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BROOKS AUTOMATION INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) Forward Looking Statements This Quarterly Report on Form 10-Q contains statements that are, or may be considered to be, forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the 21 -------------------------------------------------------------------------------- Table of Contents Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. These statements may be identified by such forward-looking terminology as "expect," "estimate," "plan," "intend," "believe," "anticipate," "may," "will," "should," "could," "continue," "project" or similar statements or variations of such terms and involve 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 2012 Annual Report on Form 10-K and which are incorporated herein by reference. Precautionary statements made in our 2012 Annual Report on Form 10-K should be read as being applicable to all related forward-looking statements whenever they appear in this report. Overview We are a leading provider of automation, vacuum and instrumentation solutions for multiple markets and are a valued business partner to original equipment manufacturers ("OEMs") and equipment users throughout the world. We serve markets where equipment productivity and availability is a critical factor for our customers' success, typically in demanding temperature and/or pressure environments. Our largest served market is the semiconductor capital equipment industry, which represented approximately 65% and 54% of our consolidated revenues for fiscal years 2011 and 2012, respectively, and 47% of our consolidated revenues for the first half of fiscal year 2013. These decreases are the result of a recent cyclical downturn in the semiconductor capital equipment market, combined with our efforts to target certain non-semiconductor revenue opportunities, including acquisitions and a divestiture which has led to an increase in the non-semiconductor portion of our revenue. The non-semiconductor markets served by us include life sciences, industrial capital equipment and other adjacent technology markets. Although we have entered into transactions to expand the non-semiconductor portions of our business, we continue to make investments to maintain and grow our semiconductor product and service offerings. In October 2012, we acquired Crossing Automation Inc. ("Crossing"), a U.S. based provider of automation solutions for the global semiconductor front-end markets. The purchase price was approximately $59.0 million, net of cash acquired. In December 2012, we committed to a restructuring plan that would achieve cost synergies associated with our acquisition of Crossing and further reduce costs and improve profitability in light of the continued near-term macro-economic environment. We eliminated and continue to eliminate redundant positions across the Company and we expect to substantially complete our restructuring plan prior to June 30, 2013. For a discussion on our restructuring plan, please refer to "Restructuring and Other Charges" below. We report financial results in the following three segments: • The Brooks Product Solutions segment provides a variety of products critical to technology equipment productivity and availability. Those products include atmospheric and vacuum tool automation systems, atmospheric and vacuum robots and robotic modules and cryogenic vacuum pumping, thermal management and vacuum measurement solutions which are used to create, measure and control critical process vacuum applications. • The Brooks Global Services segment provides an extensive range of support services including on and off-site repair services, on and off-site diagnostic support services, and installation services to enable our customers to maximize process tool uptime and productivity. This segment also provides end-user customers with spare parts support services to maximize customer tool productivity. • The Brooks Life Science Systems segment provides automated sample management systems for automated cold sample storage, automated blood fractionation equipment, sample preparation and handling equipment, cellular imaging, consumables, and parts and support services to a wide range of life science customers including pharmaceutical companies, biotechnology companies, biobanks, national laboratories, research institutes and research universities. The demand for semiconductors and semiconductor manufacturing equipment is cyclical, resulting in periodic expansions and contractions of this market. Most recently, demand for semiconductor capital equipment began to decline during late fiscal 2012 and through the first half of our fiscal 2013 resulting in lower revenues in both the Brooks Product Solutions segment and the Brooks Global Services segment. However, based on recent communications with our semiconductor capital equipment customers, we expect moderately higher revenues from this end market in the near term. We have also experienced a recent decline in demand for the products in our life science business. We believe that this decline is temporary and expect our life science business to recover by the end of our fiscal year. However, to the extent that this business does not recover as quickly as expected and projected cash flows are revised downward, we may be required to write down all or a portion of the goodwill and other long-lived assets associated with this business, which would adversely impact our earnings. 22 -------------------------------------------------------------------------------- Table of Contents Three and Six Months Ended March 31, 2013, Compared to Three and Six Months Ended March 31, 2012 Revenues We reported revenues of $116.6 million for the three months ended March 31, 2013, compared to $139.3 million in the same prior year period, a decrease of 16%. This decrease was primarily due to reduced demand for our products, primarily due to weakness in demand for semiconductor capital equipment which led to a reduction of $28.1 million in revenues from our Brooks Product Solutions segment and a $1.3 million reduction in revenues from our Brooks Global Services segment. Our Brooks Life Science Systems segment had lower sales of $5.5 million for the three months ended March 31, 2013 as compared to the same prior year period due to lower demand. This decrease was partially offset by the acquisition of Crossing which added $12.2 million to our revenues for the three months ended March 31, 2013 as compared to the same prior year period. We reported revenues of $214.6 million for the six months ended March 31, 2013, compared to $259.6 million in the same prior year period, a decrease of 17%. This decrease was primarily due to reduced demand for our products, primarily due to weakness in demand for semiconductor capital equipment which led to a reduction of $57.1 million in revenues from our Brooks Product Solutions segment and a $4.3 million reduction in revenues from our Brooks Global Services segment. Our Brooks Life Science Systems segment had lower sales of $4.2 million for the six months ended March 31, 2013 as compared to the same prior year period due to lower demand. These decreases were partially offset by the acquisition of Crossing which added $20.7 million to our revenues for the six months ended March 31, 2013, as compared to the same prior year period. Our Brooks Product Solutions segment reported revenues of $85.4 million for the three months ended March 31, 2013, a decrease of 17% from $103.5 million in the same prior year period. This segment reported revenues of $148.1 million for the six months ended March 31, 2013, a decrease of 22% from $188.8 million in the same prior year period. These decreases were mostly attributable to lower volumes of shipments to semiconductor capital equipment customers, which decreased by $28.1 million and $57.1 million for the three and six months ended March 31, 2013, respectively, as compared to the same prior year periods. This decrease was partially offset by $10.0 million and $16.5 million of product revenues for the three and six months ended March 31, 2013, respectively, contributed by our recent acquisition of Crossing as compared to the same prior year periods. Our Brooks Global Services segment reported revenues of $22.1 million for the three months ended March 31, 2013, a 4% increase from $21.2 million in the same prior year period. This segment earns revenues from services, including the service contract and repair services, and revenues from the sale of spare parts. Total service revenues for this segment were $18.4 million for the three months ended March 31, 2013, and include $1.7 million of service revenues contributed by the acquisition of Crossing. For the prior year period, service contract and repair revenues were $18.2 million. Excluding the acquisition of Crossing, service revenues for this segment declined $1.5 million for the three months ended March 31, 2013 as compared to the same prior year period. Total spare parts revenues were $3.7 million for the three months ended March 31, 2013, and include $0.5 million of spare parts revenues contributed by the acquisition of Crossing. For the prior year period, spare parts revenues were $3.0 million. Excluding the acquisition of Crossing, spare parts revenues increased $0.2 million for the three months ended March 31, 2013 as compared to the same prior year period. Our Brooks Global Services segment reported revenues of $43.3 million for the six months ended March 31, 2013, which was flat as compared to the same prior year period. The Crossing acquisition contributed $4.2 million of revenue to this segment of which $2.8 million was service related and $1.4 million was product related. Excluding the acquisition of Crossing, revenues for this segment declined $4.2 million for the six months ended March 31, 2013 as compared to the same prior year period primarily due to weakness in demand. Our Brooks Life Science Systems segment reported revenues of $9.1 million for the three months ended March 31, 2013, a 38% decrease from $14.6 million in the same prior year period. This segment reported revenues of $23.3 million for the six months ended March 31, 2013, a decrease of 15% from $27.5 million in the same prior year period. These decreases were the result of a delay in customer decisions to proceed with the purchase of automated sample management systems during the second quarter of fiscal 2013. Gross Margin Our gross margin percentage decreased to 31.4% for the three months ended March 31, 2013, compared to 34.7% for the same prior year period. This decrease was attributable to a reduction in demand for our products from semiconductor equipment and life science customers, which led to reduced production and lower absorption of our fixed costs. In addition, acquisition related charges and higher charges for amortization of intangible assets due to our acquisition of Crossing reduced gross margin percentage by 0.8% for the three months ended March 31, 2013. Our gross margin percentage decreased to 30.6% 23 -------------------------------------------------------------------------------- Table of Contents for the six months ended March 31, 2013 compared to 34.1% for the same prior year period. This decrease was attributable to acquisition related charges of $2.7 million related to the acquisition of Crossing, which reduced gross margin by 1.3%, higher charges for amortization of intangible assets due to our acquisition of Crossing which reduced gross margin by 0.3%, with the balance of the reduction primarily related to a reduction in demand for our products from semiconductor equipment and life science customers, which led to reduced production and lower absorption of our fixed costs. Our gross margin percentage for our Brooks Product Solutions segment decreased to 32.4% for the three months ended March 31, 2013 as compared to 34.7% in the same prior year period. The decrease in gross margin percentage was caused by increased charges for amortization of intangible assets due to the Crossing acquisition, which reduced gross margin by 0.2%, with the balance of the lower gross margin attributable to the reduction in demand for our products, which led to reduced production and lower absorption of our fixed costs. Gross margin percentage for our Brooks Product Solutions segment decreased to 30.7% for the six months ended March 31, 2013 as compared to 34.1% in the same prior year period. The decrease in gross margin percentage was caused by $1.4 million of charges related to the acquisition of Crossing, mainly related to the sale of acquired inventory to which a step up in value had been applied in purchase accounting, which reduced gross margin by 0.9%, increased charges for amortization of intangible assets due to the Crossing acquisition, which reduced gross margin by 0.2%, with the balance of the lower gross margin attributable to the reduction in demand for our products, which led to reduced production and lower absorption of our fixed costs. Our gross margin percentage for our Brooks Global Services segment decreased to 29.5% for the three months ended March 31, 2013 as compared to 31.0% in the same prior year period. The decrease in gross margin percentage was caused by the sale of acquired inventory to which a step up in value had been applied in purchase accounting, which reduced gross margin by 1.2%, with the balance of the decrease mainly attributable to reduction in demand for our services by semiconductor customers, which led to reduced repair activity and lower absorption of our fixed costs. Gross margin percentage for our Brooks Global Services segment decreased to 26.9% for the six months ended March 31, 2013 as compared to 31.7% in the same prior year period. The decrease in gross margin percentage was caused by $1.3 million of charges related to the acquisition of Crossing, mainly related to the sale of acquired inventory to which a step up in value had been applied in purchase accounting, which reduced gross margin by 3.0%, with the balance of the decrease attributable to the reduction in demand for our services by semiconductor customers, which led to reduced repair activity and lower absorption of our fixed costs. Our gross margin percentage for our Brooks Life Science Systems segment decreased to 26.5% for the three months ended March 31, 2013 as compared to 39.6% in the same prior year period. Gross margin percentage for our Brooks Life Science Systems segment decreased to 37.4% for the six months ended March 31, 2013 as compared to 38.7% in the same prior year period. This decrease was primarily attributable to the decrease in revenue described above, which led to reduced production and lower absorption of our fixed costs. This decrease was partially offset by a more favorable product mix for the six months ended March 31, 2013, including a firmware upgrade project that increased gross margin percentage by 2.5%. Research and Development Research and development, or R&D, expenses for the three months ended March 31, 2013 were $12.0 million, a decrease of $0.5 million, compared to $12.5 million in the same prior year period. R&D expenses for the six months ended March 31, 2013 were $23.5 million, a decrease of $1.0 million, compared to $24.5 million in the same prior year period. This decrease for the six months ended March 31, 2013 is primarily due to lower labor costs due to restructuring actions implemented during the fourth quarter of fiscal year 2012 and the first quarter of fiscal year 2013, which was partially offset by $3.1 million of R&D expenses for Crossing, which were not included in the same prior year period. Selling, General and Administrative Selling, general and administrative, or SG&A expenses were $24.8 million for the three months ended March 31, 2013, an increase of $0.5 million compared to $24.3 million in the same prior year period. SG&A expenses were $50.7 million for the six months ended March 31, 2013, a decrease of $0.3 million compared to $51.0 million in the same prior year period. The decrease for the six months ended March 31, 2013 is the result of $3.1 million of lower labor costs due to restructuring actions implemented during the fourth quarter of fiscal year 2012 and the first quarter of fiscal year 2013, $3.0 million of lower consulting costs in connection with our initiatives to improve certain operating efficiencies, $1.7 million of reduction in other SG&A costs, primarily facility and marketing costs and $0.4 million of lower intangible asset amortization, excluding the Crossing acquisition, as certain intangibles became fully amortized. These reductions were partially offset by $4.7 million of SG&A expenses for Crossing, including $1.0 million of increased amortization of intangible assets, and a one-time $3.3 million benefit recorded during the prior year period related to the reimbursement of litigation costs. 24 -------------------------------------------------------------------------------- Table of Contents Restructuring and Other Charges We recorded a restructuring charge of $0.8 million for the three months ended March 31, 2013 and $5.5 million for the six months ended March 31, 2013, respectively. Restructuring costs recorded in the first six months of fiscal 2013 relate primarily to workforce reductions implemented to consolidate the operations of Crossing and the Company, to transition internal manufacturing of the Polycold product line (certain of our cryopump and cryochiller products) to a third party contract manufacturer and other programs designed to improve our cost structure. Restructuring charges also included facility related costs incurred in connection with the consolidation of Crossing facilities with our facilities. Accrued restructuring costs as of March 31, 2013 are expected to be paid during the next twelve months. Restructuring costs for the three months ended March 31, 2013 consist of $0.7 million of severance costs and $0.1 million of facility related costs. The Brooks Product Solutions segment incurred a severance charge of $0.1 million to eliminate 13 positions and $0.3 million related to the outsourcing of the Polycold manufacturing operation. We also incurred $0.2 million of severance charges to eliminate 8 corporate positions and $0.1 million related to the Brooks Life Science Systems segment. Restructuring costs for the six months ended March 31, 2013 consist of $4.7 million of severance costs and $0.7 million of facility related costs. The Brooks Product Solutions segment incurred a severance charge of $2.6 million to eliminate 141 positions, including approximately 30 related to the acquisition of Crossing; Brooks Global Services segment incurred a severance charge of $1.1 million to eliminate 18 positions, and we incurred $0.7 million to eliminate 19 corporate positions. The Brooks Life Science Systems segment incurred severance charges of $0.3 million to eliminate 6 positions, mainly due to the consolidation of administrative functions. Total severance charges related to the outsourcing of the Polycold manufacturing operation are expected to be $1.3 million, including severance and retention bonuses. This charge will be amortized over the period from notification of the closing to the actual service end date. We expensed $0.6 million of this charge as of March 31, 2013, and will expense the balance over the remainder of fiscal year 2013. Restructuring and other charges for the six months ended March 31, 2013 also includes $0.1 million related to a partial settlement of a defined benefit pension plan that covers substantially all of our Swiss employees. The restructuring plans implemented by us during the three months ended September 30, 2012 and December 31, 2012 will reduce the combined cost structure of Brooks and Crossing by approximately $23.0 million. Approximately $4.0 million of that savings is the result of a reduction in temporary staffing, primarily in production positions, for which we did not incur severance charges. The temporary workforce may return as we see semiconductor capital equipment spending recover. The balance of our cost savings are expected to be more permanent, with approximately 33% of the savings reducing our cost of sales and the balance reducing operating expenses. In addition, our decision to outsource production of our Polycold product line will locate the manufacturing of this product closer to a majority of the end users. The impact on gross margin from this production move will be dependent on the mix of our revenues, the timeline for our transition and completion of supply chain activities that are still underway. We recorded charges to operations of $42,000 and $245,000 in the three and six months ended March 31, 2012, respectively, for severance costs related primarily to a limited workforce reduction for the Brooks Product Solutions segment and Brooks Global Services segment in response to a decline in demand from semiconductor equipment customers. In-Process Research and Development During the three months ended March 31, 2012, we acquired primarily intellectual property from Intevac, Inc. for $3.0 million. This intellectual property will be utilized in the development of a next generation of semiconductor automation tools that resides within the Brooks Product Solutions segment. We expensed essentially all of this asset purchase as an in-process research and development cost in the three months ended March 31, 2012. Interest Income Interest income was $0.3 million and $0.5 million for the three and six month periods ended March 31, 2013, as compared to $0.3 million and $0.6 million for the same prior year periods. Our cash balances available for investing decreased during the three and six months ended March 31, 2013 as compared to the same prior year periods because we used $59.0 million in cash to acquire Crossing. Other Income (Expense), Net 25 -------------------------------------------------------------------------------- Table of Contents Other income, net, was $77,000 for the three months ended March 31, 2013 and consists primarily of joint venture management fee income which was partially offset by foreign exchange losses of $234,000. Other expense, net, was $16,000 for the six months ended March 31, 2013 and consists primarily of foreign exchange losses which were partially offset by joint venture management fee income. Other income (expense), net, was ($51,000) and $295,000 for the three and six months ended March 31, 2012, and consists primarily of foreign exchange losses which were partially offset by joint venture management fee income. Income Tax Benefit We recorded an income tax benefit of $0.1 million and $3.8 million for the three and six months ended March 31, 2013, respectively. The tax benefit substantially consists of $0.9 million of tax benefits resulting from the reinstatement of the U.S. federal research and development tax credit, retroactive to January 1, 2012. The benefit also consists of U.S. deferred tax benefits partially offset by foreign taxes, certain state income taxes and interest related to unrecognized tax benefits. We recorded an income tax benefit of $0.7 million and $0.4 million for the three and six months ended March 31, 2012, respectively. The tax benefit is driven by $1.4 million of reductions in uncertain tax positions as a result of the lapse in statutes of limitations. This benefit was partially offset by provisions substantially consisting of foreign income taxes arising from our international sales mix, certain state income taxes and interest related to unrecognized tax benefits. As of March 31, 2013, we continued to maintain a valuation allowance in the U.S. against certain tax credits and state net operating losses due to the uncertainty of their realization based on our long-term forecasts and the expiration dates on these attributes. We also continued to maintain a valuation allowance in certain jurisdictions that have not generated historical cumulative profitability. Equity in Earnings (Losses) of Joint Ventures Income (expense) associated with our 50% interest in ULVAC Cryogenics, Inc., or "UCI", a joint venture with ULVAC Corporation of Japan, was ($16,000) and $0.6 million for the three months ended March 31, 2013 and 2012, respectively. This decrease was the result of lower revenues due to a cyclical slowing of demand for UCI products. The income (expense) associated with our 50% interest in Yaskawa Brooks Automation, Inc., a joint venture with Yaskawa Electric Corporation of Japan was $6,000 and ($0.2) million for the three months ended March 31, 2013 and 2012, respectively. Income associated with our 50% interest in UCI was $62,000 and $1.5 million for the six months ended March 31, 2013 and 2012, respectively. This decrease was the result of lower revenues due to a cyclical slowing of demand for UCI products. The income (loss) associated with our 50% interest in Yaskawa Brooks Automation, Inc. was ($78,000) and $5,000 for the six months ended March 31, 2013 and 2012, respectively. Liquidity and Capital Resources A considerable portion of our revenues are dependent on the demand for semiconductor capital equipment. Demand for this equipment has historically experienced periodic downturns. This cyclicality makes estimates of a considerable portion of our future revenues and cash flows inherently uncertain. At March 31, 2013, we had cash, cash equivalents and marketable securities aggregating $145.6 million. This amount was composed of $60.1 million of cash and cash equivalents, $46.3 million of investments in short-term marketable securities and $39.2 million of investments in long-term marketable securities. Cash and cash equivalents were $60.1 million at March 31, 2013, an increase of $5.5 million from September 30, 2012. The increase in cash was primarily due to $58.9 million of net sales of marketable securities and $16.7 million of cash flow from operations. These sources of cash were partially offset by the $59.0 million we used to acquire Crossing and $10.7 million we used to pay the cash dividend on December 28, 2012 and March 29, 2013. Cash provided by operating activities was $16.7 million for the six months ended March 31, 2013, and was composed of $14.7 million for non-cash related charges partially offset by a net loss of $9.7 million. Non-cash related charges consisted of items such as $12.4 million of depreciation and amortization and $5.0 million of stock-based compensation offset by a deferred tax benefit of $3.4 million. The net loss adjusted for non-cash items for the six months ended March 31, 2013 was offset by an $11.8 million decrease in working capital, primarily due to a $13.7 million decrease in inventory and $9.5 million decrease in accounts receivable partially offset by a $4.3 million decrease in prepaid expenses and other current assets, a $3.3 million decrease in accounts payable and a $2.7 million decrease in accrued compensation. 26 -------------------------------------------------------------------------------- Table of Contents Cash used in investing activities was $0.6 million for the six months ended March 31, 2013, and is composed of $59.0 million used in connection with the acquisition of Crossing, $2.1 million of deferred leasing costs incurred by us in connection with the leasing of a recently vacated building owned by us that we have agreed to lease to a third party and $1.6 million of capital expenditures. These costs are mostly offset by net sales of marketable securities of $58.9 million and $2.4 million of proceeds from the sale of certain property, plant and equipment in Switzerland. Cash used in financing activities for the six months ended March 31, 2013 is composed primarily of $10.7 million for our quarterly cash dividends paid on December 28, 2012 and March 29, 2013. At March 31, 2013, we had approximately $2.5 million of letters of credit outstanding. On June 21, 2010, we filed a registration statement on Form S-3 with the SEC to sell up to $200 million of securities, before any fees or expenses of the offering. Securities that may be sold include common stock, preferred stock, warrants or debt securities. Any such offering, if it does occur, may happen in one or more transactions. Specific terms of any securities to be sold will be described in supplemental filings with the SEC. This registration statement will expire on July 1, 2013. On May 8, 2013, our Board of Directors approved a cash dividend of $0.08 per share of the Company's common stock. The total dividend of approximately $5.3 million will be paid on June 28, 2013 to shareholders of record at the close of business on June 7, 2013. Dividends are declared at the discretion of our Board of Directors and depend on actual cash from operations, our financial condition and capital requirements and any other factors our Board of Directors may consider relevant. We intend to pay quarterly cash dividends in the future; however, the amount and timing of these dividends may be impacted by the cyclical nature of certain markets that we serve. We may reduce, delay or cancel a quarterly cash dividend based on the severity of a cyclical downturn. We believe that we have adequate resources to fund our currently planned working capital and capital expenditure requirements for the next twelve months. The cyclical nature of our served markets and uncertainty with the current global economic environment makes it difficult for us to predict longer-term liquidity requirements with certainty. We may be unable to obtain any required additional financing on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to successfully develop or enhance products, respond to competitive pressure or take advantage of acquisition opportunities, any of which could have a material adverse effect on our business. Other Key Indicators of Financial Condition and Operating Performance EBITDA and Adjusted EBITDA presented below are supplemental measures of our performance that are not required by, or presented in accordance with GAAP. They should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP. EBITDA represents net income (loss) before interest income, income tax provision (benefit), depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to give effect to certain non-recurring and non-cash items and other adjustments. We believe that the inclusion of EBITDA and Adjusted EBITDA in this Form 10-Q is appropriate because we consider it an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors and other interested parties. We use Adjusted EBITDA internally as a critical measurement of operating effectiveness. We believe EBITDA and Adjusted EBITDA facilitates operating performance comparison from period to period and company to company by backing out potential differences caused by variations in capital structures, tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). In determining Adjusted EBITDA, we eliminate the impact of a number of items. For the reasons indicated herein, you are encouraged to evaluate each adjustment and whether you consider it appropriate. In addition, in evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in the presentation of Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: • they do not reflect our cash expenditures for capital expenditure or contractual commitments; • they do not reflect changes in, or cash requirements for, our working capital requirements; • other companies, including other companies in our industry, may calculate these measures differently than we do, limiting their usefulness as a comparative measure. 27-------------------------------------------------------------------------------- Table of Contents Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. For these purposes, we rely on our GAAP results. For more information, see our consolidated financial statements and notes thereto appearing elsewhere in this report. The following table sets forth a reconciliation of net (loss) income to EBITDA for the periods indicated (in thousands): Three Months Ended Six Months Ended March 31, March 31, 2013 2012 2013 2012 Net income (loss) attributable to Brooks Automation, Inc. $ (538 ) $ 9,721 $ (9,774 ) $ 12,544 Interest income, net (265 ) (273 ) (539 ) (545 ) Benefit for income taxes (129 ) (659 ) (3,799 ) (359 ) Depreciation and amortization 6,002 5,353 12,443 10,621 EBITDA $ 5,070 $ 14,142 $ (1,669 ) $ 22,261 The following table sets forth a reconciliation of EBITDA to Adjusted EBITDA for the periods indicated (in thousands): Three Months Ended Six Months Ended March 31, March 31, 2013 2012 2013 2012 EBITDA $ 5,070 $ 14,142 $ (1,669 ) $ 22,261 Stock-based compensation 2,499 3,181 5,010 4,924 Restructuring and other charges 769 42 5,526 245 Purchase accounting impact on inventory and contracts acquired 805 471 2,907 831 Merger costs 8 - 642 221 In-process research and development - 3,026 - 3,026 Adjusted EBITDA $ 9,151 $ 20,862 $ 12,416 $ 31,508 The decrease in EBITDA for the six months ended March 31, 2013 as compared to the same prior year period was primarily related to the $44.9 million decrease in revenues and the $5.3 million increase in restructuring costs. For a further discussion of the factors impacting our revenues and costs, see the discussion of our results of operations above. In connection with our acquisitions, we have valued acquired inventories at fair value, which results in a higher inventory cost charged to cost of sales in the periods shortly after the acquisition closes. We also value acquired sales contracts at fair value, which results in lower revenue and cost of sales in the periods shortly after the acquisition closes. These charges were $0.8 million and $2.9 million in the three and six month periods ended March 31, 2013, respectively, and related primarily to the acquisition of Crossing. The charges in prior year period related to our life science acquisitions. Merger costs consist of professional fees to complete the acquisition of Crossing and the life science companies for the three and six month period ended March 31, 2013 and 2012, respectively. Recently Enacted Accounting Pronouncements In June 2011, the Financial Accounting Standards Board ("FASB") issued an amendment to the accounting guidance for presentation of comprehensive income. Under the amended guidance, a company may present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This authoritative guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. On October 1, 2012 we adopted this guidance and elected to present two separate but consecutive statements. In February 2013, the FASB issued guidance to provide information about the amounts reclassified out of accumulated other comprehensive income ("AOCI") by component. In addition, an entity is required to present, either on the face of the 28 -------------------------------------------------------------------------------- Table of Contents financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. On January 1, 2013 we adopted this standard, which had no impact on our financial position or results of operations. 29 -------------------------------------------------------------------------------- Table of Contents |