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) for $675.0 million in cash. The purchase price is subject to adjustments for working capital and other items. The Company anticipates closing of the transaction in the third fiscal quarter of 2019 upon satisfaction of various closing conditions and regulatory approvals.

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 and is included in the Brooks Semiconductor Solutions Group segment as part of the segment.

In connection with the Disposition, the Company and Edwards have agreed to enter 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 expects to 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 will 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 December 31,
	2018		2017
Revenue
Products	$	28,786	$	36,412
Services		10,538		10,317
Total revenue		39,324		46,729
Cost of revenue
Products		16,516		20,648
Services		6,049		5,125
Total cost of revenue		22,565		25,773
Gross profit		16,759		20,956
Operating expenses
Research and development		2,158		1,794
Selling, general and administrative		7,203		3,247
Total operating expenses		9,361		5,041
Operating income		7,398		15,915
Other (expense) income, net		289		272
Income before income taxes and earnings of equity method investment		7,687		16,187
Income tax provision		1,310		3,500
Income before equity in earnings of equity method investment		6,377		12,687
Equity in earnings of equity method investment		1,772		2,180
Net income	$	8,149	$	14,867

The table above reflects revenue for the three months ended December 31, 2018 in accordance with ASC 606, while results for the three months ended December 31, 2017 have not been restated and are reported in accordance with the governing revenue recognition standards applicable to that period. Results for the three months ended December 31, 2018 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 following table presents the summarized financial information for Ulvac Cryogenics, Inc., the unconsolidated subsidiaries accounted for based on the equity method (in thousands):


	December 31,		September 30,
	2018		2018
Balance Sheets:
Current assets	$	71,538	$	69,302
Non-current assets		21,568		21,338
Current liabilities		30,467		26,006
Non-current liabilities		8,588		8,397


	Three Months Ended December 31,
	2018		2017
Statements of Operations:
Total revenue	$	22,299	$	22,878
Gross profit		8,928		9,226
Operating Income		5,124		5,343
Net income		3,496		4,285

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		2017
Depreciation and amortization	$	2	$	195
Capital expenditures		308		26
Stock-based compensation		291		246
Earnings of equity method investment		(1,772)		(2,180)

The carrying value of the assets and liabilities of the discontinued operations on the Consolidated Balance Sheet as of December 31, 2018 and September 30, 2018 were as follows (in thousands). Balances as of December 31, 2018 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 that period. The carrying value of the assets and liabilities associated with discontinued operations as of December 31, 2018 was not significantly impacted by the adoption of ASC 606:


	December 31,			September 30,
	2018			2018
Assets
Accounts receivable, net	$	28,327	$		27,852
Inventories		39,884			37,953
Other current assets		123			343
Total current assets of discontinued operation	$	68,334		$	66,148

Property, plant and equipment, net	$	1,397		$	1,081
Goodwill		26,485			26,485
Intangibles, net		14			14
Equity method investment		34,053			31,472
Other assets		18			-
Total long-term assets of discontinued operation	$	61,967		$	59,052

Liabilities
Deferred revenue	$	1,907		$	1,052
Accrued warranty and retrofit costs		2,400			2,464
Accrued compensation and benefits		3,325			3,648
Other current liabilities		703			224
Total current liabilities of discontinued operation	$	8,335		$	7,388

Long-term liabilities of discontinued operation	$	506		$	698