and $3.2 million for the three months ended March 31, 2007 and 2006, respectively, and $8.5 million and $7.9 million for the six months ended March 31, 2007 and 2006, respectively.

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,
	2007		2006		2007		2006
Weighted average common shares outstanding used in computing basic earnings (loss) per share		74,766		74,371		74,680		70,174
Dilutive common stock options and restricted stock awards		561		224		493		—

Weighted average common shares outstanding for purposes of computing diluted earnings (loss) per share		75,327		74,595		75,173		70,174

Approximately 3,297,000 and 4,753,000 options to purchase common stock and 0 and 1,000 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, 2007 and 2006, respectively, as their effect would be anti-dilutive. The 3,297,000 and 4,753,000 options for the three months ended March 31, 2007 and 2006, respectively, had an exercise price greater than the average market price of the common stock. In addition, approximately 3,555,000 and 5,263,000 options to purchase common stock and 0 and 66,000 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, 2007 and 2006, 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. In addition, 2,492,000 shares of common stock for the assumed conversion of the Company’s convertible debt was excluded from this calculation for the three and six months ended March 31, 2006 as the effect of conversion would be anti-dilutive based on a conversion price of $70.23. The Company paid off the convertible debt in full on July 17, 2006.

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 $125 million in cash consideration and the assumption of certain liabilities related to Brooks Software. Brooks Software is a provider of 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 three months ended March 31, 2007 on the sale of its discontinued software business. This gain reflects the receipt of $119.1 million of cash consideration plus an additional $11.6 million to be received within the next twelve months upon the completion of certain indemnification and tax withholding obligations and the finalization of the net asset valuation, offset by expenses of $7.4 million, a tax provision of $1.8 million, and the write-off of net assets totaling $37.6 million.

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

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.”

The summary of operating results from discontinued operations of the software division for the three and six months ended March 31, 2007 and 2006 is as follows (in thousands):


	Three months ended					Six months ended
	March 31,					March 31,
	2007		2006			2007		2006
Revenues	$	26,178	$	20,405		$	47,712	$	39,085
Gross profit		19,426		13,857			34,048		25,328
Income (loss) from discontinued operations before income taxes		8,932		(2,632	)		12,673		(3,935	)
Income (loss) from discontinued operations		8,138		(2,759	)		13,298		(5,085	)

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.

In addition, the Company recognized discontinued operations from the sale of its Specialty Equipment and Life Sciences division (“SELS”). For the three months ended March 31, 2006, there was $3,000 of SELS activity for revenue and $2,000 of gross loss and loss from discontinued operations, net of tax. For the six months ended March 31, 2006, there was $55,000 of SELS activity for revenue and $50,000 of gross profit and income from discontinued operations, net of tax. There was no SELS activity for the three and six months ended March 31, 2007. Due to the losses incurred since acquisition of the SELS division, no tax benefit is reflected for the losses incurred.

Assets and liabilities from discontinued operations are as follows (in thousands):


	September 30,
	2006
Current assets from discontinued operations	$	15,277
Non-current assets from discontinued operations	$	42,047
Current liabilities from discontinued operations	$	21,223
Non-current liabilities from discontinued operations	$	963

Current assets include accounts receivable and other current assets. Current liabilities include accounts payable, deferred revenue, accrued vacation and other current liabilities. There were no SELS assets and liabilities from discontinued operations as of September 30, 2006.

8. Comprehensive Income (Loss)

Comprehensive income (loss) for the Company is computed as the sum of the Company’s net income (loss), the change in the cumulative translation adjustment and the total unrealized gain (loss) on the Company’s marketable securities. The calculation of the Company’s comprehensive income (loss) for the three and six months ended March 31, 2007 and 2006 is as follows (in thousands):


	Three months ended					Six months ended
	March 31,					March 31,
	2007			2006		2007			2006
Net income (loss)	$	107,787		$	4,352	$	129,926		$	(7,348	)
Change in cumulative translation adjustment		379			1,358		1,724			935
Cumulative translation adjustment on sale of software division		(2,085	)		¯		(2,085	)		¯
Unrealized gain (loss) on marketable securities		45			105		180			428

	$	106,126		$	5,815	$	129,745		$	(5,985	)

9. Restructuring-Related Charges and Accruals

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, the former PRI Automation, Inc. headquarters, and fully recognizes 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 Company recorded charges to continuing operations of $1,947,000 in the three months ended March 31, 2006 which consisted of approximately a $1,600,000 charge related to the vacant Billerica facility and approximately $300,000 for costs incurred related to workforce reductions. The Company recorded charges to continuing operations of $2,856,000 in the six months ended March 31, 2006 which consisted of approximately a $1,600,000 charge related to the vacant Billerica facility and approximately $1,200,000 for costs incurred related to workforce reductions.

The activity for the three and six months ended March 31, 2007 and 2006 related to the Company’s restructuring-related accruals is summarized below (in thousands):


	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 — Three Months Ended March 31, 2006
	Balance											Balance
	December 31,											March 31,
	2005		Expense		Helix Acquisition		Reversals		Utilization			2006

Facilities	$	13,960	$	1,600	$	580	$	—	$	(915	)	$	15,225
Workforce-related		8,522		1,143		282		—		(4,188	)		5,759

	$	22,482	$	2,743	$	862	$	—	$	(5,103	)	$	20,984


	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


	Activity — Six Months Ended March 31, 2006
	Balance												Balance
	September 30,												March 31,
	2005		Expense		Helix Acquisition		Reversals			Utilization			2006

Facilities	$	15,045	$	1,600	$	580	$	—		$	(2,000	)	$	15,225
Workforce-related		8,429		2,851		2,066		(486	)		(7,101	)		5,759

	$	23,474	$	4,451	$	2,646	$	(486	)	$	(9,101	)	$	20,984

Workforce related charges (reversals) include ($42,000) and $796,000 for the three months ended March 31, 2007 and 2006, respectively, and ($22,000) and $1,109,000 for the six months ended March 31, 2007 and 2006, respectively, related to discontinued operations.

The Company expects the majority of the remaining severance costs totaling $595,000 will be paid over the next twelve months. The expected facilities costs, totaling $14,478,000, net of estimated sub-rental income, will be paid on leases that expire through September 2011.

10. Employee Benefit Plans

The components of the Company’s net pension cost relating to a noncontributory defined benefit pension plan acquired with the Helix acquisition for the three and six months ended March 31, 2007 and 2006 is as follows (in thousands):


	Three months ended						Six months ended
	March 31,						March 31,
	2007			2006			2007			2006
Service cost	$	63		$	416		$	126		$	805
Interest cost		175			123			349			380
Expected return on assets		(251	)		(253	)		(501	)		(436	)

Net periodic pension benefit cost	$	(13	)	$	286		$	(26	)	$	749

In conjunction with the acquisition of Helix, the Company closed the defined benefit pension plan to new hires and approved the decision to freeze the plan such that no further benefits would accrue after October 31, 2006. The impact of this decision has been reflected in the purchase price allocation described in Note 4.

The Company does not expect to make contributions to the pension plan in fiscal 2007 given that the plan has been frozen.

11. Other Balance Sheet Information

Components of other selected captions in the Consolidated Balance Sheets are as follows (in thousands):


	March 31,		September 30,
	2007		2006
Accounts receivable	$	139,096	$	115,149
Less allowances		1,548		1,709

	$	137,548	$	113,440

Inventories
Raw materials and purchased parts	$	45,159	$	48,996
Work-in-process		33,972		25,064
Finished goods		25,689		25,794

	$	104,820	$	99,854

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. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers, 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 three and six months ended March 31, 2007 and 2006 is as follows (in thousands):


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 — Three Months Ended March 31, 2006
Balance							Balance
December 31,							March 31,
2005		Accruals		Settlements			2006
$	9,991	$	3,741	$	(2,991	)	$	10,741


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


Activity — Six Months Ended March 31, 2006
Balance							Balance
September 30,							March 31,
2005		Accruals		Settlements			2006
$	9,782	$	5,798	$	(4,839	)	$	10,741

The accrual of $5,798,000 for the six months ended March 31, 2006 includes the acquired warranty liability of $1,262,000 from Helix at date of acquisition.

12. Contingencies

There has been substantial litigation regarding patent and other intellectual property rights in the semiconductor and related industries. The Company has in the past been, and may in the future be, notified that it may be infringing intellectual property rights possessed by other third parties. The Company cannot guarantee that infringement claims by third parties or other claims for indemnification by customers or end users of its products resulting from infringement claims will not be asserted in the future or that such assertions, if proven to be true, will not materially

and adversely affect the Company’s’ business, financial condition and results of operations. If any such claims are asserted against the Company’s intellectual property rights, the Company may seek to enter into a royalty or licensing arrangement. The Company cannot guarantee, however, that a license will be available on reasonable terms or at all. The Company could decide in the alternative to resort to litigation to challenge such claims or to attempt to design around the patented technology. Litigation or an attempted design around could be costly and would divert the Company’s management’s attention and resources. In addition, if the Company does not prevail in such litigation or succeed in an attempted design around, the Company could be forced to pay significant damages or amounts in settlement. Even if a design around is effective, the functional value of the product in question could be greatly diminished.

Commercial Litigation Matters

In January 2006 a ruling was issued against the Company by a Massachusetts state court in a commercial litigation matter involving the Company and BlueShift Technologies, Inc. Awards of damages and costs were assessed against Brooks in January and April 2006 in the amount of approximately $1.6 million, which had been accrued for at December 31, 2005. Brooks has filed a notice of appeal in the case with the Massachusetts Appeals Court and that appeal was argued on April 4, 2007. The matter is now under consideration by the Court.

Proceedings Relating to Equity Incentive Practices and the Restatement

On May 12, 2006, the Company announced that it had received notice that the Boston Office of the United States Securities and Exchange Commission (the “SEC”) was conducting an informal inquiry concerning stock option grant practices to determine whether violations of the securities laws had occurred. On June 2, 2006, the SEC issued a voluntary request for information in connection with an informal inquiry by that office regarding a loan the Company previously reported had been made to former Chairman and CEO Robert Therrien in connection with the exercise by him of stock options in 1999. On June 23, 2006, the Company was informed that the SEC had opened a formal investigation into this matter and on the general topic of the timing of stock option grants. On June 28, 2006, the SEC issued subpoenas to the Company and to the Special Committee of the Board of Directors, which had previously been formed on March 8, 2006, requesting documents related to the Company’s stock option grant practices and to the loan to Mr. Therrien.

On May 19, 2006, the Company received a grand jury subpoena from the United States Attorney (the “DOJ”) for the Eastern District of New York requesting documents relating to stock option grants. Responsibility for the DOJ’s investigation was subsequently assumed by the United States Attorney for the District of Massachusetts. On June 22, 2006 the United States Attorney’s Office for the District of Massachusetts issued a grand jury subpoena to the Company in connection with an investigation by that office into the timing of stock option grants by the Company and the loan to Mr. Therrien mentioned above.

The Company is cooperating fully with the investigations being conducted by the SEC and the DOJ.

Private Litigation

On May 22, 2006, a derivative action was filed nominally on the Company’s behalf in the Superior Court for Middlesex County, Massachusetts, captioned as Mollie Gedell, Derivatively on Behalf of Nominal Defendant Brooks Automation, Inc. v. A. Clinton Allen, et al. The Defendants named in the complaint are: A. Clinton Allen, Director of the Company; Roger D. Emerick, former Director of the Company; Edward C. Grady, Director, President and CEO of the Company; Amin J. Khoury, former Director of the Company; Joseph R. Martin, Director of the Company; John K. McGillicuddy, Director of the Company; and Robert J. Therrien, former Director, President and CEO of the Company.

On May 26, 2006, a derivative action was filed in the Superior Court for Middlesex County, Massachusetts nominally on the Company’s behalf, captioned as Ralph Gorgone, Derivatively on Behalf of Nominal Defendant Brooks Automation, Inc. v. Edward C. Grady, et al. The Defendants named in the complaint are: Mr. Grady; Mr. Allen; Mr. Emerick; Mr. Khoury; Robert J. Lepofsky, Director of the Company; Mr. Martin; Mr. McGillicuddy; Krishna G. Palepu, Director of the Company; Alfred Woollacott, III, Director of the Company; Mark S. Wrighton, Director of the Company; and Marvin Schorr, Director Emeritus of the Company.

On August 4, 2006 the Superior Court for Middlesex County, Massachusetts, entered an order consolidating the above state derivative actions under docket number 06-1808 and the caption In re Brooks Automation, Inc. Derivative Litigation. On September 5, 2006, the Plaintiffs filed a Consolidated Shareholder Derivative Complaint; the Defendants named therein are: Mr. Allen, Mr. Martin, Mr. Grady, Mr. McGillicuddy, Mr. Therrien, Mr. Emerick, and Mr. Khoury; Robert W. Woodbury, Jr., the Company’s Chief Financial Officer; Joseph Bellini, former President and Chief Operating Officer of the Company’s Enterprise Software Group; Thomas S. Grilk, Secretary and General Counsel of the Company; current employee Michael W. Pippins; Stanley D. Piekos and Ellen B. Richstone, the Company’s former Chief Financial Officers; and David R. Beaulieu, Jeffrey A. Cassis, Santo DiNaro, Peter Frasso, Robert A. McEachern, Dr. Charles M. McKenna, James A. Pelusi, Michael F. Werner, former Officers and employees of the Company. The Consolidated Shareholder Derivative Complaint alleges that certain current and former directors and officers breached fiduciary duties owed to Brooks by backdating stock option grants, issuing inaccurate financial results and false or misleading public filings, and that Messrs. Therrien, Emerick and Khoury breached their fiduciary duties, and Mr. Therrien was unjustly enriched, as a result of the loan to and stock option exercise by Mr. Therrien mentioned above, and seeks, on our behalf, damages for breaches of fiduciary duty and unjust enrichment, disgorgement to the Company of all profits from allegedly backdated stock option grants, equitable relief, and Plaintiffs’ costs and disbursements, including attorneys’ fees, accountants’ and experts’ fees, costs, and expenses. The Defendants served motions to dismiss and, in response, Plaintiffs have moved for leave to amend their Complaint. The Proposed Amended Complaint makes allegations substantially similar to those in the Consolidated Shareholder Derivative Complaint, and adds as Defendants Richard C. Small, Senior Vice President and Corporate Controller of the Company, and Mr. Woolacott, Mr. Wrighton, Mr. Lepofsky, and Mr. Palepu, Directors of the Company. If the Court grants Plaintiffs leave to file an amended complaint, Defendants, including the Company, anticipate filing motions to dismiss directed at the amended complaint.

On May 30, 2006, a derivative action was filed in the United States District Court for the District of Massachusetts, captioned as Mark Collins, Derivatively on Behalf of Nominal Defendant Brooks Automation, Inc. v. Robert J. Therrien, et al. The defendants in the action are: Mr. Therrien; Mr. Allen; Mr. Emerick; Mr. Grady; Mr. Khoury; Mr. Martin; and Mr. McGillicuddy.

On June 7, 2006, a derivative action was filed in the United States District Court for the District of Massachusetts, captioned as City of Pontiac General Employees’ Retirement System, Derivatively on Behalf of Brooks Automation, Inc. v. Robert J. Therrien, et al. The Defendants in this action are: Mr. Therrien; Mr. Emerick; Mr. Khoury; Mr. Allen; Mr. Grady; Mr. Lepofsky; Mr. Martin; Mr. McGillicuddy; Mr. Palepu; Mr. Woollacott, III; Mr. Wrighton; and Mr. Schorr.

The District Court issued an Order consolidating the above federal derivative actions on August 15, 2006, and a Consolidated Verified Shareholder Derivative Complaint was filed on October 6, 2006; the Defendants named therein are: Mr. Allen, Mr. Grady, Mr. Lepofsky, Mr. Martin, Mr. McGillicuddy, Mr. Palepu, Mr. Schorr, Mr. Woollacott, Mr. Wrighton, Mr. Woodbury, Mr. Therrien, Mr. Emerick, Mr. Khoury, and Mr. Werner. The Consolidated Verified Shareholder Derivative Complaint alleges violations of Section 10(b) and Rule 10b-5 of the Exchange act; Section 14(a) of the Exchange Act; Section 20(a) of the Exchange Act; breach of fiduciary duty; corporate waste; and unjust enrichment, and seeks, on behalf of Brooks, damages, extraordinary equitable relief including disgorgement and a constructive trust for improvidently granted stock options or proceeds from alleged insider trading by certain defendants, Plaintiffs’ costs and disbursements including attorneys’ fees, accountants’ and experts’ fees, costs and expenses. On December 27, 2006, the Court granted Defendants’ motion to stay the federal derivative actions in favor of the first-filed state derivative action described above.

On June 19, 2006, a putative class action was filed in the United States District Court, District of Massachusetts, captioned as Charles E. G. Leech Sr. v. Brooks Automation, Inc., et al. The defendants in this action are: the Company; Mr. Therrien; Ellen Richstone, the Company’s former Chief Financial Officer; Mr. Emerick; Mr. Khoury; Robert W. Woodbury, Jr., the Company’s Chief Financial Officer; and Mr. Grady. The complaint alleges violations of Section 10(b) of the Exchange Act and Rule 10b-5 against the Company and the individual defendants; Section 20(a) of the Exchange Act against the individual defendants; Section 11 of the Securities Act against the Company and Messrs. Grady, Woodbury, Emerick, Khoury and Therrien; Section 12 of the Securities Act against the Company and Messrs. Grady, Woodbury, Emerick, Khoury and Therrien; and Section 15 of the Securities Act against Messrs. Grady, Woodbury, Emerick, Khoury and Therrien. The complaint seeks, inter alia, damages, including interest, and plaintiff’s costs.

On July 19, 2006, a putative class action was filed in the United States District Court for the District of Massachusetts, captioned as James R. Shaw v. Brooks Automation, Inc. et al., No. 06-11239-RWZ. The Defendants in the case are the Company, Mr. Therrien, Ms. Richstone, Mr. Emerick, Mr. Khoury, Mr. Woodbury, and Mr. Grady. The complaint alleges violations of Section 10(b) of the Exchange Act and Rule 10b-5 against all defendants and violations of Section 20(a) of the Exchange Act against all individual defendants. The complaint seeks, inter alia, damages, including interest, and plaintiff’s costs. On December 13, 2006, the Court issued an order consolidating the Shaw action with the Leech action described above and appointing a lead plaintiff and lead counsel. The lead plaintiff has filed a Consolidated Amended Complaint. Motions to dismiss have been filed by all defendants in the case and briefing is now in process.

On August 22, 2006, an action captioned as Mark Levy v. Robert J. Therrien and Brooks Automation, Inc., was filed in the United States District Court for the District of Delaware, seeking recovery, on behalf of the Company, from Mr. Therrien under Section 16(b) of the Securities Exchange Act of 1934 for alleged “short-swing” profits earned by Mr. Therrien due to the loan and stock option exercise in November 1999 referenced above, and a sale by Mr. Therrien of Brooks stock in March 2000. The Complaint seeks disgorgement of all profits earned by Mr. Therrien on the transactions, attorneys’ fees and other expenses. On February 20, 2007, a second Section 16(b) action, concerning the same loan and stock option exercise in November 1999 discussed above and seeking the same remedy, was filed in the United States District Court of the District of Delaware, captioned Aron Rosenberg v. Robert J. Therrien and Brooks Automation, Inc. On April 4, 2007, the Court issued an order consolidating the Levy and Rosenberg actions. Defendants have filed motions to dismiss.

The Company is aware of additional proposed class actions, posted on the websites of various law firms. The Company is not yet aware of the filing of any such actions and has not been served with a complaint or any other process in any of these matters.

Matter to which the Company is Not a Party

Jenoptik-Asyst Litigation

The Company acquired certain assets, including a transport system known as IridNet, from the Infab division of Jenoptik AG on September 30, 1999. Asyst Technologies, Inc. had previously filed suit against Jenoptik AG and other defendants, or collectively, the defendants, in the Northern District of California charging that products of the defendants, including IridNet, infringe Asyst’s U.S. Patent Nos. 4,974,166, or the ‘166 patent, and 5,097,421, or the ‘421 patent. Asyst later withdrew its claims related to the ‘166 patent from the case. Summary judgment of noninfringement was granted in that case by the District Court and judgment was issued in favor of Jenoptik on the ground that the product at issue did not infringe the asserted claims of the ‘421 patent. However, Asyst appealed the adverse judgment to the Court of Appeals for the Federal Circuit. In its decision on that appeal the Court of Appeals affirmed a portion of the District Court’s grant of summary judgment in favor of Jenoptik but also reversed another portion of that judgment and reinstated one of Asyst’s other claims. On the basis of that order and the claim construction guidance furnished by the Court of Appeals, the District Court issued an order granting summary judgment in favor of Asyst on one of its infringement claims against Jenoptik.

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

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 and summarized in Part II, Item 1A of this report. Precautionary statements made in our Annual Report on Form 10-K or in Part II, Item 1A of this report should be read as being applicable to all related forward-looking statements whenever they appear in this report.

Overview

Brooks Automation, Inc. (“Brooks”, “we”, “us” or “our”) is a leading supplier of technology products and solutions primarily serving the worldwide semiconductor market. We supply products and services to both chip manufacturers and original equipment manufacturers, or OEMs, who make semiconductor device manufacturing equipment. 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 world-wide. Although our core business addresses the increasingly complex automation and integrated subsystems requirements of the global semiconductor industry, we also provide solutions for a number of related industries, including the flat panel display manufacturing, data storage and certain other industries which have complex manufacturing environments.

Our business is significantly dependent on capital expenditures by semiconductor manufacturers, which in turn are dependent on the current and anticipated market demand for integrated circuit (“IC”) chips and electronics equipment. To maintain manufacturing leadership and growth in the semiconductor industry, companies make significant capital expenditures in manufacturing equipment and investments in research and development. For example, investments in the production of chips that use advanced 90-nanometer (“nm”) and 65nm process technology are the enablers (increased chip performance, decreased power consumption and reduced cost) for a broad range of new products that are expected to help drive growth in the chip industry. Further advances in IC designs utilizing 45nm and smaller sizes continue to enable innovation and are driving the need for new manufacturing facilities and new generation processing equipment.

We offer a wide range of wafer handling products, vacuum subsystems and wafer transport platforms for use within the semiconductor process and metrology equipment. Our automation hardware products, historically the core products of Brooks, include wafer transfer robots and platforms, or systems that operate in either vacuum or atmospheric environments that are sold to equipment manufacturers. We also provide hardware directly to fabs including equipment for lithography that automate the storage, inspection and transport of photomasks, or reticles. Our vacuum products and subsystems include vacuum technology solutions such as cryogenic pumps for creating vacuum, products for measuring vacuum, and thermal management products that are used in manufacturing equipment for the semiconductor, data storage and flat panel display industries. Additionally, the Company leverages its domain knowledge and manufacturing expertise, enhanced by the acquisition of Synetics Solutions, to build customer-designed automation (“CDA”) systems, or contract automation systems, in a program designed to help customers outsource their automation. The primary customers for these solutions are manufacturers of process equipment. Finally, the global customer service offerings provide customers with support for all our hardware offerings.

We are currently focusing our major efforts in the following aspects of our business:

	•		Implementing global sourcing and manufacturing efficiency through expanded operations in the U.S., Mexico and Asia to be close to the customer;

	•		Expanding our vacuum business globally with new products and new channels such as the recently formed joint venture in Japan with Yaskawa; and

	•		Expanding our sales of equipment automation to the larger vertically integrated OEMs with new integrated sub-system and automation system platforms, and through our CDA business.

Recent Developments

On March 30, 2007, we completed the sale of our software division, Brooks Software, to Applied Materials, Inc., a Delaware corporation (“Applied”) for $125 million in cash consideration and the assumption of certain liabilities related to Brooks Software. Brooks Software is a provider of real-time applications for greater efficiency and productivity in collaborative, complex manufacturing environments. We transferred to Applied substantially all

of our 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. A portion of the cash consideration was placed in escrow to secure certain indemnification obligations of the Company and certain potential tax withholding obligations. In addition, the cash consideration is subject to a post-closing adjustment based on the net asset value of certain assets and liabilities transferred.

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

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

Three and Six Months Ended March 31, 2007, Compared to Three and Six Months Ended March 31, 2006

Revenues

We reported revenues of $194.9 million for the three months ended March 31, 2007, compared to $148.8 million in the three months ended March 31, 2006, a 31.0% increase. The increase reflects the additional revenues of $21.9 million related to the Synetics acquisition, along with higher revenues from legacy Brooks business of $21.0 million due to higher demand for semiconductor capital equipment primarily from large OEM equipment suppliers and higher revenues from the legacy Helix business of approximately $3.2 million. Our revenues for the six months ended March 31, 2007 were $386.3 million, compared to $257.3 million in the same prior year period, a 50.1% increase. This increase reflects the additional revenues of approximately $47.2 million related to the Synetics acquisition, along with higher revenues from legacy Brooks business of $62.0 million due to higher demand for semiconductor capital equipment primarily from large OEM equipment suppliers, and higher revenues from the legacy Helix business of $19.8 million due to higher demand and an additional month of activity in the first half of fiscal year 2007 compared to the same period in fiscal year 2006.

Product revenues increased $40.2 million, or 33.4%, to $160.6 million, in the three months ended March 31, 2007, from $120.4 million in the three months ended March 31, 2006. This increase is attributable to the additional revenues of $21.0 million related to the Synetics acquisition, along with higher revenues from legacy Brooks business of $17.2 million due to higher demand for semiconductor capital equipment primarily from large OEM equipment suppliers and higher revenues from the legacy Helix business of $2.0 million. Service revenues increased $5.9 million, or 20.8%, to $34.3 million in the three months ended March 31, 2007. This increase reflects additional revenues of $0.9 million related to Synetics acquisition, along with higher revenues from legacy Brooks services of $3.8 million and higher revenues from legacy Helix services of $1.2 million.

Product revenues increased $115.7 million, or 56.4%, to $320.9 million, in the six months ended March 31, 2007, from $205.2 million in the six months ended March 31, 2006. This increase is attributable to the additional revenues of $45.4 million related to the Synetics acquisition, along with higher revenues from legacy Brooks business of $54.3 million due to higher demand for semiconductor capital equipment primarily from large OEM equipment suppliers, and higher revenues from the legacy Helix business of $16.0 million due to higher demand and an additional month of activity in the first half of fiscal year 2007 compared to the same period in fiscal 2006. Service revenues increased $13.3 million, or 25.5%, to $65.4 million in the six months ended March 31, 2007. This increase reflects additional revenues of $1.7 million related to Synetics acquisition, along with higher revenues from legacy Brooks services of $7.8 million and higher revenues from legacy Helix services of $3.8 million.

Revenues outside the United States were $70.7 million, or 36.3% of revenues, and $147.1 million, or 38.1% of revenues, in the three and six months ended March 31, 2007 respectively, compared to $53.6 million, or 36.0% of revenues, and $100.5 million, or 39.1% of revenues, in the three and six months ended March 31, 2006 respectively.

We expect that foreign revenues will continue to account for a significant portion of total revenues. The current international component of revenues is not indicative of the future international component of revenues.

Gross Margin

Gross margin dollars increased to $62.5 million for the three months ended March 31, 2007 or $64.8 million net of $2.3 million of completed technology amortization, compared to $45.9 million for the three months ended March 31, 2006, or $52.2 million net of a $4.2 million charge to write-off the remaining step-up in inventory related to the Helix acquisition and $2.1 million of completed technology amortization. Gross margin percentage increased to 32.1% for the three months ended March 31, 2007, compared to 30.8% for the three months ended March 31, 2006. Excluding the $4.2 million inventory write-off taken in the second quarter of fiscal year 2006 and the amortization of completed technology, the overall increase in gross margin of $12.6 million reflects the additional margin of $3.9 million related to the Synetics acquisition, along with higher margin of $8.0 million associated with legacy Brooks business due primarily to higher revenues and approximately $0.7 million related to the legacy Helix business.

Gross margin dollars increased to $122.2 million for the six months ended March 31, 2007 or $126.9 million net of $4.7 million of completed technology amortization, compared to $71.3 million for the six months ended March 31, 2006, or $86.1 million net of a $11.2 million charge to write-off the remaining step-up in inventory related to the Helix acquisition and $3.6 million of completed technology amortization. Gross margin percentage increased to 31.6% for the six months ended March 31, 2007, compared to 27.7% for the six months ended March 31, 2006. Excluding the $11.2 million inventory write-off taken in the first half of fiscal year 2006 and the amortization of completed technology, the overall increase in gross margin of $40.8 million reflects the additional margin of $8.5 million related to the Synetics acquisition, along with higher margin of $26.3 million associated with legacy Brooks business due primarily to higher revenues and approximately $6.0 million related to the legacy Helix business.

Gross margin on product revenues was $51.0 million or $53.3 million net of $2.3 million of completed technology amortization, compared to $34.6 million for the three months ended March 31, 2006, or $40.9 million net of a $4.2 million charge to write-off the remaining step-up in inventory related to the Helix acquisition and $2.1 million of completed technology amortization. Gross margin percentage on product revenues increased to 31.7% for the three months ended March 31, 2007, compared to 28.7% for the three months ended March 31, 2006. Excluding the $4.2 million inventory write-off taken in the second quarter of fiscal year 2006 and the amortization of completed technology, the overall increase in gross margin of $12.4 million reflects the additional margin of $3.6 million related to the Synetics acquisition, plus higher additional margin of $11.4 million associated with legacy Brooks business due primarily to higher revenues, offset by lower margin of $2.6 million related to the legacy Helix business due primarily to higher manufacturing costs.

Gross margin on product revenues increased to $102.9 million for the six months ended March 31, 2007 or $107.6 million net of $4.7 million of completed technology amortization, compared to $50.1 million for the six months ended March 31, 2006, or $64.9 million net of a $11.2 million charge to write-off the remaining step-up in inventory related to the Helix acquisition and $3.6 million of completed technology amortization. Gross margin percentage increased to 32.0% for the six months ended March 31, 2007, compared to 24.4% for the six months ended March 31, 2006. Excluding the $11.2 million inventory write-off taken in the first half of fiscal year 2006 and the amortization of completed technology, the overall increase in gross margin of $42.7 million reflects the additional margin of $7.9 million related to the Synetics acquisition, along with higher margin of $34.4 million associated with legacy Brooks business due primarily to higher revenues and $0.4 million related to the legacy Helix business.

Gross margin on service revenues was $11.5 million or 33.6% for the three months ended March 31, 2007, compared to $11.3 million or 39.8% in the three months ended March 31, 2006. Gross margin on service revenues was $19.3 million or 29.6% for the six months ended March 31, 2007, compared to $21.2 million or 40.7% in the six months ended March 31, 2006. This decrease in gross dollars and percentage is primarily attributable to materials costs incurred on customer service, upgrade and repairs programs as well as higher warranty-related spending.

Research and Development

Research and development expenses for the three months ended March 31, 2007, were $13.3 million, an increase of $2.4 million, compared to $10.9 million in the three months ended March 31, 2006. Research and development expenses for the six months ended March 31, 2007, were $26.4 million, an increase of $6.3 million, compared to $20.1 million in the six months ended March 31, 2006. Research and development expenses decreased as a percentage of revenues to 6.8% in the three months ended March 31, 2007 from 7.3% in the three months ended March 31, 2006, and also decreased to 6.8% in the six months ended March 31, 2007 compared to 7.8% in the six months ended March 31, 2006. The increase in absolute spending in the three months ended March 31, 2007 is attributable to the additional spending of $1.1 million related to the Synetics acquisition, along with higher spending of $1.6 million associated with legacy Brooks products, offset by lower spending of $0.3 million related to the Helix business. The increase in absolute spending in the six months ended March 31, 2007 is attributable to the additional spending of $2.1 million related to the Synetics acquisition, along with higher spending of $4.1 million associated with legacy Brooks products, and higher spending of $0.1 million related to the Helix business. The decrease as a percentage of revenues was primarily the result of continued focus on controlling costs and refocusing our development efforts to be more efficient as well as higher revenue levels against which these costs are measured.

Selling, General and Administrative

Selling, general and administrative expenses were $30.6 million for the three months ended March 31, 2007, an increase of $2.9 million, compared to $27.7 million in the three months ended March 31, 2006. Selling, general and administrative expenses were $61.6 million for the six months ended March 31, 2007, an increase of $8.3 million, compared to $53.3 million in the six months ended March 31, 2006. Selling, general and administrative expenses decreased as a percentage of revenues, to 15.7% in the three months ended March 31, 2007 from 18.6% in the three months ended March 31, 2006, and also decreased to 15.9% in the six months ended March 31, 2007 compared to 20.7% in the six months ended March 31, 2006. The increase in absolute spending in the three months ended March 31, 2007 is primarily attributable to additional expenses of $1.6 million related to the Synetics business along with higher legal expenses related to the stock option matter of $1.6 million. The increase in absolute spending in the six months ended March 31, 2007 is primarily attributable to additional expenses of $3.5 million related to the Synetics business, higher legal expenses related to the stock option matter of $3.1 million, along with higher management incentive charges of $1.6 million.

Restructuring and Acquisition-related Charges

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, the former PRI Automation, Inc. headquarters, and fully recognizes 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. We recorded charges to continuing operations of $1.9 million in the three months ended March 31, 2006 which consisted of a $1.6 million charge related to the vacant Billerica facility and $0.3 million for costs incurred related to workforce reductions. We recorded charges to continuing operations of $2.9 million in the six months ended March 31, 2006 which consisted of a $1.6 million charge related to the vacant Billerica facility and $1.3 million for costs incurred related to workforce reductions.

Interest Income and Expense

Interest income decreased by $1.2 million, to $2.4 million, in the three months ended March 31, 2007, from $3.6 million in the three months ended March 31, 2006. Interest income decreased by $2.6 million, to $4.5 million, in the six months ended March 31, 2007, from $7.1 million in the six months ended March 31, 2006. This decrease is the result of lower investment balances due to the repayment of the Convertible Subordinated Notes in the quarter ended September 30, 2006. Interest expense decreased by $2.1 million, to $0.3 million, in the three months ended March 31, 2007, from $2.4 million for the three months ended March 31, 2006. Interest expense decreased by $4.3 million, to $0.4 million, in the six months ended March 31, 2007, from $4.7 million for the six months ended March 31, 2006. The expense incurred in the prior periods related primarily to the Convertible Subordinated Notes that were paid off in the quarter ended September 30, 2006.

Equity in Earnings of Ulvac Cryogenics, Inc.

We participate in a joint venture, ULVAC Cryogenics, Inc., or UCI, with ULVAC Corporation of Chigasaki,

Japan, which was part of the acquired operations of Helix in October 2005. Income associated with our 50% interest in UCI was $0.2 million, $0.3 million, $0.6 million and $0.5 million in the three and six months ended March 31, 2007 and 2006, respectively.

Other (Income) Expense

We recorded other expense, net of $0.4 million in the three months ended March 31, 2007, compared to other income, net of $0.7 million in the three months ended March 31, 2006. For the six months ended March 31, 2007, we recorded other expense, net of $0.9 million compared to other income, net of $0.2 million in the six months ended March 31, 2006. This decrease in both the three and six month periods is primarily due to foreign exchange losses.

Income Tax Provision

We recorded an income tax provision of $1.5 million and $2.1 million in the three and six months ended March 31, 2007 respectively, compared to a provision of $0.9 million and $1.2 million in the three and six months ended March 31, 2006 respectively. The tax provision recorded for both periods was primarily due to alternative minimum taxes along with foreign income and withholding taxes. We continued to provide a full valuation allowance for our net deferred tax assets at March 31, 2007, 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. We continue to assess the need for the valuation allowance at each balance sheet date based on all available evidence. However, it is possible that the “more likely than not” criterion could be met in fiscal 2007 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 statement of operations.

We are subject to income taxes in various jurisdictions. Significant judgment is required in determining the world-wide provision for income taxes. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that the tax reserves reflect the probable outcome of known contingencies. Tax reserves established include, but are not limited to, business combinations, transfer pricing, withholding taxes, and various state and foreign audit matters, some of which may be resolved in the near future resulting in an adjustment to the reserve.

Discontinued Operations

We recorded income from discontinued operations of $8.1 million for the three months ended March 31, 2007, compared to a loss of $2.8 million associated with this business for the three months ended March 31, 2006. This favorable change is primarily the result of higher margin of $5.3 million on higher revenues of $5.8 million, lower amortization of completed technology of $0.3 million, and reduced R&D and SG&A spending of $6.0 million, offset by higher income taxes of $0.7 million. We recorded income from discontinued operations of $13.3 million for the six months ended March 31, 2007, compared to a loss of $5.0 million associated with this business for the six months ended March 31, 2006. This favorable change is primarily the result of higher margin of $7.8 million on higher revenues of $8.6 million, lower amortization of completed technology of $0.9 million, reduced R&D and SG&A spending of $7.9 million, and the recognition of a tax benefit resulting from the reversal of tax reserves due to an audit settlement of $2.1 million.

We recorded a gain of $83.9 million in the three months ended March 31, 2007 on the sale of our discontinued software business which was completed on March 30, 2007. This gain reflects the receipt of $119.1 million of cash consideration plus an additional $11.6 million to be received within the next twelve months upon the completion of certain indemnification and tax withholding obligations and the finalization of the net asset valuation, offset by expenses of $7.4 million, a tax provision of $1.8 million, and the write-off of net assets totaling $37.6 million.

Liquidity and Capital Resources

Our business is significantly dependent on capital expenditures by semiconductor manufacturers and OEM’s 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. In response to this cyclicality, we

implement cost reduction programs aimed at aligning our ongoing operating costs with our currently expected revenues over the near term. These cost management initiatives have included consolidating facilities, reductions to headcount, salary and wage reductions and reduced spending. The cyclical nature of the industry make estimates of future revenues, results of revenues, results of operations and net cash flows inherently uncertain.

At March 31, 2007, we had cash, cash equivalents and marketable securities aggregating $320.8 million. This amount was comprised of $252.7 million of cash and cash equivalents, $60.5 million of investments in short-term marketable securities and $7.6 million of investments in long-term marketable securities. At September 30, 2006, we had cash, cash equivalents and marketable securities aggregating $191.4 million. This amount was comprised of $115.8 million of cash and cash equivalents, $68.3 million of investments in short-term marketable securities and $7.3 million of investments in long-term marketable securities.

Cash provided by operations was $18.0 million for the six months ended March 31, 2007, and was primarily attributable to our net income of $129.9 million, non-cash depreciation and amortization of $16.2 million and compensation expense related to common stock and options of $4.1 million, partially offset by the working capital adjustments related to the sale of our software division of $81.8 million and a decrease in cash of $49.8 million due to net working capital changes. This change in working capital was primarily the result of increased accounts receivable balances of $21.7 million. Other changes in working capital included decreased accounts payable levels of $15.0 million, an increase in prepaid expenses of $8.1 million and an increased inventory balance of $6.1 million.

Cash provided by investing activities was $114.7 million for the six months ended March 31, 2007, and is principally comprised of proceeds from the sale of our software business of $119.1 million and net sales of marketable securities of $7.8 million, partially offset by $12.2 million used for capital additions.

Cash provided by financing activities was $3.5 million for the six months ended March 31, 2007, and is primarily due to the issuance of stock under our employee stock purchase plan and the exercise of options to purchase our common stock.

While we have no significant capital commitments, as we expand our product offerings, we anticipate that we will continue to make capital expenditures to support our business and improve our computer systems infrastructure. We may also use our resources to acquire companies, technologies or products that complement our business.

At March 31, 2007, 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 our existing resources will be adequate to fund our currently planned working capital and capital expenditure requirements for both the short and long-term. 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 May 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements” (“SFAS 154”). SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. On October 1, 2006, we adopted SFAS 154 and did not realize a material impact on our financial position or results of operations.

In June 2006, the 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 FAS No. 109, “Accounting for Income Taxes.” FIN No. 48 prescribes a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The guidance will become effective as of the beginning of our fiscal year beginning after December 15, 2006. We are currently evaluating the potential impact of FIN No. 48 on our financial position and results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”) expressing the Staff’s views regarding the process of quantifying financial statement misstatements. There have been two widely-recognized methods for quantifying the effects of financial statement errors: the “roll-over” method and the “iron curtain” method. The roll-over method focuses primarily on the impact of a misstatement on the income statement, including the reversing effect of prior year misstatements, but its use can lead to the accumulation of misstatements in the balance sheet. The iron-curtain method, on the other hand, focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of the error on each of our financial statements and the related financial statement disclosures. This model is commonly referred to as a “dual approach” because it essentially requires quantification of errors under both the iron-curtain and the roll-over methods. The provisions of SAB 108 should be applied to annual financial statements covering the first fiscal year ending after November 15, 2006. We are currently evaluating the provisions of SAB 108.

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 (“GAAP”) 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 should be applied prospectively as of the beginning of the fiscal year in which it is initially applied, with limited exceptions. We are currently evaluating the provisions of SFAS 157.

b. Recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to SFAS No. 87, “Employers’ Accounting for Pensions", or SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions". Amounts recognized in accumulated other comprehensive income, including the gains or losses, prior service costs or credits, and the transition asset or obligation remaining from the initial application of SFAS No. 87 and SFAS No. 106, are adjusted as they are subsequently recognized as components of net periodic benefit cost pursuant to the recognition and amortization provisions of those Statements.

c. Measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end

statement of financial position (with limited exceptions).

An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the first fiscal year ending after December 15, 2006. Retrospective application is not permitted. We are currently evaluating the provisions of SFAS 158.

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 No. 159”). SFAS No. 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 our fiscal year beginning after November 15, 2007. We are currently evaluating the potential impact of SFAS No. 159 on our financial position and results of operations.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Our primary market risk exposures are to changes in foreign currency exchange rates. A portion of our business is conducted outside the United States through foreign subsidiaries which maintain accounting records in their local currencies. Consequently, some of our assets and liabilities are denominated in currencies other than the United Stated dollar. Fluctuations in foreign currency exchange rates affect the carrying amount of these assets and liabilities and our operating results. We do not enter into market risk sensitive instruments to hedge these exposures.

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, the Company’s chief executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files 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 the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Commercial Litigation Matters

In January 2006 a ruling was issued against us by a Massachusetts state court in a commercial litigation matter involving us and BlueShift Technologies, Inc. Awards of damages and costs were assessed against us in January and April 2006 in the amount of approximately $1.6 million, which had been accrued for at December 31, 2005. We have filed a notice of appeal in the case with the Massachusetts Appeals Court and that appeal was argued on April 4, 2007. The matter is now under consideration by the Court.

Regulatory Proceedings

On May 12, 2006, we announced that the Company had received notice that the Boston Office of the United States Securities and Exchange Commission (the “SEC”) was conducting an informal inquiry concerning stock option grant practices to determine whether violations of the securities laws had occurred. On June 2, 2006, the SEC issued a voluntary request for information to us in connection with an informal inquiry by that office regarding a loan we previously reported had been made to former Chairman and CEO Robert Therrien in connection with the

exercise by him of stock options in 1999. On June 23, 2006, we were informed that the SEC had opened a formal investigation into this matter and on the general topic of the timing of stock option grants. On June 28, 2006, the SEC issued subpoenas to the Company and to the Special Committee of the Board of Directors, which had previously been formed on March 8, 2006, requesting documents related to the Company’s stock option grant practices and to the loan to Mr. Therrien.

On May 19, 2006, we received a grand jury subpoena from the United States Attorney (the “DOJ”) for the Eastern District of New York requesting documents relating to stock option grants. Responsibility for the DOJ’s investigation was subsequently assumed by the United States Attorney for the District of Massachusetts. On June 22, 2006 the United States Attorney’s Office for the District of Massachusetts issued a grand jury subpoena to us in connection with an investigation by that office into the timing of stock option grants by us and the loan to Mr. Therrien mentioned above.

The Company is cooperating fully with the investigations being conducted by the SEC and the DOJ.

Private Litigation

On May 22, 2006, a derivative action was filed nominally on our behalf in the Superior Court for Middlesex County, Massachusetts, captioned as Mollie Gedell, Derivatively on Behalf of Nominal Defendant Brooks Automation, Inc. v. A. Clinton Allen, et al. The Defendants named in the complaint are: A. Clinton Allen, Director of the Company; Roger D. Emerick, former Director of the Company; Edward C. Grady, Director, President and CEO of the Company; Amin J. Khoury, former Director of the Company; Joseph R. Martin, Director of the Company; John K. McGillicuddy, Director of the Company; and Robert J. Therrien, former Director, President and CEO of the Company.

On May 26, 2006, a derivative action was filed in the Superior Court for Middlesex County, Massachusetts nominally on our behalf, captioned as Ralph Gorgone, Derivatively on Behalf of Nominal Defendant Brooks Automation, Inc. v. Edward C. Grady, et al. The Defendants named in the complaint are: Mr. Grady; Mr. Allen; Mr. Emerick; Mr. Khoury; Robert J. Lepofsky, Director of the Company; Mr. Martin; Mr. McGillicuddy; Krishna G. Palepu, Director of the Company; Alfred Woollacott, III, Director of the Company; Mark S. Wrighton, Director of the Company; and Marvin Schorr, Director Emeritus of the Company.

On August 4, 2006 the Superior Court for Middlesex County, Massachusetts, entered an order consolidating the above state derivative actions under docket number 06-1808 and the caption In re Brooks Automation, Inc. Derivative Litigation. On September 5, 2006, the Plaintiffs filed a Consolidated Shareholder Derivative Complaint; the Defendants named therein are: Mr. Allen, Mr. Martin, Mr. Grady, Mr. McGillicuddy, Mr. Therrien, Mr. Emerick, and Mr. Khoury; Robert W. Woodbury, Jr., the Company’s Chief Financial Officer; Joseph Bellini, former President and Chief Operating Officer of the Company’s Enterprise Software Group; Thomas S. Grilk, Secretary and General Counsel of the Company; current employee Michael W. Pippins; Stanley D. Piekos and Ellen B. Richstone, the Company’s former Chief Financial Officers; and David R. Beaulieu, Jeffrey A. Cassis, Santo DiNaro, Peter Frasso, Robert A. McEachern, Dr. Charles M. McKenna, James A. Pelusi, Michael W. Pippins and Michael F. Werner, former Officers and employees of the Company. The Consolidated Shareholder Derivative Complaint alleges that certain current and former directors and officers breached fiduciary duties owed to Brooks by backdating stock option grants, issuing inaccurate financial results and false or misleading public filings, and that Messrs. Therrien, Emerick and Khoury breached their fiduciary duties, and Mr. Therrien was unjustly enriched, as a result of the loan to and stock option exercise by Mr. Therrien mentioned above, and seeks, on our behalf, damages for breaches of fiduciary duty and unjust enrichment, disgorgement to the Company of all profits from allegedly backdated stock option grants, equitable relief, and Plaintiffs’ costs and disbursements, including attorneys’ fees, accountants’ and experts’ fees, costs, and expenses. The Defendants served motions to dismiss and, in response, Plaintiffs have moved for leave to amend their Complaint. The Proposed Amended Complaint makes allegations substantially similar to those in the Consolidated Shareholder Derivative Complaint, and adds as Defendants Richard C. Small, Senior Vice President and Corporate Controller of the Company, and Mr. Woolacott, Mr. Wrighton, Mr. Lepofsky, and Mr. Palepu, Directors of the Company. If the Court grants Plaintiffs leave to file an amended complaint, Defendants, including the Company, anticipate filing motions to dismiss directed at the amended complaint.

On June 19, 2006, a putative class action was filed in the United States District Court, District of Massachusetts, captioned as Charles E. G. Leech Sr. v. Brooks Automation, Inc., et al. The defendants in this action are: the Company; Mr. Therrien; Ellen Richstone, the Company’s former Chief Financial Officer; Mr. Emerick; Mr. Khoury; Robert W. Woodbury, Jr., the Company’s Chief Financial Officer; and Mr. Grady. The complaint alleges violations of Section 10(b) of the Exchange Act and Rule 10b-5 against us and the individual defendants; Section 20(a) of the Exchange Act against the individual defendants; Section 11 of the Securities Act against us and Messrs. Grady, Woodbury, Emerick, Khoury and Therrien; Section 12 of the Securities Act against us and Messrs. Grady, Woodbury, Emerick, Khoury and Therrien; and Section 15 of the Securities Act against Messrs. Grady, Woodbury, Emerick, Khoury and Therrien. The complaint seeks, inter alia, damages, including interest, and plaintiff’s costs.

We are aware of additional proposed class actions, posted on the websites of various law firms. We are not yet aware of the filing of any such actions and have not been served with a complaint or any other process in any of these matters.

Matter to which the Company is Not a Party

Jenoptik-Asyst Litigation

We acquired certain assets, including a transport system known as IridNet, from the Infab division of Jenoptik AG on September 30, 1999. Asyst Technologies, Inc. had previously filed suit against Jenoptik AG and other defendants, or collectively, the defendants, in the Northern District of California charging that products of the defendants, including IridNet, infringe Asyst’s U.S. Patent Nos. 4,974,166, or the ‘166 patent, and 5,097,421, or the ‘421 patent. Asyst later withdrew its claims related to the ‘166 patent from the case. Summary judgment of noninfringement was granted in that case by the District Court and judgment was issued in favor of Jenoptik on the ground that the product at issue did not infringe the asserted claims of the ‘421 patent. However, Asyst appealed the adverse judgment to the Court of Appeals for the Federal Circuit. In its decision on that appeal the Court of Appeals affirmed a portion of the District Court’s grant of summary judgment in favor of Jenoptik but also reversed another portion of that judgment and reinstated one of Asyst’s other claims. On the basis of that order and the claim construction guidance furnished by the Court of Appeals, the District Court issued an order granting summary judgment in favor of Asyst on one of its infringement claims against Jenoptik.

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

Item 1A. Risk Factors

The following risk factors are a summary of the risk factors disclosed in our Annual report on Form 10-K for the fiscal year ended September 30, 2006.

Factors That May Affect Future Results

You should carefully consider the risks described below and the other information in this report before deciding to invest in shares of our common stock. These are the risks and uncertainties we believe are most important for you to consider. Additional risks and uncertainties not presently known to us, which we currently deem immaterial or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. If any of the following risks or uncertainties actually occurs, our business, financial condition and operating results would likely suffer. In that event, the market price of our common stock could decline and you could lose all or part of your investment.

Risks Relating to Our Industry

	•		Due in part to the cyclical nature of the semiconductor manufacturing industry and related industries, we have incurred substantial operating losses in past years and may have future losses.

	•		We face substantial competition which may lead to price pressure and otherwise adversely affect our sales.

Risks Relating to Brooks

	•		Our operating results could fluctuate significantly, which could negatively impact our business.

	•		Delays and technical difficulties in our products and operations may result in lost revenue, lost profit, delayed or limited market acceptance or product liability claims.

	•		If we do not continue to introduce new products and services that reflect advances in technology in a timely and effective manner, our products and services will become obsolete and our operating results will suffer.

	•		The global nature of our business exposes us to multiple risks. As we increase the number of manufacturing facilities that we operate in other countries, there is an increased risk that we will experience delays in production, which could in turn have an adverse impact on the timing of deliveries to customers and on the ability of customers to meet their own delivery requirements.

	•		Our business could be materially harmed if we fail to adequately integrate the operations of the businesses that we have acquired or may acquire.

	•		Failure to retain key personnel could impair our ability to execute our business strategy.

	•		We face risks related to the restatement of our financial statements and the pending SEC and US Attorney investigations regarding our past practices with respect to equity incentives.

	•		We face litigation risks relating to our past practices with respect to equity incentives that could have a material adverse effect on the Company.

Risks Relating to Our Customers

•		Because we rely on a limited number of customers for a large portion of our revenues, the loss of one or more of these customers could materially harm our business.

•		Because of the lengthy sales cycles of many of our products, we may incur significant expenses before we generate any revenues related to those products.

•		Customers generally do not make long term commitments to purchase our products and our customers may cease purchasing our products at any time.

Other Risks

•

We may be subject to claims of infringement of third-party intellectual property rights, or demands that we license third-party technology, which could result in significant expense and prevent us from using our technology.

Jenoptik-Asyst Litigation

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

•		Our failure to protect our intellectual property could adversely affect our future operations.

•		If the site of the majority of our manufacturing operations were to experience a significant disruption in operations, our business could be materially harmed.

•		Our business could be materially harmed if one or more key suppliers fail to deliver key components.

•		We are exposed to potential risks and we will continue to incur costs as a result of the internal control testing and evaluation process mandated by Section 404 of the Sarbanes-Oxley Act of 2002.

•		Our stock price is volatile.

•		Provisions in our organizational documents and contracts may make it difficult for someone to acquire control of us.

•		We will incur significant stock-based compensation charges related to certain stock options and restricted stock in future periods.

Item 4. Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting on February 5, 2007. A report containing the information required by this item was included in the Company’s quarterly report on Form 10-Q, filed with the SEC on February 7, 2007. The report is attached as Exhibit 22.01 and incorporated by reference.

Item 6. Exhibits

The following exhibits are included herein:


Exhibit No.		Description
22.01		Published Report Regarding Matters Submitted to Vote of Security Holders (previously included under Part II, Item 4 of Brooks’ quarterly report on Form 10-Q, filed with the SEC on February 7, 2007).

31.01		Rule 13a-14(a), 15d-14(a) Certification

31.02		Rule 13a-14(a), 15d-14(a) Certification

32		Section 1350 Certifications

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 10, 2007	/s/ EDWARD C. GRADY
	Edward C. Grady
	Director, President and Chief Executive Officer (Principal Executive Officer)


DATE: May 10, 2007	/s/ ROBERT W. WOODBURY, JR.
	Robert W. Woodbury, Jr.
	Executive Vice President and Chief Financial Officer (Principal Accounting Officer)

EXHIBIT INDEX


Exhibit No.		Description
22.01		Published Report Regarding Matters Submitted to Vote of Security Holders (previously included under Part II, Item 4 of Brooks’ quarterly report on Form 10-Q, filed with the SEC on February 7, 2007).

31.01		Rule 13a-14(a), 15d-14(a) Certification

31.02		Rule 13a-14(a), 15d-14(a) Certification

32		Section 1350 Certifications

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