Discontinued Operations

9 Months Ended

Jun. 30, 2020

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 $661.1 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. In the third quarter of fiscal year 2020, Edwards has asserted claims for indemnification under the definitive agreement relating to alleged breaches of representations and warranties relating to customer warranty claims and inventory. The Company cannot determine the probability of any losses or outcome of these claims including the amount of any indemnifiable losses, if any, resulting from these claims at this time, however, the Company believes that none of these claims will have a material adverse effect on its consolidated financial position or results of operations. If the resolution of these claims results in indemnifiable losses in excess of the applicable indemnification deductibles and indemnification escrow established under the definitive agreement, Edwards would be required to seek recovery under the representation and warranty insurance Edwards obtained in connection with the closing of the transaction. The Company believes that any indemnifiable losses in excess of the applicable deductibles and indemnification escrow established in the definitive agreement would be covered by such insurance. If Edwards is unable to obtain recovery under its insurance, however, it could seek recovery of such indemnifiable losses, if any, directly from the Company.

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 outlined the information technology, people, and facility support the Company would provide to Edwards for a period up to 9 months after transaction closing date. The supply agreement allowed 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		2020		2019
Revenue
Products	$	23,546	$	-	$	76,227
Services		10,994		-		33,291
Total revenue		34,540		-		109,518
Cost of revenue
Products		15,451		-		47,148
Services		6,288		-		19,016
Total cost of revenue		21,739		-		66,164
Gross profit		12,801		-		43,354
Operating expenses
Research and development		2,279		-		6,605
Selling, general and administrative		4,808		(171)		17,005
Restructuring charges		24				24
Total operating expenses		7,111		(171)		23,634
Operating income		5,690		171		19,720
Other income (loss), net		418		(410)		985
Income (loss) before income taxes and earnings of equity method investment		6,108		(239)		20,705
Income tax provision (benefit)		1,610		(57)		4,850
Income (loss) before equity in earnings of equity method investment		4,498		(182)		15,855
Equity in earnings of equity method investment		1,835		-		4,876
Net income (loss)	$	6,333	$	(182)	$	20,731

The Company did not record income or loss related to our semiconductor cryogenics business for the three months ended June 30, 2020.

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

	Three Months Ended		Nine months ended
	June 30, 2019		June 30, 2019
Statements of Operations:
Total revenue	$	23,209	$	68,252
Gross profit		9,905		27,134
Operating Income		5,267		14,476
Net income		3,674		9,777

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		Nine months ended
	June 30, 2019		June 30, 2019
Depreciation and amortization	$	4	$	4
Capital expenditures		87		494
Stock-based compensation		215		635
Earnings of equity method investment		(1,835)		(4,876)