-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BQDrGtiXs70SEACVVXEVK0BY0OF1S0QGdiXmHSN/589CD1OiiVVTbjrs0d06GK2S rYPTetVNMV2Sk9SJbjxA6g== 0001169232-08-003610.txt : 20081007 0001169232-08-003610.hdr.sgml : 20081007 20081007060049 ACCESSION NUMBER: 0001169232-08-003610 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20081007 DATE AS OF CHANGE: 20081007 GROUP MEMBERS: DAVID NIERENBERG GROUP MEMBERS: THE D3 FAMILY BULLDOG FUND, L.P. GROUP MEMBERS: THE D3 FAMILY CANADIAN FUND, L.P. GROUP MEMBERS: THE D3 FAMILY FUND, L.P. GROUP MEMBERS: THE DIII OFFSHORE FUND, L.P. GROUP MEMBERS: THE NIERENBERG INVESTMENT MANAGEMENT OFFSHORE, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BROOKS AUTOMATION INC CENTRAL INDEX KEY: 0000933974 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 043040660 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-45079 FILM NUMBER: 081111114 BUSINESS ADDRESS: STREET 1: 15 ELIZABETH DRIVE CITY: CHELMSFORD STATE: MA ZIP: 01824 BUSINESS PHONE: (978) 262-2400 MAIL ADDRESS: STREET 1: 15 ELIZABETH DRIVE CITY: CHELMSFORD STATE: MA ZIP: 01824 FORMER COMPANY: FORMER CONFORMED NAME: BROOKS-PRI AUTOMATION INC DATE OF NAME CHANGE: 20020514 FORMER COMPANY: FORMER CONFORMED NAME: BROOKS AUTOMATION INC DATE OF NAME CHANGE: 19941215 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: NIERENBERG INVESTMENT MANAGEMENT CO CENTRAL INDEX KEY: 0001282683 IRS NUMBER: 911677205 FILING VALUES: FORM TYPE: SC 13D/A MAIL ADDRESS: STREET 1: 19605 NE 8TH ST CITY: CAMAS STATE: WA ZIP: 98607 SC 13D/A 1 d75076_13d.txt AMENDMENT NO. 9 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 9) BROOKS AUTOMATION, INC. (BRKS) - -------------------------------------------------------------------------------- (Name of Issuer) - -------------------------------------------------------------------------------- Common Stock (Title of Class of Securities) 114340102 - -------------------------------------------------------------------------------- (CUSIP Number) David Nierenberg The D3 Family Funds 19605 NE 8th Street Camas, WA 98607 (360) 604-8600 - -------------------------------------------------------------------------------- With a copy to: Henry Lesser, Esq. DLA Piper US LLP 2000 University Avenue East Palo Alto, CA 94303 (650) 833-2000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 6, 2008 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box |_|. - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON The D3 Family Fund, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Washington - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 ----------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 977,504 common shares (1.54%) OWNED BY ----------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 0 WITH ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 977,504 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON For the reporting person listed on this page, 977,504; for all reporting persons as a group, 6,346,806 shares (9.98%) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.98% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 2 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON The D3 Family Bulldog Fund, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Washington - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 ----------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 3,920,907 common shares (6.17%) OWNED BY ----------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 0 WITH ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,920,907 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON For the reporting person listed on this page, 3,920,907; for all reporting persons as a group, 6,346,806 shares (9.98%) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.98% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 3 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON The D3 Family Canadian Fund, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Washington - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 ----------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 367,675 common shares (0.58%) OWNED BY ----------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 0 WITH ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 367,675 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON For the reporting person listed on this page, 367,675 shares; for all reporting persons as a group, 6,346,806 shares (9.98%) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.98% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 4 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON The DIII Offshore Fund, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Washington - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 ----------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 1,080,720 common shares (1.70%) OWNED BY ----------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 0 WITH ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,080,720 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON For the reporting person listed on this page, 1,080,720; for all reporting persons as a group, 6,346,806 shares (9.98%) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.98% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 5 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON Nierenberg Investment Management Company, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Washington - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 ----------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 6,346,806 common shares (9.98%) OWNED BY ----------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 0 WITH ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 6,346,806 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON For the reporting person listed on this page, 6,346,806; for all reporting persons as a group, 6,346,806 shares (9.98%) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.98% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 6 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON Nierenberg Investment Management Offshore, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bahamas - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 ----------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 1,080,720 common shares (1.70%) OWNED BY ----------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 0 WITH ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,080,720 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON For the reporting person listed on this page, 1,080,720; for all reporting persons as a group, 6,346,806 shares (9.98%) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.98% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 7 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON David Nierenberg - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 ----------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 6,346,806 common shares (9.98% OWNED BY ----------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON 0 WITH ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 6,346,806 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON For the reporting person listed on this page, 6,346,806; for all reporting persons as a group, 6,346,806 shares (9.98%) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* |_| - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.98% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 8 This Amendment No.9 to Schedule 13D (this "Amendment") amends the below-indicated items from the Schedule 13D previously filed by or on behalf of the undersigned parties (the "Reporting Persons"), as previously amended (the "Schedule 13D"), by supplementing such Items with the information below: Item 3. Source and Amount of Funds or Other Consideration The total amount of funds used by the Reporting Persons to make all of the purchases of Shares, as reported in Item 5(c), was $860,683. The total amount of funds used by the Reporting Persons to make all purchases of Shares beneficially owned by the Reporting Persons, as reported in Item 5(a, b), was $83,940,679.The source of funds for purchases of Shares by each of the Reporting Persons is the working capital of the applicable D3 Family Fund. Item 4. Purpose of Transaction The Reporting Persons are calling upon BRKS to commit to an immediate and continuing substantial share repurchase program. This request was made in a letter dated October 6, 2007 which the Reporting Persons, through David Nierenberg, sent to BRKS CEO Robert Lepofsky. The letter is attached to this filing and is incorporated by reference herein. The statements by the Reporting Persons in the above-referenced letter regarding their investment in BRKS represent solely their own analyses and judgments, based on publicly-available information and their own internal evaluation thereof. Those statements are not intended, and should not be relied on, as investment advice to any other investor or prospective investor. To the extent those statements reflect assessments of possible future developments, those assessments are forward-looking statements that are inherently subject to the uncertainties associated with all assessments of future events; actual developments may materially differ as a result of circumstances affecting BRKS and/or extrinsic factors such as developments in BRKS' industry and the economic environment. The Reporting Persons reserve the right to change their internal evaluation of this investment in the future, as well as to increase or decrease their investment depending on their evaluation, and to discuss BRKS and their investment in it with the directors and executive officers of BRKS and third parties, without further amending the Schedule 13D except as required by applicable rules. Item 5. Interest in Securities of the Issuer (a, b) The Reporting Persons, in the aggregate, beneficially own 6,346,806 Shares, constituting approximately 9.98% of the outstanding Shares. (c) During the past sixty (60) days, the following purchases of Shares were made by the Reporting Persons named below in open market transactions: 9 Fund Transaction Date Shares Bought Price ---- ---------------- ------------- ----- D3 Family Canadian Fund, LP 08/12/2008 1,300 9.59 D3 Family Canadian Fund, LP 08/18/2008 13,800 9.56 D3 Family Canadian Fund, LP 08/19/2008 18,000 9.53 D3 Family Canadian Fund, LP 08/20/2008 7,500 9.55 D3 Family Canadian Fund, LP 08/21/2008 7,400 9.47 D3 Family Canadian Fund, LP 08/22/2008 300 9.60 D3 Family Canadian Fund, LP 08/26/2008 21,700 9.55 D3 Family Canadian Fund, LP 08/27/2008 7,000 9.54 D3 Family Canadian Fund, LP 08/29/2008 13,000 9.60 Item 7. Material to be filed as Exhibits Exhibit 1 to this Amendment is the letter referred to in response to Item 4 of this Amendment. 10 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, each of the undersigned certifies that the information set forth in the Statement is true, complete and correct. D3 Family Fund, L.P., D3 Family Bulldog Fund, and D3 Family Canadian Fund, L.P. By: Nierenberg Investment Management Company, Inc. Its: General Partner October 7, 2008 By: /s/ David Nierenberg - ------------------------- ------------------------------------------- David Nierenberg, President DIII Offshore Fund, L.P. By: Nierenberg Investment Management Offshore, Inc. Its: General Partner October 7, 2008 By: /s/ David Nierenberg - ------------------------- ------------------------------------------- David Nierenberg, President Nierenberg Investment Management Company, Inc. October 7, 2008 By: /s/ David Nierenberg - ------------------------- ------------------------------------------- David Nierenberg, President Nierenberg Investment Management Offshore, Inc. October 7, 2008 By: /s/ David Nierenberg - ------------------------- ------------------------------------------- David Nierenberg, President October 7, 2008 /s/ David Nierenberg - ------------------------- ------------------------------------------- David Nierenberg 11 EX-99.1 2 d75076_ex1.txt LETTER Exhibit 1 THE D3 FAMILY FUNDS October 6, 2008 Mr. Robert J. Lepofsky, President and Chief Executive Officer Brooks Automation, Inc. 15 Elizabeth Drive Chelmsford, Massachusetts 01824 Dear Bob, Brooks and the D3 Funds have had a very productive dialogue for several years on issues of governance, strategy, and capital structure. We are delighted with what the company has become since Ed Grady became CEO, Joe Martin Chairman, and since you succeeded Ed as CEO. We consider ourselves fortunate to be your largest and one of your oldest shareholders. We certainly are living through extraordinary times, aren't we? The current volatility in the capital markets; the anxieties which are causing this; the large share repurchase programs recently announced by Microsoft, Nike, Hewlett-Packard and Sysco; the downturn of your principal served market; and the SEC's temporary relaxation of share repurchase rule 10b-18 all prompt us to resume our discussion with you, Joe, and the Board of Directors about Brooks' financial strategy. We believe that Brooks has, and can generate, sufficient cash over the next three or four years to both fund an aggressive share repurchase program, which would nearly halve your share count relative to Brooks 77 million shares before your first repurchase, and enable Brooks to roughly double its revenues relative to your current revenue run rate, through organic growth and acquisitions. We urge you and Brooks' Board to commit to and commence such a program right now, while the share price is weak. We believe Brooks has the financial strength to attain both objectives without using debt. While we discuss in this letter a three to four year share repurchase program, we view this as the opening phase of what we hope will become an even longer term program at Brooks to grow earnings per share (EPS) and to increase return on invested capital (ROIC) by actively managing three variables: revenue growth, costs, and capital structure. Similar long term programs have been used successfully to build shareholder value at Teledyne from 1972 to 1984, and for decades at Loews Corporation and Washington Post. At Teledyne the repurchase program enabled it to increase EPS nearly six times faster than net income. We know that you and Brooks' board appreciate this; your last two repurchases demonstrate this. Our request today is a strong endorsement of your leadership of Brooks, the Board's governance of the company, Brooks' strong competitive position, your fortress balance sheet, and your long term growth prospects. We would not seek, through repurchase, to own more of Brooks unless we believed strongly that it is an excellent firm with a bright future. 1 Nierenberg Investment Management Company, Inc., 19605 NE 8th Street, Camas, WA 98607 (360)604-8600, Fax (360)604-1811 Brooks has accomplished a great deal since we first became shareholders in 2003. The Board has selected a new chair and new committee chairs. Three former directors are gone. Oversight and governance have improved significantly. Regulatory investigations and shareholder litigation have been resolved. Brooks has focused its strategy on tool automation systems, key component subsystems, and customer service, shedding and monetizing none-core businesses, paying off debt, and repurchasing 13.5 million shares. The company has acquired Helix and Synetics, a pair of smart, strategic, well integrated acquisitions. Brooks has refreshed its product line. The company is beginning to penetrate Japan, the world's second largest semiconductor capital equipment (SCE) market, through your joint venture with Yaskawa (YBA). Brooks' sharpened strategic focus, smart acquisitions, new products, and YBA joint venture have enabled the company to penetrate previously captive tier one SCE customers and to drive its market share from 18% to 28%, making Brooks the clear world leader in its niche. Recently you have announced, and nearly completed, a cost reduction program to reduce Brooks' breakeven quarterly revenue rate to $125M. This is a notable record of accomplishment, though, knowing you, we can envision you modestly saying "There is so much more to do." It must be frustrating to you and your team that market macro fears and "short-termism" currently cause Brooks' share price not to reflect the transforming accomplishments of the past five years. But this will change. We believe that there is one more thing Brooks should do to round its accomplishments: use your current and future financial strength to recommit to a long term share repurchase program to boost your ROIC and EPS by nearly halving your share count relative to where it was before. We emphasize "long term program" to better distinguish it from episodic, interrupted, or discontinuous repurchases. The three examples we cited earlier demonstrate that, in a world where far more repurchases are announced than well executed, the most successful repurchases are long term programs which are ambitious in scope. Smaller, discontinuous programs accomplish little. They generally fail to demonstrate durable or significant commitment. Repurchasing shares is like going on a diet: fundamentally changing habits works better than fits and starts. Most diets fail, as do most repurchases - unless they are programmed to become a new habit, which is what we advocate here. We believe that the correct way to assess Brooks' ability to nearly halve the share count resembles how you think about long term growth strategy - over a three or four year period. If, instead, one scoped the size of Brooks' share repurchase program using a momentary snap shot of today's balance sheet, one would overlook the near term opportunity to monetize your inventory, the longer term opportunity to monetize your real estate, and your massive, NOL-sheltered, opportunity to generate hundreds of millions in operating cash flow now that you have reduced Brooks' breakeven rate. As we will now demonstrate, the combination of your current cash, with the cash Brooks can generate from monetization and operations over the next three to four years produces a cash hoard 157-224% more than your most recent published cash balance. Brooks reported cash, marketable securities, and long term marketable securities of $178.407 million at the end of your June 2008 quarter. Brooks also reported owning land and buildings worth $44.678 million in its Form 10-K for the fiscal year ended September 30, 2007. Your real estate is valued at Brooks' historical cost, less accumulated depreciation of the buildings. We believe that 2 Nierenberg Investment Management Company, Inc., 19605 NE 8th Street, Camas, WA 98607 (360)604-8600, Fax (360)604-1811 Brooks owns this real estate unencumbered by any debt. We do not believe that Brooks has monetized any land or buildings since publishing the fiscal 2007 10-K. Since Brooks acquired its real estate, the company has exited the fab automation, software, and life science businesses; it has outsourced some manufacturing to Synetics, Mexico, and China; and management has mentioned publicly on many occasions its continuing commitment to shifting more manufacturing to low cost locations. While we do not profess to be real estate experts, nor do we know what you know about the utilization of your company owned facilities, we believe that Brooks has more of the shareholders' money invested in real estate than it should have today and in the future. In fact, continued outsourcing of manufacturing, and possible outsourcing of some engineering, could free up even more of Brooks' real estate. While we are not urging you to monetize all real estate, or to sell now, we do advocate monetizing excess land and buildings whenever you conclude that is advantageous to do so, or when catalyzed by a possible acquisition. For the purpose of our analysis today, we will "guesstimate" that Brooks could extract at least $22 million cash from its real estate during the next three years - half of your carrying cost. Now we will shift our analysis from your balance sheet to your potential operating cash flows over the next three to four years, as the SCE industry ultimately climbs out of its current trough, as Brooks continues to drive the merchant market for SCE tool automation to substitute for the captive market, as the YBA joint venture enables Brooks to penetrate the Japanese market, as you reposition and grow Brooks' service business to resemble Helix' in size and profitability, as tool automation grows into new areas of the fab, and as you grow your solar business. The current downturn not withstanding, all of us believe that Brooks is a growth company, both organically and through possible acquisitions. Over the next three to four years, we believe that Brooks could grow its revenues to $800 million to $1 billion. We do not believe that Brooks would disagree with our assessment of the company's upside potential. In fact, just last month, when Brooks presented at Citi's Technology Conference, the company showed a slide entitled "A Realistic Target Financial Model" (slide number 14), which showed calendar 2010 revenues ranging from $700 million to $1 billion, which it footnoted as coming from a revenue "base" of $700 million "+ 100 million organic growth + $200 million external growth." Independently, we land in the very same place. Let's consider the implications of this for cash flow growth and cash accumulation. On your last several quarterly earnings calls, you and CFO Martin Headley estimated that 40% of revenues above the $500 million annualized break-even would flow through to operating profit. Referring to this, during the June quarter earnings call you said "we are preparing to deliver higher profits and cash flow than at any time in Brooks' history." We believe that you are absolutely correct. Moreover, Brooks has accumulated such a gigantic NOL tax shield from past losses that, with the exception of perhaps $3 million per year in foreign tax payments, we believe that most of Brooks' operating profit over the next three to four years will flow directly into after tax profit. Thus, when Brooks reaches $800 million in annual revenues, after tax operating profits would reach $117 million ($300 million above the breakeven level x 40% flow-through, minus $3 million for foreign taxes). At $1 billion in revenues, after tax operating profits would reach $197 million. Obviously we cannot forecast when this might happen. For our purposes, we will project a straight climb in the $800 million scenario over four fiscal years, with $27 million of after tax profit in fiscal 2009, climbing to $57 million in fiscal 2010, $87 million in fiscal 2011 (very close to Brooks' Citi presentation calendar 2010 free cash flow number of $99 million), and 3 Nierenberg Investment Management Company, Inc., 19605 NE 8th Street, Camas, WA 98607 (360)604-8600, Fax (360)604-1811 $117 million in fiscal 2012. In the $1 billion revenue scenario, we slowed early growth to make it non-linear: begin with the same $27 million in fiscal 2009, rising to $77 million in fiscal 2010, $132 million in fiscal 2011, and $197 million in fiscal 2012. Accumulated after tax cash profits over the four fiscal years would range from $288 million in the $800 million revenue case to $433 million in the $1 billion case. To estimate Brooks' operating cash flow from fiscal 2009-2012 we also must project depreciation, capital expenditures, inventories, and receivables. To simplify this, we will assume that Brooks' annual depreciation expense should roughly equal capital expenditures. This feels reasonable to us because your Oracle investment is mostly complete and because we believe Brooks holds excess real estate. Brooks' June quarter inventory level was high enough that we believe that inventory could be an immediate source of cash and that, with Martin Headley's strong capability in financial management, Brooks may not need to add any net dollars to inventory from June 30, 2008 through the end of fiscal 2012, even as the company grows. Finally, while receivables probably are a near term source of cash, we would expect over four years that Brooks would need to invest $45 - $70 million more cash to fund the growth of receivables. The final piece of our cash flow exercise is to project cash flow from the exercise of stock options. While this is inherently unknowable, it nonetheless is real. We will "guesstimate" that this might generate a total of $15 million in cash over the next four years. Let's combine all the current and projected cash in one table:
Source of cash: Amount (in millions of dollars): - --------------- -------------------------------- Current cash, marketable securities, and long term marketable securities 178 Excess real estate, monetized over time 22 Estimated accumulated after tax profits, FY 2009-2012 288-433 Estimated depreciation and capex, FY 2009-2012 0 Estimated additional inventory investments, FY 2009-2012 0 Estimated additional receivables investment, FY 2009-2012 (45-70) Estimated cash from options exercises, FY 2009-2012 15 TOTAL CURRENT AND FOUR YEAR CASH: $458 - 578 MILLION
This combination of a balance sheet snap shot and a dynamic four year projection produces a very large sum of free cash, 157-224% more than Brooks' current cash and securities, and 93-118% of the company's current market capitalization. To us, therefore, it seems unfortunate that Brooks has stopped repurchasing shares. With this much cash today, and so much more to come, Brooks could nearly halve its share count relative to where you started, while retaining and generating sufficient free cash to make acquisitions, without using debt and while retaining half of your real estate. If, hypothetically, Brooks were to repurchase 26 million shares at a hypothetical average price of $10 per share over the next several years, your repurchase program would require $260 million, leaving $198.4 - $318.0 million for acquisitions. 4 Nierenberg Investment Management Company, Inc., 19605 NE 8th Street, Camas, WA 98607 (360)604-8600, Fax (360)604-1811 Therefore, this is what we recommend that the Board of Brooks commit to doing and commence right away. We are not recommending a 10b5-1 program or another Dutch Auction. Rather, we request a flexible, multi-year program of using cash, monetizable assets and free cash flow from future operations to reduce your fully diluted share count to 40 million by 2012. Now is the time to put this cash to work. Let's think about what this could mean for Brooks' long term shareholders. If four years from now Brooks were to generate $117 million of after tax profits on $800 million in revenues, or $197 million on $1 billion in revenue, on a fully diluted share count of 40 million, EPS would rise from break-even today to $2.92 - - $4.92. When trying to project Brooks' share price on earnings like this, we should normalize for income taxes and assume the end of NOL protection. Normalized 2012 EPS would be $1.76 - $2.95. Assuming a typical market multiple of 15 times earnings, Brooks' share price would rise to $26.40 - $44.25, more than three to five times where it is today. Assuming a 20 multiple, which would not be unusual after four years of rapid profit growth; Brooks' share price would rise to $35.20 - $59.00, nearly five to over seven times where it is today. Like you, we want Brooks to grow. We are not opposed to acquisitions. The Helix and Synetics acquisitions were both good ones. Most acquisitions Brooks made before Ed Grady's arrival, however, were not. We believe that all prospective acquisitions should be benchmarked against the share repurchase scenarios we just discussed. Acquisitions are inherently risky. It may be better to buy more of what you already know - your own shares - than incurring the risks of buying other things you cannot know as well. Fortunately Brooks is not forced to choose between acquisitions and a repurchase program. Our analysis shows that you can do both. And if the numbers are tight, Brooks could monetize all its real estate. Bob, in conclusion, we recognize that these are unprecedented and frightening times. We know that the SCE industry is suffering through a serious trough. We know that Brooks has reduced headcount. But we also know, despite today's fears and uncertainty, that these downturns always do come to an end. Teledyne, Loews, and Washington Post initiated their long term purchase program during troubled times. Troubled times are when bargains are greatest, whether you are buying your own shares or other companies. Given Brooks' financial strength, now is a time of special opportunity. On September 22, four leading companies announced major repurchase programs. This month the market will endure tax loss selling by mutual funds. Over the next three months, other hedge funds are likely to de-leverage and to generate cash to fund investor withdrawals. It could be a terrific time for Brooks to put the shareholders' money to work. Ultimately, when the markets settle down, and when they can envision the turn in your fortunes, you know what could happen to your share price: it could zoom 100-200% in a couple of months, leaving all who didn't pounce earlier saying "could have, should have, would have." The time to move is now. Thanks for considering our views. Sincerely yours, /s/David Nierenberg 5 Nierenberg Investment Management Company, Inc., 19605 NE 8th Street, Camas, WA 98607 (360)604-8600, Fax (360)604-1811 -----END PRIVACY-ENHANCED MESSAGE-----