Discontinued Operations

12 Months Ended

Sep. 30, 2021

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

3.    Discontinued Operations

Planned Disposition of Semiconductor Automation Business

On September 20, 2021, the Company entered into a definitive agreement to sell its semiconductor automation business (the “automation business”) to THL for $3 billion in cash, subject to adjustments. The Company anticipates closing of the transaction in the first half of calendar year 2022 upon satisfaction of customary closing conditions and regulatory approvals.

The semiconductor automation business is comprised of the Brooks Semiconductor Solution Group segment. At the completion of the sale, the Company will no longer serve the semiconductor market.

During the fourth quarter of fiscal 2021, the Company determined that its automation business met the criteria to be classified as a discontinued operation and, as a result, its historical financial results are reflected in the Company’s financial statements as a discontinued operation, and assets and liabilities were classified as assets and liabilities held for sale.

The following table presents the financial results of automation business discontinued operations with respect to the automation business (in thousands):

	Year Ended September 30,
	2021		2020		2019
Revenue
Products	$	624,358	$	463,309	$	403,634
Services		55,698		45,427		43,035
Total revenue		680,056		508,736	$	446,669
Cost of revenue
Products		354,786		274,727		238,301
Services		29,750		26,134		26,712
Total cost of revenue		384,536		300,861		265,013
Gross profit		295,520		207,875		181,656
Operating expenses
Research and development		48,647		41,245		39,045
Selling, general and administrative		70,634		50,881		48,635
Restructuring charges		230		692		506
Total operating expenses		119,511		92,818		88,186
Operating income		176,009		115,057		93,470
Other income (loss), net		133		207		(69)
Income before income taxes		176,142		115,264		93,401
Income tax provision		35,357		23,867		22,719
Net income from discontinued operations	$	140,785	$	91,397	$	70,682

The following table presents the significant non-cash items and capital expenditures for the discontinued operations with respect to the semiconductor automation business that are included in the Consolidated Statements of Cash Flows (in thousands):

	Year Ended September 30,
	2021		2020		2019
Depreciation and amortization	$	8,472	$	11,374	$	13,153
Capital expenditures		6,414		4,815		2,341
Stock-based compensation		7,405		5,501		6,412

The carrying value of the assets and liabilities of the discontinued operations with respect to the semiconductor automation business on the Consolidated Balance Sheets as of September 30, 2021 and 2020 was as follows (in thousands):

	September 30,
	2021		2020
Assets
Cash and cash equivalents	$	45,000	$	45,000
Accounts receivable, net		142,256		93,498
Inventories		110,735		77,708
Other current assets		13,394		6,657
Total current assets of discontinued operation	$	311,385	$	222,863
Property, plant and equipment, net	$	32,058	$	28,931
Long-term deferred tax assets		3,167		1,143
Goodwill		81,477		48,359
Intangibles, net		44,468		6,002
Other assets		22,658		14,283
Total long-term assets of discontinued operation	$	183,828	$	98,718
Liabilities
Accounts payable	$	68,074	$	36,070
Deferred revenue		7,141		5,580
Accrued warranty and retrofit costs		6,081		5,990
Accrued compensation and benefits		18,144		14,598
Accrued Income Taxes		11,702		8,118
Accrued expenses and other current liabilities		18,014		12,476
Total current liabilities of discontinued operation	$	129,156	$	82,832
Long-term tax reserves		2,356		697
Long-term deferred tax liabilities		6,548		141
Long-term pension liabilities		5,490		5,511
Long-term operating lease liabilities		15,425		12,950
Other long-term liabilities		2,625		8,276
Total long-term liabilities of discontinued operation	$	32,444	$	27,575

Acquisition within the Automation Business

On April 29, 2021, the Company acquired Precise Automation Inc., a leading developer of collaborative robots and automation subsystems headquartered in Fremont, California. The total cash purchase price for the acquisition was approximately $69.8 million. Precise provides the automation business with a product offering and technology portfolio to take advantage of the opportunities in the collaborative robot market.

The allocation of the consideration included $38.7 million of technology, $2.5 million of customer relationships, $33.1 million of goodwill, $6.2 million of deferred tax liabilities, and several other assets and liabilities. The purchase price allocation was based on a preliminary valuation which is subject to further adjustments within the measurement period when additional information becomes available.

The Company applied variations of the income approach to estimate the fair values of the intangible assets acquired. The completed technology was valued using excess earnings method and the customer relationships was valued using distributor margin method, both of which have a useful life of 11 years. The intangible assets acquired are amortized over the total weighted average period of 11 years using methods that approximate the pattern in which the economic benefits are expected to be realized.

The Company has included the financial results of the acquired operations within income from discontinued operations on its Consolidated Statements of Operations. The goodwill and intangible assets are not tax deductible

The Company did not present a pro forma information summary for its consolidated results of operations for the fiscal years ended September 30, 2021 and 2020 because such results were immaterial.

Disposition of the Semiconductor Cryogenics Business

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 $661.5 million, which excludes $6.3 million retained by Edwards at closing based on an estimate of net working capital adjustments, which are currently pending finalization. Net proceeds from the sale were approximately $553.1 million, net of taxes and closing costs paid and remaining estimated taxes payable. As part of this sale, we transferred our intellectual property, or IP, for our cryogenics pump products, but not our IP related to our semiconductor automation or life sciences businesses. Net income from discontinued operations for fiscal year 2019 is inclusive of the net gain on sale of $408.6 million. In the third quarter of fiscal year 2020, Edwards 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’s continuing operation.

The semiconductor cryogenics business consisted of the CTI pump business, Polycold chiller business, the related services business and a 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 parties provided to each other for the period ending 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 until one-year anniversary of closing the Disposition. The lease agreements provide facility space in Chelmsford, Massachusetts to Edwards free of charge for three years after the transaction closing date. Edwards has 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 businesses with further acquisitions and strengthening its semiconductor automation business with opportunistic acquisitions.

The semiconductor cryogenics business disposition met the "held for sale" criteria and the “discontinued operation” criteria in accordance with 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 with respect to the semiconductor cryogenics business (in thousands):

	Year Ended September 30,
	2021		2020		2019
Revenue
Products	$	-	$	-	$	76,227
Services		-		-		33,291
Total revenue		-		-		109,518
Cost of revenue
Products		-		-		47,148
Services		-		-		19,016
Total cost of revenue		-		-		66,164
Gross profit		-		-		43,354
Operating expenses
Research and development		-		-		6,605
Selling, general and administrative		279		(171)		20,889
Restructuring charges		-				24
Total operating expenses		279		(171)		27,518
Operating (loss) income		(279)		171		15,836
Interest income
Interest expense
Other loss, net		(1,256)		(410)		539,948
Loss on discontinued operations before income taxes	$	(1,535)	$	(239)	$	555,784
Income tax benefit		(366)		(57)		134,110
Income (loss) before equity in earnings of equity method investment		(1,169)		(182)		421,674
Equity in earnings of equity method investment		-		-		6,188
Net loss from discontinued operations	$	(1,169)	$	(182)	$	427,862

The Company did not record income or loss related to our semiconductor cryogenics business for the fiscal year ended September 30, 2020 and 2021. The table above reflects revenue for the year ended September 30, 2019 in accordance with ASC 606.

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

	Year Ended September 30,
	2019
Statements of Operations:
Total revenue	$	88,357
Gross profit		35,127
Operating Income		17,791
Net income		12,483

The following table presents the significant non-cash items and capital expenditures for the discontinued operations with respect to the semiconductor cryogenics business that are included in the Consolidated Statements of Cash Flows (in thousands):

	Year Ended September 30,
	2021		2020		2019
Depreciation and amortization	$	-	$	-	$	4
Capital expenditures		-		-		666
Stock-based compensation		-		-		635
Earnings of equity method investment		-		-		(6,188)