Discontinued Operations

9 Months Ended

Jun. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

3. Discontinued Operations

On August 27, 2018, the Company entered into a definitive agreement to sell its semiconductor cryogenics business to Edwards Vacuum LLC (a member of the Atlas Copco Group) (“Edwards”) for $675.0 million in cash, subject to adjustments. On July 1, 2019, the Company completed the sale for $675.0 million, subject to adjustments for working

capital and other items. The Company expects net cash proceeds from the sale to be approximately $550 million, after adjustments and deducting taxes and other items.

The semiconductor cryogenics business consists of the CTI pump business, Polycold chiller business, the related services business and the Company's 50% share in Ulvac Cryogenics, Inc., a joint venture based in Japan. The semiconductor cryogenics business was originally acquired by the Company in its 2005 merger with Helix Technology Corporation. The operating results of the semiconductor cryogenics business had been included in the Brooks Semiconductor Solutions Group segment before the plan of disposition.

In connection with the closing of the Disposition on July 1, 2019, the Company and Edwards entered into a transition service agreement, a supply agreement, and lease agreements. The transition service agreement outlines the information technology, people, and facility support the Company will provide to Edwards for a period up to 9 months after transaction closing date. The supply agreement allows the Company to purchase CTI and Polycold goods at cost from Edwards up to an aggregate amount equal to $1.0 million during the one-year term after closing of the Disposition. The lease agreements provide facility space to Edwards free of charge for three years after the transaction closing date. Edwards will have the option to renew each lease at the then current market rates after the initial three-year lease term has ended. This Disposition is consistent with the Company’s long-standing strategy to increase shareholder value by accelerating the growth of its Life Sciences business with further acquisitions and strengthening its semiconductor automation business with opportunistic acquisitions.

The Disposition met the "held for sale" criteria and the “discontinued operation” criteria in accordance with FASB ASC 205 as of September 30, 2018. As such, its operating results have been reported as a discontinued operation for all periods presented. 

The following table presents the financial results of discontinued operations (in thousands):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2019		2018		2019		2018
Revenue
Products	$	23,546	$	38,834	$	76,227	$	114,706
Services		10,994		12,283		33,291		33,448
Total revenue		34,540		51,117		109,518		148,154
Cost of revenue
Products		15,451		22,289		47,148		65,436
Services		6,288		6,231		19,016		16,866
Total cost of revenue		21,739		28,520		66,164		82,302
Gross profit		12,801		22,597		43,354		65,852
Operating expenses
Research and development		2,279		2,073		6,605		5,483
Selling, general and administrative		4,808		6,392		17,005		16,823
Restructuring charges		24		-		24		2
Total operating expenses		7,111		8,465		23,634		22,308
Operating income		5,690		14,132		19,720		43,544
Other income, net		418		292		985		819
Income before income taxes and earnings of equity method investment		6,108		14,424		20,705		44,363
Income tax provision (benefit)		1,610		(2,040)		4,850		12,111
Income before equity in earnings of equity method investment		4,498		16,464		15,855		32,252
Equity in earnings of equity method investment		1,835		1,329		4,876		4,931
Net income	$	6,333	$	17,793	$	20,731	$	37,183

The table above reflects revenue for the three and nine months ended June 30, 2019 in accordance with ASC 606, while results for the three and nine months ended June 30, 2018 have not been restated and are reported in accordance with the governing revenue recognition standards applicable to those periods prior to adoption of ASC 606. Results for the three and nine months ended June 30, 2019 were not significantly impacted by the adoption of ASC 606.

The Company performed its fiscal year 2018 annual goodwill impairment analysis in April 2018. This analysis was updated upon announcement of entering into a definitive agreement for the Disposition for the year ended September 30, 2018. The Company concluded that there was no impairment indicator related to the goodwill of the semiconductor cryogenics business at either date the impairment analysis was performed. The Company did not include goodwill related to the semiconductor cryogenics business in its annual impairment analysis in April 2019, as the Disposition was classified as assets held for sale.

The following table presents the summarized financial information for Ulvac Cryogenics, Inc., the unconsolidated subsidiaries accounted for based on the equity method (in thousands):

	June 30,		September 30,
	2019		2018
Balance Sheets:
Current assets	$	76,534	$	69,302
Non-current assets		22,175		21,338
Current liabilities		27,928		26,006
Non-current liabilities		9,338		8,397

	Three Months Ended June 30,				Nine Months Ended June 30,
	2019		2018		2019		2018
Statements of Operations:
Total revenue	$	23,209	$	22,272	$	68,252	$	68,236
Gross profit		9,905		7,998		27,134		26,209
Operating Income		5,267		3,845		14,476		14,103
Net income		3,674		2,436		9,777		9,715

The following table presents the significant non-cash items and capital expenditures for the discontinued operations that are included in the Consolidated Statements of Cash Flows (in thousands):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2019		2018		2019		2018
Depreciation and amortization	$	4	$	196	$	4	$	588
Capital expenditures		87		55		494		127
Stock-based compensation		215		238		635		730
Earnings of equity method investment		(1,835)		(1,329)		(4,876)		(4,931)

The carrying value of the assets and liabilities of the discontinued operations on the Consolidated Balance Sheet as of June 30, 2019 and September 30, 2018 were set forth in the table below (in thousands). Balances as of June 30, 2019 are presented under ASC 606, while balances as of September 30, 2018 have not been restated and are reported in accordance with the governing revenue recognition standards applicable to the period prior to adoption of ASC 606. The carrying value of the assets and liabilities associated with discontinued operations as of June 30, 2019 was not significantly impacted by the adoption of ASC 606:

	June 30,		September 30,
	2019		2018
Assets
Accounts receivable, net	$	22,812	$	27,852
Inventories		38,513		37,953
Other current assets		340		343

Total current assets of discontinued operation	$	61,665	$	66,148
Property, plant and equipment, net	$	1,320	$	1,081
Goodwill		26,484		26,485
Intangibles, net		15		14
Equity method investment		37,735		31,472
Other assets		7		-
Total long-term assets of discontinued operation	$	65,561	$	59,052
Liabilities
Accounts payable	$	8,511	$	11,149
Deferred revenue		1,126		1,052
Accrued warranty and retrofit costs		2,555		2,464
Other current liabilities		549		3,872
Total current liabilities of discontinued operation	$	12,741	$	18,537
Long-term liabilities of discontinued operation	$	107	$	698