Goodwill and Intangible Assets

9 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill represents the excess of net book value over the estimated fair value of net tangible and identifiable intangible assets of a reporting unit. Goodwill is tested for impairment annually or more often if impairment indicators are present at the reporting unit level. The Company elected April 1 as its annual goodwill impairment assessment date and performs additional impairment tests if triggering events occur. If events occur or circumstances change that would more likely than not reduce fair values of the reporting units below their carrying values, goodwill will be evaluated for impairment between annual tests.

Prior to the third quarter of fiscal year 2016, the Company had six reporting units, including five reporting units that had goodwill. Four reporting units were a part of the Brooks Product Solutions operating segment, and each of the Brooks Global Services segment and Brooks Life Science Systems segment represented a reporting unit. During the third quarter of fiscal year 2016, the Company reorganized its operating and reportable segments into (i) Brooks Semiconductor Solutions Group, or BSSG,; and (ii) Brooks Life Science Systems and realigned its reporting units to reflect the revised segment structure. The combination of the Brooks Product Solutions segment and Brooks Global services segment did not have a direct impact on the goodwill at the reporting unit level. As a result of this re-alignment, the Company had five reporting units as of June 30, 2016, including four reporting units within the Brooks Semiconductor Solutions Group operating segment and one reporting unit which was Brooks Life Science Systems operating segment. Please refer to Note 16, "Segment Information" for additional information on the operating and reporting segments realignment. The revised reporting unit structure reflects the aggregation of two reporting units, Polycold and CTI Cryogenics, into one reporting unit called BSSG Cryogenics as a result of the reorganization of the Company’s internal management structure and the economic similarities that exist between the two reporting units. The Company tested goodwill for impairment before and after the reporting unit aggregation and determined that fair value of each reporting unit individually and in aggregate exceeded their carrying values. The fair value of the BSSG Cryogenics reporting unit significantly exceeded its carrying value as of June 30, 2016. BSSG Cryogenics goodwill carrying amount was $24.0 million million as of June 30, 2016.

The Company completed its annual goodwill impairment test as of April 1 and determined that no adjustment to goodwill was necessary. Fair values of all of the reporting units, except for Polycold, substantially exceeded their respective carrying values. Fair value of Polycold reporting unit on a standalone basis exceeded its carrying value by 12%. During the second quarter of 2016, the Company concluded that recent operating trends and declining forecasts for the Polycold reporting unit represented indicators of potential goodwill impairment. As a result, the Company performed the first step of the quantitative goodwill impairment test as of February 1, 2016 and determined that the fair value exceeded the carrying value by 18%, and that no goodwill impairment existed. The Company determined Polycold's fair value based on an Income Approach in accordance with the Discounted Cash Flow method, or DCF method, which is based on future cash flow forecasts discounted at a weighted-average cost of capital. Forecasted sales volumes, product costs and the resulting future cash flows used in the valuation of Polycold are driven by various factors, such as customer demand, macroeconomic environment and competitive dynamics, and may impact fair value of Polycold's goodwill. During the three months ended June 30, 2016, the Company incorporated lower projected future cash flows into the model due to lower forecasted revenue and gross margin in fiscal year 2016 which resulted in a decrease of the excess of Polycold's fair value over its carrying value from 18% during the second quarter of fiscal year 2016 to 12% during the third quarter of fiscal year 2016. The estimated fair value of Polycold's reporting unit assumed a taxable transaction. Polycold's goodwill carrying amount was $24.0 million as of the date of each goodwill impairment assessment.

The components of the Company’s goodwill by an operating segment at June 30, 2016 and September 30, 2015 are as follows (in thousands):



	Brooks Semiconductor Solutions Group			Brooks Life Science Systems		Other			Total
Gross goodwill, at September 30, 2014	$	651,067		$	47,378	$	26,014		$	724,459
Accumulated goodwill impairments	(588,944		)	—		(26,014		)	(614,958		)
Goodwill, net of accumulated impairments, at September 30, 2014	62,123			47,378		—			109,501
Acquisitions and adjustments	3,660			8,247		—			11,907
Gross goodwill, at September 30, 2015	654,727			55,625		26,014			736,366
Accumulated goodwill impairments	(588,944		)	—		(26,014		)	(614,958		)
Goodwill, net of accumulated impairments, at September 30, 2015	65,783			55,625		—			121,408
Acquisitions and adjustments	1,050			79,928		—			80,978
Gross goodwill, at June 30, 2016	655,777			135,553		26,014			817,344
Accumulated goodwill impairments	(588,944		)	—		(26,014		)	(614,958		)
Goodwill, net of accumulated impairments, at June 30, 2016	$	66,833		$	135,553	$	—		$	202,386

During the nine months ended June 30, 2016, the Company recorded a goodwill increase of $79.9 million related primarily to the acquisition of BioStorage which represented the excess of the consideration transferred over the fair value of the net assets acquired. Additionally, the Company recorded a measurement period adjustment related to the acquisition of Contact which resulted in a decrease in the tangible assets' fair value of $1.1 million and a corresponding increase in goodwill. Please refer to the Note 4 "Acquisitions" for further information on the measurement period adjustment recorded during the first quarter of fiscal year 2016.

The components of the Company’s identifiable intangible assets as of June 30, 2016 and September 30, 2015 are as follows (in thousands):



	June 30, 2016						September 30, 2015
	Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value
Patents	$	7,808	$	7,463	$	345	$	7,808	$	7,394	$	414
Completed technology	60,441		49,982		10,459		60,748		46,718		14,030
Trademarks and trade names	9,143		4,028		5,115		4,241		3,604		637
Customer relationships	114,201		44,474		69,727		77,716		37,351		40,365
Total intangible assets	$	191,593	$	105,947	$	85,646	$	150,513	$	95,067	$	55,446

Amortization expense for intangible assets was $3.8 million and $3.2 million, respectively, during the three months ended June 30, 2016 and 2015 and $11.1 million and $9.6 million, respectively, during the nine months ended June 30, 2016 and 2015.

Estimated future amortization expense for the intangible assets for the remainder of fiscal year 2016 and the subsequent four fiscal years is as follows (in thousands):



Fiscal year ended September 30,
2016	$	3,810
2017	15,566
2018	14,052
2019	13,713
2020	12,909
Thereafter	25,596
	$	85,646

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details