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 March 31,				Six Months Ended March 31,
	2019		2018		2019		2018
Revenue
Products	$	23,895	$	39,460	$	52,681	$	75,872
Services		11,759		10,848		22,297		21,165
Total revenue		35,654		50,308		74,978		97,037
Cost of revenue
Products		15,182		22,499		31,698		43,147
Services		6,678		5,510		12,727		10,635
Total cost of revenue		21,860		28,009		44,425		53,782
Gross profit		13,794		22,299		30,553		43,255
Operating expenses
Research and development		2,168		1,620		4,326		3,414
Selling, general and administrative		4,993		7,180		12,196		10,427
Restructuring charges		-		2		-		2
Total operating expenses		7,161		8,802		16,522		13,843
Operating income		6,633		13,497		14,031		29,412
Other income, net		278		255		567		527
Income before income taxes and earnings of equity method investment		6,911		13,752		14,598		29,939
Income tax provision		1,930		10,651		3,240		14,151
Income before equity in earnings of equity method investment		4,981		3,101		11,358		15,788
Equity in earnings of equity method investment		1,269		1,422		3,041		3,602
Net income	$	6,250	$	4,523	$	14,399	$	19,390

The table above reflects revenue for the three and six months ended March 31, 2019 in accordance with ASC 606, while results for the three and six months ended March 31, 2018 have not been restated and are reported in accordance with the governing revenue recognition standards applicable to that period. Results for the three and six months ended March 31, 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 following table presents the summarized financial information for Ulvac Cryogenics, Inc., the unconsolidated subsidiaries accounted for based on the equity method (in thousands):


	March 31,		September 30,
	2019		2018
Balance Sheets:
Current assets	$	70,071	$	69,302
Non-current assets		21,409		21,338
Current liabilities		27,168		26,006
Non-current liabilities		8,227		8,397


	Three Months Ended March 31,				Six Months Ended March 31,
	2019		2018		2019		2018
Statements of Operations:
Total revenue	$	22,756	$	23,106	$	45,050	$	45,979
Gross profit		8,305		8,879		17,241		18,112
Operating Income		4,078		4,690		9,214		10,046
Net income		2,602		2,738		6,108		7,052

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 March 31,				Six Months Ended March 31,
	2019		2018		2019		2018
Depreciation and amortization	$	-	$	196	$	-	$	391
Capital expenditures		99		46		407		72
Stock-based compensation		129		246		420		492
Earnings of equity method investment		(1,269)		(1,422)		(3,041)		(3,602)

The carrying value of the assets and liabilities of the discontinued operations on the Consolidated Balance Sheet as of March 31, 2019 and September 30, 2018 were as follows (in thousands). Balances as of March 31, 2019 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 March 31, 2019 was not significantly impacted by the adoption of ASC 606:


	March 31,		September 30,
	2019		2018
Assets
Accounts receivable, net	$	25,675	$	27,852
Inventories		39,280		37,953
Other current assets		50		343
Total current assets of discontinued operation	$	65,005	$	66,148

Property, plant and equipment, net	$	1,499	$	1,081
Goodwill		26,485		26,485
Intangibles, net		15		14
Equity method investment		35,055		31,472
Other assets		18		-
Total long-term assets of discontinued operation	$	63,072	$	59,052

Liabilities
Deferred revenue	$	1,082	$	1,052
Accrued warranty and retrofit costs		2,303		2,464
Accrued compensation and benefits		2,839		3,648
Other current liabilities		371		224
Total current liabilities of discontinued operation	$	6,595	$	7,388

Long-term liabilities of discontinued operation	$	523	$	698