Discontinued Operations

12 Months Ended

Sep. 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 for $675.0 million in cash, subject to adjustments. On July 1, 2019, the Company completed the sale of the semiconductor cryogenics business for $661.5 million, which excludes $6.3 million retained by Edwards at closing based on the initial adjustment for net working capital. Net proceeds from the sale were approximately $553.1 million, after deducting estimated taxes payable and closing costs, which remains subject to adjustment for the final determination of working capital and other items. Net income from discontinued operations for fiscal year 2019 is inclusive of the net gain on sale of $408.6 million.

The semiconductor cryogenics business consists of the CTI pump business, Polycold chiller business, the related services business and a 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 parties will provide to each other 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 in Chelmsford, Massachusetts to Edwards free of charge for three years after the transaction closing date. Edwards has 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 businesses 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):

	Year Ended September 30,
	2019		2018		2017
Revenue
Products	$	76,227	$	150,365	$	126,638
Services		33,291		45,731		38,748
Total revenue		109,518		196,096		165,386
Cost of revenue
Products		47,148		85,350		73,714
Services		19,016		22,834		22,400
Total cost of revenue		66,164		108,184		96,114
Gross profit		43,354		87,912		69,272
Operating expenses
Research and development		6,605		7,605		6,860
Selling, general and administrative		20,889		25,017		12,536
Restructuring charges		24		2		82
Total operating expenses		27,518		32,624		19,478
Operating income		15,836		55,288		49,794
Other income, net		539,948		1,091		1,057
Income before income taxes and earnings of equity method investment		555,784		56,379		50,851
Income tax provision		134,110		14,420		8,760
Income before equity in earnings of equity method investment		421,674		41,959		42,091
Equity in earnings of equity method investment		6,188		6,788		9,834
Net income	$	427,862	$	48,747	$	51,925

The table above reflects revenue for the year ended September 30, 2019 in accordance with ASC 606, while results for the years ended September 30, 2018 and 2017 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 year ended September 30, 2019 were not significantly impacted by the adoption of ASC 606.

The Company performed its annual goodwill impairment analysis in April 2018. This analysis was updated upon announcement of the Disposition for the year ended September 30, 2018. The Company has concluded that there is no impairment indicator related to the goodwill of the Disposition group 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): 

	September 30,
	2018
Balance Sheets:
Current assets	$	69,302
Non-current assets		21,338
Current liabilities		26,006
Non-current liabilities		8,397

	Year Ended September 30,
	2019		2018		2017
Statements of Operations:
Total revenue	$	88,357	$	94,652	$	104,667
Gross profit		35,127		34,982		41,241
Operating Income		17,791		18,405		26,340
Net income		12,483		13,345		19,451

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):

	Year Ended September 30,
	2019		2018		2017
Depreciation and amortization	$	4	$	743	$	919
Capital expenditures		666		302		1,049
Stock-based compensation		635		966		705
Earnings of equity method investment		(6,188)		(6,788)		(9,834)

The carrying value of the assets and liabilities of the discontinued operations on the Consolidated Balance Sheet as of September 30, 2018 was as follows (in thousands):

	September 30,
	2018
Assets
Accounts receivable, net	$	27,852
Inventories		37,953
Other current assets		343
Total current assets of discontinued operation	$	66,148
Property, plant and equipment, net	$	1,081
Goodwill		26,485
Intangibles, net		14
Equity method investment		31,472
Total long-term assets of discontinued operation	$	59,052
Liabilities
Accounts payable	$	11,149
Deferred revenue		1,052
Accrued warranty and retrofit costs		2,464
Other current liabilities		3,872
Total current liabilities of discontinued operation	$	18,537
Long-term liabilities of discontinued operation	$	698