Company Quick10K Filing
Brooks Automation
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 72 $2,800
10-Q 2020-02-06 Quarter: 2019-12-31
10-K 2019-12-17 Annual: 2019-09-30
10-Q 2019-08-02 Quarter: 2019-06-30
10-Q 2019-05-03 Quarter: 2019-03-31
10-Q 2019-02-08 Quarter: 2018-12-31
10-K 2018-11-29 Annual: 2018-09-30
10-Q 2018-08-07 Quarter: 2018-06-30
10-Q 2018-05-02 Quarter: 2018-03-31
10-Q 2018-02-05 Quarter: 2017-12-31
10-K 2017-11-17 Annual: 2017-09-30
10-Q 2017-08-04 Quarter: 2017-06-30
10-Q 2017-05-05 Quarter: 2017-03-31
10-Q 2017-02-07 Quarter: 2016-12-31
10-K 2016-11-29 Annual: 2016-09-30
10-Q 2016-07-28 Quarter: 2016-06-30
10-Q 2016-04-28 Quarter: 2016-03-31
10-Q 2016-02-03 Quarter: 2015-12-31
10-K 2015-11-05 Annual: 2015-09-30
10-Q 2015-08-06 Quarter: 2015-06-30
10-Q 2015-04-30 Quarter: 2015-03-31
10-Q 2015-02-05 Quarter: 2014-12-31
10-K 2014-11-13 Annual: 2014-09-30
10-Q 2014-07-31 Quarter: 2014-06-30
10-Q 2014-05-08 Quarter: 2014-03-31
10-Q 2014-02-06 Quarter: 2013-12-31
10-K 2013-11-22 Annual: 2013-09-30
10-Q 2013-08-08 Quarter: 2013-06-30
10-Q 2013-05-09 Quarter: 2013-03-31
10-Q 2013-01-31 Quarter: 2012-12-31
10-K 2012-11-21 Annual: 2012-09-30
10-Q 2012-08-09 Quarter: 2012-06-30
10-Q 2012-05-10 Quarter: 2012-03-31
10-Q 2012-02-09 Quarter: 2011-12-31
10-K 2011-11-28 Annual: 2011-09-30
10-Q 2011-08-04 Quarter: 2011-06-30
10-Q 2011-05-05 Quarter: 2011-03-31
10-Q 2011-02-04 Quarter: 2010-12-31
10-K 2010-11-23 Annual: 2010-09-30
10-Q 2010-08-05 Quarter: 2010-06-30
10-Q 2010-05-06 Quarter: 2010-03-31
10-Q 2010-02-05 Quarter: 2009-12-31
8-K 2020-02-06 Earnings, Exhibits
8-K 2020-01-24 Shareholder Vote
8-K 2019-11-06 Earnings, Exhibits
8-K 2019-09-06 Officers
8-K 2019-08-01 Earnings, Exhibits
8-K 2019-07-05 Enter Agreement, M&A, Other Events, Exhibits
8-K 2019-06-18 Other Events, Exhibits
8-K 2019-04-29 Earnings, Exhibits
8-K 2019-02-22 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-02-13 Enter Agreement, Exhibits
8-K 2019-02-05 Earnings, Shareholder Vote, Exhibits
8-K 2018-11-19 Earnings, Exhibits
8-K 2018-11-15 Enter Agreement, M&A, Off-BS Arrangement
8-K 2018-09-26 Enter Agreement, Other Events, Exhibits
8-K 2018-09-04 Officers, Exhibits
8-K 2018-08-27 Enter Agreement, Other Events, Exhibits
8-K 2018-08-06 Earnings, Exhibits
8-K 2018-05-01 Earnings, Exhibits
8-K 2018-02-01 Earnings, Shareholder Vote, Exhibits
BRKS 2019-12-31
Part I. Financial Information
Item 1. Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.01 ex-31d01.htm
EX-31.02 ex-31d02.htm
EX-32 ex-32.htm

Brooks Automation Earnings 2019-12-31

BRKS 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
SPB 2,990 6,990 5,394 3,597 1,262 527 865 5,117 35% 5.9 8%
GTES 2,977 7,430 4,448 3,235 1,246 789 1,296 5,568 39% 4.3 11%
SSD 2,970 1,070 201 1,090 477 119 201 2,828 44% 14.1 11%
LPL 2,909 33,175,710 18,289,464 0 0 0 0 2,909 0%
BRKS 2,800 1,493 755 587 234 35 103 3,190 40% 30.9 2%
ITGR 2,710 2,374 1,262 1,237 366 188 373 3,557 30% 9.5 8%
ENR 2,692 5,578 5,007 2,233 924 6 330 6,047 41% 18.3 0%
AAON 2,612 342 459 117 50 90 2,598 25% 28.8 15%
KMT 2,541 2,656 1,282 2,375 831 247 453 2,957 35% 6.5 9%
ORBK 2,448 1,304 392 0 0 0 0 2,206 0%

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: December 31, 2019

OR

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to _________

Commission File Number 000-25434

BROOKS AUTOMATION, INC.

(Exact name of registrant as specified in its charter)

Delaware

04-3040660

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

15 Elizabeth Drive

Chelmsford, Massachusetts

(Address of principal executive offices)

01824

(Zip Code)

Registrant’s telephone number, including area code: (978262-2400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

BRKS

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date, January 27, 2020: common stock, $0.01 par value and 73,619,648 shares outstanding.

Table of Contents

BROOKS AUTOMATION, INC.

Table of Contents

PAGE NUMBER

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated Balance Sheets as of December 31, 2019 (unaudited) and September 30, 2019

3

Consolidated Statements of Operations for the three months ended December 31, 2019 and 2018 (unaudited)

4

Consolidated Statements of Comprehensive Income for the three months ended December 31, 2019 and 2018 (unaudited)

5

Consolidated Statements of Cash Flows for the three months ended December 31, 2019 and 2018 (unaudited)

6

Consolidated Statements of Changes in Equity for the three months ended December 31, 2019 and 2018 (unaudited)

7

Notes to Consolidated Financial Statements (unaudited)

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

Item 3. Quantitative and Qualitative Disclosures about Market Risk

44

Item 4. Controls and Procedures

45

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

47

Item 1A. Risk Factors

47

Item 6. Exhibits

48

Signatures

49

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

BROOKS AUTOMATION, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share and per share data)

    

December 31, 

    

September 30, 

2019

2019

(In thousands, except share and per share data)

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

335,319

$

301,642

Marketable securities

 

11,233

 

34,124

Accounts receivable, net

 

165,176

 

165,602

Inventories

 

105,181

 

99,445

Prepaid expenses and other current assets

 

46,560

 

46,332

Total current assets

 

663,469

 

647,145

Property, plant and equipment, net

 

105,296

 

100,669

Long-term marketable securities

 

3,039

 

2,845

Long-term deferred tax assets

 

6,004

 

5,064

Goodwill

 

490,370

 

488,602

Intangible assets, net

 

242,248

 

251,168

Other assets

 

48,532

 

20,506

Total assets

$

1,558,958

$

1,515,999

Liabilities and Stockholders' Equity

 

 

  

Current liabilities

 

 

  

Current portion of long-term debt

$

827

$

829

Accounts payable

65,306

58,919

Deferred revenue

 

29,042

 

29,435

Accrued warranty and retrofit costs

 

7,493

 

7,175

Accrued compensation and benefits

 

25,810

 

31,375

Accrued restructuring costs

 

844

 

1,040

Accrued income taxes payable

 

100,451

 

99,263

Accrued expenses and other current liabilities

 

53,179

 

44,234

Total current liabilities

 

282,952

 

272,270

Long-term debt

49,918

50,315

Long-term tax reserves

 

18,543

 

18,274

Long-term deferred tax liabilities

 

13,636

 

20,636

Long-term pension liabilities

 

5,397

 

5,338

Long-term operating lease liabilities

20,526

Other long-term liabilities

 

9,291

 

10,212

Total liabilities

 

400,263

 

377,045

Commitments and contingencies (Note 17)

 

  

 

  

Stockholders' Equity

 

  

 

  

Preferred stock, $0.01 par value - 1,000,000 shares authorized, no shares issued or outstanding

 

 

Common stock, $0.01 par value - 125,000,000 shares authorized, 87,080,017 shares issued and 73,618,148 shares outstanding at December 31, 2019, 85,759,700 shares issued and 72,297,831 shares outstanding at September 30, 2019

 

871

 

857

Additional paid-in capital

 

1,926,350

 

1,921,954

Accumulated other comprehensive income

 

13,154

 

3,511

Treasury stock, at cost- 13,461,869 shares

 

(200,956)

 

(200,956)

Accumulated deficit

 

(580,724)

 

(586,412)

Total stockholders' equity

1,158,695

1,138,954

Total liabilities and stockholders' equity

$

1,558,958

$

1,515,999

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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BROOKS AUTOMATION, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except per share data)

Three Months Ended

December 31, 

    

2019

    

2018

    

Revenue

 

  

 

  

 

Products

$

131,862

$

125,375

Services

 

78,638

 

53,993

Total revenue

 

210,500

 

179,368

Cost of revenue

 

  

 

  

Products

 

79,971

 

74,574

Services

 

45,543

 

32,713

Total cost of revenue

 

125,514

 

107,287

Gross profit

 

84,986

 

72,081

Operating expenses

 

  

 

  

Research and development

 

14,401

 

13,148

Selling, general and administrative

 

59,343

 

53,541

Restructuring charges

 

576

 

59

Total operating expenses

 

74,320

 

66,748

Operating income

 

10,666

 

5,333

Interest income

 

699

 

423

Interest expense

 

(737)

 

(5,290)

Other expenses, net

 

(417)

 

(30)

Income before income taxes

 

10,211

 

436

Income tax benefit

 

(2,963)

 

(5,830)

Income from continuing operations

 

13,174

 

6,266

(Loss) income from discontinued operations, net of tax

 

(117)

 

8,149

Net income

$

13,057

$

14,415

Basic net income per share:

 

  

 

  

Income from continuing operations

$

0.18

$

0.09

(Loss) income from discontinued operations, net of tax

 

(0.00)

 

0.11

Basic net income per share

$

0.18

$

0.20

Diluted net income per share:

  

  

Income from continuing operations

$

0.18

$

0.09

(Loss) income from discontinued operations, net of tax

 

(0.00)

0.11

Diluted net income per share

$

0.18

$

0.20

Weighted average shares used in computing net income per share:

 

  

 

  

Basic

 

72,972

 

71,450

Diluted

 

73,645

 

72,165

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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BROOKS AUTOMATION, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(In thousands)

Three Months Ended

December 31, 

    

2019

    

2018

    

Net income

$

13,057

$

14,415

Other comprehensive income, net of tax:

 

  

 

  

Foreign currency translation adjustments

 

9,645

 

1,677

Unrealized gains (losses) on marketable securities, net of tax effects of $0 and ($38) during the three months ended December 31, 2019 and 2018

 

10

 

(121)

Actuarial losses, net of tax effects of $1 and $2 during the three months ended December 31, 2019 and 2018

 

(12)

 

(9)

Total other comprehensive income, net of tax

 

9,643

 

1,547

Comprehensive income

$

22,700

$

15,962

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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BROOKS AUTOMATION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands)

Three Months Ended

 

December 31, 

    

2019

    

2018

    

 

Cash flows from operating activities

 

  

  

 

Net income

$

13,057

$

14,415

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

  

Depreciation and amortization

16,477

11,838

Stock-based compensation

 

4,410

 

4,467

Amortization of premium on marketable securities and deferred financing costs

 

67

 

235

Earnings of equity method investments

 

 

(1,772)

Deferred income taxes

 

(8,183)

 

(7,682)

Other losses on disposals of assets

 

126

 

6

Loss on sale of divestiture, net of tax

319

Changes in operating assets and liabilities, net of acquisitions and divestiture:

 

  

 

Accounts receivable

 

1,503

 

(13,826)

Inventories

 

(4,335)

 

(12,260)

Prepaid expenses and other assets

 

6,120

 

1,029

Accounts payable

 

5,255

 

7,932

Deferred revenue

 

(720)

 

6,385

Accrued warranty and retrofit costs

 

221

 

572

Accrued compensation and tax withholdings

 

(5,755)

 

(13,842)

Accrued restructuring costs

 

(203)

 

(181)

Accrued expenses and other liabilities

 

(2,616)

 

8,948

Net cash provided by operating activities

 

25,743

 

6,264

Cash flows from investing activities

  

 

  

Purchases of property, plant and equipment

 

(9,614)

 

(3,560)

Purchases of marketable securities

 

(10,742)

 

(1,290)

Sales of marketable securities

 

 

48,904

Maturities of marketable securities

33,584

2,557

Acquisitions, net of cash acquired

 

 

(445,210)

Net cash provided by (used in) investing activities

 

13,228

 

(398,599)

Cash flows from financing activities

 

  

 

  

Proceeds from term loans, net of discount

 

 

340,540

Principal payments on debt

 

(414)

 

(1,789)

Payments of capital leases

(319)

(121)

Common stock dividends paid

 

(7,369)

 

(7,208)

Net cash provided by (used in) financing activities

 

(8,102)

 

331,422

Effects of exchange rate changes on cash and cash equivalents

 

2,808

 

(1,004)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

33,677

 

(61,917)

Cash, cash equivalents and restricted cash, beginning of period

    

 

305,171

  

 

197,708

    

  

Cash, cash equivalents and restricted cash, end of period

$

338,848

  

$

135,791

  

Supplemental disclosure of non-cash investing and financing activities:

 

  

 

Purchases of property, plant and equipment included in accounts payable

$

2,622

$

1,717

Deferred financing costs included in accounts payable

1,750

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets

Cash and cash equivalents

$

335,319

$

135,741

Restricted cash included in prepaid expenses and other current assets

3,529

50

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows

$

338,848

$

135,791

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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BROOKS AUTOMATION, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited)

(In thousands, except share data)

    

    

    

    

    

    

    

Common

Accumulated

Common

Stock at 

Additional

Other 

Stock 

Par 

Paid-In 

Comprehensive 

Accumulated

Treasury

Total

Shares

Value

Capital

Income

Deficit

Stock

Equity

 

(In thousands, except share data)

Balance September 30, 2018

 

84,164,130

$

841

$

1,898,434

$

13,587

$

(994,074)

$

(200,956)

$

717,832

Shares issued under restricted stock and purchase plans, net

 

1,252,908

 

13

 

(13)

 

  

 

  

 

  

 

Stock-based compensation

 

  

 

  

 

4,467

 

  

 

  

 

  

 

4,467

Common stock dividends declared, at $0.10 per share

 

  

 

  

 

  

 

  

 

(7,208)

 

  

 

(7,208)

Foreign currency translation adjustments

 

  

 

  

 

  

 

1,677

 

  

 

  

 

1,677

Changes in unrealized gains on marketable securities, net of tax effects of ($38)

 

  

 

  

 

  

 

(121)

 

  

 

  

 

(121)

Actuarial losses, net of tax effects of $2

 

  

 

  

 

  

 

(9)

 

  

 

  

 

(9)

Net income

 

  

 

  

 

  

 

  

 

14,415

 

  

 

14,415

Cumulative effect of adoption of ASC 606

(858)

(858)

Balance December 31, 2018

 

85,417,038

$

854

$

1,902,888

$

15,134

$

(987,725)

$

(200,956)

$

730,195

Balance September 30, 2019

85,759,700

$

857

$

1,921,954

$

3,511

$

(586,412)

$

(200,956)

$

1,138,954

Shares issued under restricted stock and purchase plans, net

 

1,320,317

 

14

 

(14)

Stock-based compensation

 

4,410

 

  

 

  

 

  

 

4,410

Common stock dividends declared, at $0.10 per share

 

  

 

  

 

 

  

 

(7,369)

 

  

 

(7,369)

Foreign currency translation adjustments

 

  

 

  

 

  

 

9,645

 

  

 

  

 

9,645

Changes in unrealized losses on marketable securities, net of tax effects of $0

 

  

 

  

 

  

 

10

 

  

 

  

 

10

Actuarial losses, net of tax effects of $1

 

  

 

  

 

  

 

(12)

 

  

 

  

 

(12)

Net income

 

  

 

  

 

 

  

 

13,057

 

  

 

13,057

Balance December 31, 2019

 

87,080,017

$

871

$

1,926,350

$

13,154

$

(580,724)

$

(200,956)

$

1,158,695

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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BROOKS AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Basis of Presentation

The unaudited consolidated financial statements of Brooks Automation, Inc. and its subsidiaries (“Brooks”, or the “Company”) included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all material adjustments, which are of a normal and recurring nature and necessary for a fair statement of the financial position and results of operations and cash flows for the periods presented, have been reflected in the accompanying unaudited consolidated financial statements. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full fiscal year.

Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted and, accordingly, the accompanying financial information should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) for the fiscal year ended September 30, 2019 (the "2019 Annual Report on Form 10-K"). The accompanying Consolidated Balance Sheet as of September 30, 2019 was derived from the audited annual consolidated financial statements as of the period then ended.

Discontinued Operations

In the fourth quarter of fiscal year 2018, the Company entered into a definitive agreement to sell its semiconductor cryogenics business (the “Disposition”) to Edwards Vacuum LLC (a member of the Atlas Copco Group) (“Edwards”). The Company determined that the semiconductor cryogenics business met the “held for sale” criteria and the “discontinued operations” criteria in accordance with Financial Accounting Standard Boards (“FASB”) Accounting Standards Codification (“ASC”) 205, Presentation of Financial Statements, (“FASB ASC 205”) as of September 30, 2018. The Consolidated Balance Sheets and Consolidated Statements of Operations, and the notes to the Consolidated Financial Statements were restated for all periods presented to reflect the discontinuation of the semiconductor cryogenics business, in accordance with FASB ASC 205. The discussion in the notes to these Consolidated Financial Statements, unless otherwise noted, relate solely to the Company's continuing operations. Please refer to Note 3, “Discontinued Operations” for further information.

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 as a result of the initial net working capital adjustments. Net cash proceeds from the sale were $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.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are associated with recording accounts receivable, inventories, goodwill, intangible assets other than goodwill, long-lived assets, derivative financial instruments, deferred income taxes, warranty obligations, revenue recognized in accordance with the percentage of completion method, and stock-based compensation expense. The Company bases its estimates on historical experience and various other assumptions, including in certain circumstances future projections that management believes to be

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reasonable under the circumstances. Although the Company regularly assesses these estimates, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they occur and become known.

Foreign Currency Translation

Certain transactions of the Company and its subsidiaries are denominated in currencies other than their functional currency.

Foreign currency exchange losses generated from the settlement and remeasurement of these transactions are recognized in earnings and presented within “Other expenses, net” in the Company’s unaudited Consolidated Statements of Operations. Net foreign currency transaction and remeasurement losses totaled $0.7 million and $0.1 million, respectively, during the three months ended December 31, 2019 and 2018.

Derivative Instruments

The Company has transactions and balances denominated in currencies other than the U.S. dollar. Most of these transactions or balances are denominated in Euros, British Pounds and a variety of Asian currencies. The Company enters into foreign exchange contracts to reduce its exposure to currency fluctuations. The forward contract arrangements that the Company enters into, typically mature in three months or less. These transactions do not qualify for hedge accounting. Net gains and losses related to these contracts are recorded as a component of "Other expenses, net" in the accompanying unaudited Consolidated Statements of Operations and are as follows for the three months ended December 31, 2019 and 2018 (in thousands):

Three Months Ended

December 31, 

    

2019

    

2018

    

Realized gains (losses) on derivatives not designated as hedging instruments

$

(3,668)

$

2,977

The fair values of the forward contracts are recorded in the Company’s accompanying unaudited Consolidated Balance Sheets as “Prepaid expenses and other current assets” and “Accrued expenses and other current liabilities”. Foreign exchange contract assets and liabilities are measured and reported at fair value based on observable market inputs and classified within Level 2 of the fair value hierarchy described below due to a lack of an active market for these contracts.

Fair Value Measurements

The Company measures at fair value certain financial assets and liabilities, including cash equivalents and available for sale securities. FASB ASC 820, Fair Value Measurement and Disclosures, establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following levels of inputs may be used to measure fair value:

Level 1 Inputs: Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 Inputs: Observable inputs other than prices included in Level 1, including quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Inputs: Unobservable inputs that are significant to the fair value of the assets or liabilities and reflect an entity’s own assumptions in pricing assets or liabilities since they are supported by little or no market activity.

As of December 31, the Company had no assets or liabilities measured and recorded at fair value on a recurring basis using Level 3 inputs.

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Leases

The Company has operating leases for real estate and non-real estate and finance leases for non-real estate. The classification of a lease as operating or finance and the determination of the right-of-use asset (ROU asset) and lease liability are determined at lease inception. The ROU asset represents the Company’s right to use an underlying asset for the lease term and the lease liability represents the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, an incremental borrowing rate is used based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.

The Company’s lease agreements may contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. Fixed payments for non-lease components are combined with lease payments and accounted for as a single lease component which increases the amount of the ROU asset and liability.

The ROU asset for operating leases is included within Other assets and the ROU asset for finance leases is included within Property, plant, and equipment, net on the Consolidated Balance Sheets. The short-term lease liabilities for both operating leases and finance leases are included within Accrued expenses and other current liabilities. The long-term lease liabilities for operating leases and finance leases are included within Long-term operating lease liabilities, and Other long-term liabilities, respectively, on the Consolidated Balance Sheets.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12: Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 clarifying and amending existing guidance. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted. The Company is evaluating the impact of this ASU.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. The provisions may be adopted prospectively or retrospectively. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of this ASU.

In August 2018, the FASB issued ASU 2018-14, Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans, which amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The amendments require additional disclosure for the weighted-average interest crediting rates, a narrative description of the reasons for significant gains and losses, and an explanation of any other significant changes in the benefit obligation or plan assets. The amendment removes disclosure requirement for accumulated other comprehensive income expected to be recognized over the next year, information about plan assets to be returned to the entity, and the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost, and the benefit obligation for postretirement health care benefits. The ASU is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The ASU does not amend the interim disclosure requirements of ASC 715-20. The Company is currently evaluating the impact of this ASU.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820 to add and remove

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disclosure requirements related to fair value measurement. The amendments include new disclosure requirement for changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The amendments eliminated disclosure requirements for amount of and reasons for transfers between Level 1 and Level 2, valuation processes for Level 3 fair value measurements, and policy for timing of transfers between levels of the fair value hierarchy. In addition, the amendments modified certain disclosure requirement to provide clarification or to promote appropriate exercise of discretion by entities. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted. The Company is currently evaluating the impact of this ASU.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides guidance for recognizing credit losses on financial instruments based on an estimate of current expected credit losses model. The FASB subsequently issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses to clarify and address certain items related to the amendments in ASU 2016-13. ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief, was issued to provide entities that have certain instruments within the scope of ASC 326 with an option to irrevocably elect the fair value option under ASC 825-10, Financial Instruments - Overall, applied on an instrument-by-instrument basis for eligible instruments. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of this ASU.

Recently Adopted Accounting Pronouncements

In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates (SEC Update). ASU 2019-07 aligns the guidance in various SEC sections of the Codification with the requirements of certain SEC final rules. ASU 2019 -07 was effective immediately during the Company’s third quarter of fiscal 2020 and the adoption did not have any impact on our consolidated financial statements and related disclosures.

In March 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which amends ASC 220 to add, remove, and clarify disclosure requirements related to reporting comprehensive income. This ASU gives entities the option to reclassify tax effects recorded in accumulated other comprehensive income as a result of tax reform to retained earnings. The entities have the option to apply the guidance retrospectively or in the period of adoption. The guidance requires entities to make new disclosures, regardless of whether they elect to reclassify tax effects. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption in any period is permitted. The Company adopted the guidance during the first quarter of fiscal year 2020. There is no accounting impact on the Company’s consolidated financial statements and related disclosures because the Company does not have stranded tax effects in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), an amendment of the FASB ASC 840. Under Topic 842, lessees are required to recognize a ROU asset and lease liability on the balance sheet for all leases with terms beyond twelve months. The new standard also requires enhanced disclosures that provide more transparent information to financial statement users about lease portfolios. The Company adopted Topic 842 effective October 1, 2019 using the modified retrospective approach. The Company applied Topic 842 to all its leases as of October 1, 2019 with comparative prior periods continuing to be reported under Topic 840. With the adoption of Topic 842, the Company assumed the assessment determined under Topic 840 of whether contracts contain leases, the classification of leases as operating or finance and the remaining lease term of each lease. Certain leases contain both lease and non-lease components, which the Company has elected to treat as a single lease component. On October 1, 2019, the Company recorded a ROU asset related to its operating leases of $28.1 million and a lease liability related to its operating leases of $27.1 million on its Consolidated Balance Sheets. There was no impact to the Company’s finance ROU asset and

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liability on October 1, 2019. The adoption of the standard does not impact the Consolidated Results of Operations or Consolidated Statement of Cash Flows. See Note 9, “Leases” for further information.

Other

For further information with regard to the Company’s significant accounting policies, please refer to Note 2 "Summary of Significant Accounting Policies" to the Company’s consolidated financial statements included in the 2019 Annual Report on Form 10-K.

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.

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. 

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

Three Months Ended December 31,

    

2019

    

2018

Revenue

  

Products

$

-

$

28,786

Services

-

10,538

Total revenue

-

39,324

Cost of revenue

Products

-

16,516

Services

-

6,049

Total cost of revenue

-

22,565

Gross profit

-

16,759

Operating expenses

Research and development

-

2,158

Selling, general and administrative

(257)

7,203

Total operating expenses

(257)

9,361

Operating income

257

7,398

Other (loss) income, net

(410)

289

(Loss) income before income taxes and earnings of equity method investment

(153)

7,687

Income tax provision

(36)

1,310

(Loss) income before equity in earnings of equity method investment

(117)

6,377

Equity in earnings of equity method investment

-

1,772

Net (loss) income

$

(117)

$

8,149

The table above reflects revenue for the three months ended December 31, 2018 in accordance with ASC 606. Results for the three months ended December 31, 2018 were not significantly impacted by the adoption of ASC 606.

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 December 31,

    

    

2018

Statements of Operations:

  

Total revenue

$

22,299

Gross profit

8,928

Operating Income

5,124

Net income

3,496

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 December 31,

2018

Depreciation and amortization

$

2

Capital expenditures

308

Stock-based compensation

291

Earnings of equity method investment

(1,772)

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4. Marketable Securities

The Company invests in marketable securities that are classified as available-for-sale and records them at fair value in the Company’s unaudited Consolidated Balance Sheets. Marketable securities reported as current assets represent investments that mature within one year from the balance sheet date. Long-term marketable securities represent investments with maturity dates greater than one year from the balance sheet date. The securities are valued using matrix pricing and benchmarking and classified within Level 2 of the fair value hierarchy because they are not actively traded. Matrix pricing is a mathematical technique used to value securities by relying on the securities’ relationship to other benchmark quoted prices.

Unrealized gains and losses are excluded from earnings and reported as a separate component of accumulated other comprehensive income until the security is sold or matures. Gains or losses realized from sales of marketable securities are computed based on the specific identification method and recognized as a component of "Other expenses, net" in the accompanying unaudited Consolidated Statements of Operations. There were no marketable securities sales during the three months ended December 31, 2019. During the three months ended December 31, 2018, the Company sold marketable securities with a fair value and amortized cost of $49.4 million and $49.5 million, respectively, and recognized net losses of $0.1 million. As a result, during this period, the Company collected cash proceeds of $48.9 million from the sale of marketable securities and reclassified net unrealized holding losses of $0.1 million from accumulated other comprehensive income into “Other expenses, net” in the accompanying unaudited Consolidated Statements of Operations as a result of these transactions.

The following is a summary of the amortized cost and the fair value, including accrued interest receivable and unrealized holding gains (losses) on the short-term and long-term marketable securities as of December 31, 2019 and September 30, 2019 (in thousands):

    

    

Gross

    

Gross

    

Amortized

Unrealized 

Unrealized 

Cost

Losses

Gains

Fair Value

December 31, 2019:

 

  

 

  

 

  

 

  

U.S. Treasury securities and obligations of U.S. government agencies

 

$

6,696

$

$

1

 

$

6,697

Bank certificates of deposits

500

500

Corporate securities

4,519

4,519

Municipal securities

 

2,515

 

2,515

Other debt securities

 

41

 

41

$

14,271

$

$

1

$

14,272

September 30, 2019:

 

  

 

  

 

  

 

  

U.S. Treasury securities and obligations of U.S. government agencies

$

31,863

 

$

(2)

 

$

5

 

$

31,866

Bank certificates of deposits

750

750

Corporate securities

4,317

1

4,318

Other debt securities

 

35

 

 

 

35

$

36,965

$

(2)

$

6

$

36,969

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The fair values of the marketable securities by contractual maturities at December 31, 2019 are presented below (in thousands):

    

Fair Value

Due in one year or less

$

11,233

Due after one year through five years

 

Due after five years through ten years

Due after ten years

 

3,039

Total marketable securities

$

14,272

Expected maturities could differ from contractual maturities because the security issuers may have the right to prepay obligations without prepayment penalties.

The Company reviews the marketable securities for impairment at each reporting period to determine if any of the securities have experienced an other-than-temporary decline in fair value. The Company considers factors, such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer, the Company’s intent to sell, or whether it is more likely than not it will be required to sell the investment before recovery of its amortized cost basis. If the Company believes that an other-than-temporary decline in fair value has occurred, it writes down the investment to its fair value and recognizes the credit loss in earnings and the non-credit loss in accumulated other comprehensive income or loss. There were no securities in an unrealized loss position as of December 31, 2019. The aggregate fair value of the marketable securities in an unrealized loss position was $12.0 million as of September 30, 2019. Aggregate unrealized losses for these securities were insignificant as of September 30, 2019 and are presented in the table above. The securities in an unrealized loss position as of September 30, 2019 were not considered other-than-temporarily impaired and, as such, the Company did not recognize impairment losses during the period then ended. The unrealized losses were attributable to changes in interest rates that impacted the value of the investments.

Cash equivalents of $6.2 million at September 30, 2019 consist of money market funds and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Cash equivalents of $37.2 million and $10.0 million, respectively, as of December 31, and September 30, 2019 consist primarily of treasury bills and agency bonds and are classified within Level 2 of the fair value hierarchy because they are not actively traded. Cash equivalents from level 1 and level 2 are recorded in “Cash and cash equivalents” within the accompanying unaudited Consolidated Balance Sheet.

5. Acquisitions

Acquisition Completed in Fiscal Year 2019

Acquisition of the GENEWIZ Group

On November 15, 2018, the Company acquired all the outstanding capital stock of GENEWIZ Group (“GENEWIZ”), a leading global genomics service provider headquartered in South Plainfield, New Jersey. GENEWIZ provides genomics services that enable research scientists to advance their discoveries within the pharmaceutical, academic, biotechnology, agriculture and other markets. It provides gene sequencing and synthesis services for more than 4,000 institutional customers worldwide supported by their global network of laboratories spanning the United States, China, Japan, Germany and the United Kingdom. This transaction has added a new and innovative platform which further enhances the Company’s core capabilities, and added even more value to samples that are under the Company’s care.

The total cash purchase price for the acquisition was $442.7 million, net of cash acquired, which included a working capital settlement of $0.4 million. The Company used the proceeds of the incremental term loan described in Note 8, “Debt” to pay a portion of the purchase price.

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On the acquisition date, the Company paid $32.3 million to escrow accounts related to the satisfaction of the seller's indemnification obligations with respect to their representations and warranties and other indemnities. The Company also retained an amount equal to $1.5 million as collateral for any adjustment shortfall based on the final merger consideration calculation. During the fiscal year 2019, the final merger consideration was calculated to be $4.0 million less than the merger consideration paid at closing. To satisfy the shortfall, the Company reversed the $1.5 million liability associated with the holdback, received approval from the former shareholders to retain $0.7 million of funds the Company received on their behalf, and collected $1.8 million from the escrow accounts.

The Company recorded the assets acquired and liabilities assumed related to GENEWIZ at their fair values as of the acquisition date, from a market participant’s perspective. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. The following table presents the net purchase price and the fair values of the assets and liabilities of GENEWIZ (in thousands):

    

Fair Value of

Assets and

Liabilities

Accounts receivable (approximates contractual value)

$

28,566

Inventories

 

4,370

Prepaid expenses and other current assets

11,635

Property, plant and equipment

 

36,379

Goodwill

 

235,160

Intangible assets

 

189,129

Other assets

15,998

Current portion of long-term debt

 

(3,170)

Accounts payable

 

(6,522)

Deferred revenue

 

(67)

Accrued compensation and benefits

(5,145)

Other current liabilities

 

(10,073)

Long-term debt

(2,482)

Long-term tax reserves

(13,400)

Long-term deferred tax liabilities

(34,993)

Other long-term liabilities

(2,681)

Total purchase price, net of cash acquired

$

442,704

The Company applied variations of the income approach to estimate the fair values of the intangible assets acquired. The identifiable intangible assets include customer relationships (excess earnings method) of $125.5 million with a useful life of 14 years, completed technology (relief from royalty method) of $44.5 million with useful lives from 10 to 15 years and trademarks (relief from royalty method) of $19.1 million with a useful life of 13 years. The intangible assets acquired are amortized over the total weighted average period of 13.3 years using methods that approximate the pattern in which the economic benefits are expected to be realized.

Goodwill of $235.2 million largely reflects the potential synergies and expansion of the Company’s core technologies and offerings in the Life Sciences business. The goodwill from this acquisition is reported within the Brooks Life Sciences segment and is not tax deductible.

The revenues and net income from GENEWIZ recognized in the Company's consolidated results of operations were $40.0 million and $0.8 million, respectively for the three months ended December 31, 2019. The revenues and net income from GENEWIZ recognized in the Company’s consolidated results of operations were $16.4 million and $0.9 million, respectively during the period from the acquisition date to December 31, 2018. During the three months ended December 31, 2019, and the comparable reporting period since acquisition in fiscal year 2019, net income included $5.1 million and $1.6 million, respectively, related to amortization expense of acquired intangible assets. During the three months ended December 31, 2019 and 2018,