FOOL CONFERENCE CALL SYNOPSIS*
By Dale Wettlaufer (MF Raleigh)

BROOKS AUTOMATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BRKS)") else Response.Write("(NASDAQ: BRKS)") end if %>
15 Elizabeth Dr.
Chelmsford, MA 01824
508-262-2400

ALEXANDRIA, Va., November 24, 1996/FOOLWIRE/ -- Brooks Automation, Inc. reported on November 20 its fiscal 1996 year-end and fourth quarter results for the period ending September 30, 1996.

Revenues for the 1996 fiscal year increased 77% to $90.4 million, compared with $51.0 million for the 1995 fiscal year. Fourth quarter fiscal 1996 revenues were $24.0 million, an increase of 47% compared with the same quarter of fiscal 1995.

Net income for fiscal 1996 rose 72% to $8.5 million ($1.04 per share), compared with $4.9 million ($0.73 per share) for fiscal 1995. Net income for the fourth quarter of fiscal 1996 rose 13% to $2.2 million ($0.27 per share), compared with $1.9 million ($0.23 per share) for the fourth quarter of fiscal 1995.

Commenting on the quarter, Robert J. Therrien, President and Chief Executive Officer of Brooks Automation, Inc. said: "In this period of difficult market conditions for semiconductor production equipment, we are pleased that we were able to sustain revenues and orders at a higher rate than the industry. Our book-to-bill ratio of 0.94 compares favorably with the 0.74 ratio for worldwide front-end wafer fab equipment reported by SEMI, an industry trade organization."

"We have continued to add new customers during the quarter, especially overseas, and to introduce new products. As a result, international revenues grew to 24% of current quarter revenues up from 11% in fiscal 1995. Also, Brooks has maintained its investment in research and development at nearly 14% of revenues. We will continue to focus our investments in areas that strengthen our position in handling and automation technology to achieve our goal of delivering the lowest total cost of ownership to manufacturers of leading edge devices. We have also implemented measures to reduce other spending and improve profit performance during this period of declining demand for semiconductor production equipment."

ADDITIONAL COMMENTS

Sequentially, sales dropped five percent, ending a streak of 15 consecutive quarters of record revenues.

The engineering and operations groups are busy completing new systems for delivery in the quarter, including new 300 mm. wafer handling products in a new flat panel system. The company was delayed in completing delivery of systems to a new European customer, which is why it fell short of internal sales forecasts. Those systems have now been delivered to Electrotec.

Overseas shipments grew to 24% of sales, though, including nearly $4 million in shipments to Japan, where the company has opened a customer support technology center.

Shipments to Lam Research dropped to $5.2 million, or 22% of Q4 revenues. For the year, Lam sales of $19 million represented 21% of total business.

Brooks' sales growth of 77% bested by 25 percentage point the growth of the front-end equipment market, according to the company's estimates and SEMI estimates.

The systems business integrated handing platforms -- including some system-level software -- grew to 54% of new equipment sales. AccuMate handling modules and systems represented 93% of sales as the older-generation atmospheric business, mainly robots and aligners, declined to only 7% of sales. During the quarter, the company introduced a new atmospheric handling platform.

Flat panel sales amounted to $7.3 million, or 8% of sales. Major orders are pending for these systems as FPD manufacturers are moving ahead with large substrate manufacturing capabilities to meet increased demand for 12" notebook displays and other new FPD products.

International business grew to 20% of the year's sales, driven mainly by $10 million in Japanese sales. In the year ahead, the company believes new overseas business, growth in flat panel displays, sales of 300 mm., and other leading-edge wafer handling technologies will offset any reduction from existing US OEMs serving declining front-end wafer equipment markets.

Gross margin was 41.1% of sales, down from year-to-date gross margin of 41.8%. The decline is attributable to the higher mix of system sales and the number of first-time systems shipments. Operating expenses, specifically R&D and SG&A (sales, general, and administrative expenses) did not grow in the quarter. These expenses were down $100,000 from the previous quarter.

The company has moved to reduce its cost structure and has reduced total compensation expenses by $2.5 million annually, which includes a 9% reduction in workforce. Discretionary expenses and other operating costs have been reduced $1.5 million.

Receivables increased $2.6 million during the quarter as sales were concentrated in the last third of the quarter. Overseas customers are also offered longer payment terms. Inventory declined by 7%, or $1.3 million. Fixed capital investments made in the quarter included about $2 million in leasehold agreements and lab equipment for the Japanese customer technology center. Total capital spending rose to $3.6 million in the quarter.

The company believes that it had sufficient capital resources to deal with whatever challenges the industry brings in the coming months.

In Q4, Brooks' top-10 customers represented 70% of their business, down from 78% last quarter. This trend indicates that the company is diversifying its customer base. Before this year, 10 companies accounted for 80% of Brooks' sales; 20 companies now make up the top 80% of sales. The company served 15 new customers in the fiscal year. Hitachi was a new customer in Q4 as that company ordered the MagnaTrans flat panel display robot for its Phase III fab. The company also added Applied Materials and TEL Japan to the customer list. Applied selected software from Brooks Canada for epy tools. TEL purchased both 200 mm platforms for 200 mm. R&D and 300 mm. module for etch products.

MARKET POSITION, PRODUCT DISCUSSION

64 companies represent the universe of possible customers for wafer processing cluster tools. Including this year's new customers, Brooks is designed into 42 of 64 modules at 0.35 micron or less, representing 65% market share. 35 of the 64, or 55% market share, use Brooks for platforms at 0.35 micron or less; 28 of the 64, 44%, use Brooks' machine control software. At half-micron or greater, Brooks' market share position was much less strong -- at 10% market share or less in the categories mentioned above; in machine control software, Brooks was a non-entity.

While the company is not immune to weakness in the cycle, they believe that they are extremely well-positioned for the upside in 0.35-0.25 micron growth.

Japan was the major international growth market for Brooks in fiscal 1996. This has been the fastest start-up for Brooks, having broken into the market in early 1995. Year over year, Brooks' business in Japan grew 400% from a $2 million base in fiscal 1995. This growth reflects the move in that country to 200 mm. wafers and also the growth of flat panel displays. The Japanese lost market share to Applied Materials due to tool architecture that missed the needs of the market, due in part to their lagging in the software area. The Japanese believe that they did not lose market share because their process performance was inferior. Brooks is able to offer, at prices competitive to what these companies could hope to develop in-house, software and automation capabilities that make their processing machinery competitive with what Applied and other systems manufacturers are offering on the world market.

In October, Brooks opened its 7,000 square foot technology center in Japan. The facility has a clean room, development demo tools, a repair center, and training facility. 53 representatives from 15 companies attended the opening. The Japanese customers are pleased with the effort as well as the addition of Japanese staff.

In fiscal 1997, Brooks expects Japanese sales to double to $20 million with a solid balance of 200 mm. wafer, 300 mm., and flat panel display businesses.

While Korea only represents about 4% of direct business, Korean chip manufacturers consume a large proportion of the company's products through US, Japanese, and European OEMs. Brooks estimates that its OEMs will add approximately 150 tools in Korea in the next 12 months. It is critical that Brooks have a support presence in Korea. The company has just signed a lease on a support center there, which will house training and development activities. The Korean government and major tool manufacturers are committed to developing that country's equipment infrastructure. There are at least five start-up companies in Korea developing cluster tools. Brooks thinks that these companies will have some impact on non-Korean manufacturers in 1997 and reported that each of these companies has selected Brooks tools for their efforts. Including the large chip makers, Brooks believes that it has 100% of the developmental market in that country. Brooks believes that Samsung will start to push for platform and software standardization at 300 mm.. The company has already received an order for 300 mm. tools and has had discussions with Samsung regarding the benefits to their operations through standardizing on platforms and software controls for cluster tools.

In September, Brooks opened its new direct sales office in Taiwan. This facility is staffed by two field engineers and one sales executive. As in Korea, much of the activity taking place in this facility will involve supporting tools shipped through OEMs. The company also sees attractive opportunities for direct sales in factory and tool automation.

The company expects international revenues to grow from 20% to 30% of overall revenues in fiscal 1997. Modules represented 46% of sales in 1996. Brooks did increase penetration with strategic 300 mm. shipments, new 200 mm. PVD orders, placement of 200 mm. R&D tools with Tokyo Electron (TEL), and initial deliveries with the new atmospheric RTP (rapid thermal processing) platforms. In Q4, the company shipped its first two atmospheric cluster tool platforms for RTP applications. The company believes that RTP, etch, other applications that have historically required clean-room environments will still require a controlled, atmospheric environment. The goal is to control the parts per million per order while keeping the overall platform cost in line with the total RTP budget.

Penetrating the PVD market was a major objective in 1996. In fiscal 1995, Brooks shipped only its modules for PVD tools and had only three accounts. There are only eight major players in PVD. In 1996, Brooks captured business with five of these. Applied Materials has captured a significant part of this business, with some placing their market share above 60%. However, Brooks believes that this has more to do with the overall cluster tool platform and software than the overall software performance. However, Brooks believes that once strategic PVD OEMs, such as Alvax and Electrotec, bring new tools to the 200 mm. market with improved ultra-high vacuum platforms with Brooks products, they will gain back accounts that they once had. Brooks' customers look forward to growth in the 200 mm. markets and some have already signed contracts. Of all the wafer process applications, PVD is the most demanding in terms of platform performance, that is vacuum, throughput, recovery time, footprint, and number of process modules. This is reflected in the high average selling prices in the market.

In 1996, PVD-related business grew from $2.3 million last year to $9.6 million in fiscal 1996. The company aims to continue PVD growth this year as strategic PVD OEMs capture market share based on superior UHV platform, software, and process technology.

Though revenues from 300 mm. tools will not happen until the turn of the century, crucial design activity is happening now. Brooks has to be early in this market. Their products have won design-in with TEL's first 300 mm. tools, which is a significant win for Brooks, as they have done very little business with that company even though it is the industry's second-largest supplier. Considering the highly competitive environment that Brooks faces with Japanese automation companies, who have established relationships with TEL, this is obviously a large accomplishment for Brooks. Brooks is now doing business with seven 300 mm. OEMs. Brooks tools are installed a number of tools going into the fab of a Japanese consortium, which counts ten large Japanese semiconductor companies among its members. This fab is meant to give the Japanese a head start in 300 mm. processing. Getting into this fab is important because of the consideration of standardizing on platforms and possibly software, much as the Koreans are considering.

Brooks also shipped in the quarter its first 300 mm. side-opening carry interface to a Japanese OEM. This factory interface has been well-received by Motorola. Brooks believes that Motorola and Motorola/Siemens will be the first US company to build a 300 mm. line and that Motorola is leading the way to in mini-environment technologies with their side-opening carrying decision. If Motorola is successful with that decision, then Brooks believes that the rest of the industry will follow, with the possibly decision of Japanese companies, that have strong ties with automated guided vehicles in their fabs and ultra-clean clean room strategies.

Approximately 43 300 mm. tools will be developed by OEMs worldwide in 1997. Brooks aims to have products in approximately 30 of these tools -- 50% modules and 50% platforms. If that goal is achieved, 300 mm. business will have grown 200% on FY 1997, from $1.9 million in 1996 to $6.6 million in 1997. Brooks expects to ship more 300 mm. products in the current quarter than in all of fiscal 1996.

Brooks also believes that the current trend in laptop computers to 12.1 inch displays plays to their advantage because of the company's focus on Phase 3 fabs, which are more efficient than Phase 2. FPD manufacturers are also aiming for 14-20 inch flat panel displays, which require Phase III cluster tools to produce. This market has the potential to be much larger than the laptop computer market. Nine companies have announced plans for Phase III fabs. The company expects to place product in five of those nine.

FPD business grew five times from FY 1995, from $1.5 million to $7.5 million in 1996. The company expects continued growth in FY 1997. Six of the nine companies supplying Phase 3 tools are Brooks customers. In Q4, Hitachi selected Brooks as the robot supplier and has specified that all cluster tools in their new Phase 3 fabs must use the Brooks MagnaTrans 60 robot. This is a significant win, since Hitachi plans to surpass the other FPD manufacturers by using larger substrates. Phase 3.5 will use the largest substrates ever produced for LCD fabrication, which puts Brooks in the lead for Phase 4 substrate development.

The integration of the software acquisition has continued to go well. 11 customers are using Brooks Canada software in conjunction with robotic platforms. Customers feel that single-sourcing hardware and software will make a given system perform closer to specification. In Q4, the company began initial shipments of software and control products to Applied Materials for their epy reactors. This line is expected to begin shipments in late 1996. Brooks expects growth in software sales to Applied in 1997.

In Q1 1996, Brooks will enter the atmospheric module and buffer station market. The company estimates that this market will grow to $500 million in 1997. Brooks has historically focused on the vacuum process tools market, which is a $1 billion market. Brooks has an advantage in this market because of the smaller suppliers, its technical, sales, and customer support presence in the major markets, product innovation, and its cost advantages over these smaller players. Virtually none of these players have the software that can be easily integrated into tool controls.

QUESTION & ANSWER SESSION

R&D spending over the last five years has averaged around 15% of revenues. Customers are encouraging the company to expand its product line. While the CEO detailed the amount of products that had come from R&D -- over 26 new products have come from R&D over the last four years -- the company did not want to commit to a firm projection of R&D spending as a percentage of revenues. In absolute dollar terms, they are looking at $14 million.

New orders for flat panel systems accounted for 6% orders in Q4. For the year, FPD systems accounted for 4% of new orders.

The company's tax rate for the year was 34.5%. Going forward, investors should model in a 35% tax rate.

Brooks is moving toward parity pricing around the world. FPD systems show lower gross margins by a couple points.

Korean sales this year were $3.5 million -- DRAM is still a question for the near future. Sales in Korea will show growth in the 1997-1997 time frame as part of a two year sales cycle; Brooks is still in the development stage with Korean customers.

Flat panel systems sales in 1996 were $7.3 million. For 1997, the company sees those sales increasing to the $10-15 million range. The company has numerous OEM customers competing on projects -- the range of estimated revenues depends upon the success of those partners, but the company believes that it can achieve 33% market share.

Revenues for the coming year will be back-loaded into the last three-quarters of the year. The company is seeing some inventory adjustments with older customers which have already been ramping production. In the coming quarter, the company believes that revenues could be down 20% or more. Ordering activity at present is leading the company to forecast the December quarter as the softest quarter of the year.

Capital spending in 1996 totaled $9.6 million. For 1997, the company anticipates cap. ex. of $6-7 million.

Lam has been adjusting inventory. It appears as though Lam has received orders for its Alliance cluster tool lately, and the company does expect growth in sales to Lam in the coming year, Q1 notwithstanding.

Cost -cutting programs consist of staff reductions and zero-growth or decreases in performance-based pay for management. Some of the cost savings contributions have also come from suppliers who have shared in the growth at Brooks in the last three years.

The company continues to see pricing pressures from customers and is passing on some of the cost savings discussed above.

Backlog was $35 million at the end of Q4 -- the company reminded analysts that the number can always change and that they are "managing backlog" to serve customers.

The company believes that Q1 book-to-bill will be positive, though it's not clear that Q1 orders will exceed Q4 orders. About $5 million in backlog is made up of longer lead-time FPD orders.

International book-to-bill was $6 million to $5 million. 25% of backlog is for international orders.

Accounts receivable DSO (days sales outstanding) increased to 74 days from 62 as international business went from 11% of sales to 20% this year. In Japan and Korea, the company is dealing with 90 and 120 day payment terms.

Depreciation for the year was $2.6 million. Headcount at the end of October was 421 employees.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.