(Mark One)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended September 30, 2020
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: 0-25434
Brooks Automation, Inc.
(Exact name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
15 Elizabeth Drive
Chelmsford, Massachusetts
(Address of Principal Executive Offices)
04-3040660
(I.R.S. Employer
Identification No.)
01824
(Zip Code)
978-262-2400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.01 par value
Trading Symbols
BRKS
Name of Each Exchange on Which Registered
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. Yes ☐ No ☑
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ☑
The aggregate market value of the registrant’s Common Stock, $0.01 par value, held by non-affiliates of the registrant as of March 31, 2020, was
approximately $1,641,753,726 based on the closing price per share of $30.50 on March 31, 2020 on the Nasdaq Stock Market. As of March 31, 2020,
73,752,753 shares of the registrant’s Common Stock, $0.01 par value, were outstanding. As of November 5, 2020, 73,831,841 shares of the registrant’s
Common Stock, $0.01, par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement involving the election of directors, which is expected to be filed within 120 days after the end of the
registrant’s fiscal year, are incorporated by reference in Part III of this Report.
BROOKS AUTOMATION, INC.
TABLE OF CONTENTS
PART I
PAGE NUMBER
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes In and Disagreements With Accountants on Financial Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Exhibits and Financial Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15.
Item 16.
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Information Relating to Forward-Looking Statements
Certain statements in this Form 10-K constitute forward-looking statements, which are subject to the safe harbor
provisions created by the Private Securities Litigation Reform Act of 1995. Certain, but not all, of the forward-looking
statements in this report are specifically identified as forward-looking, by use of phrases and words such as “we believe,”
“we estimate,” “we expect,” “may,” “should,” “could,” “intend,” “likely,” and other future-oriented terms. The
identification of certain statements as “forward-looking” is not intended to mean that other statements not specifically
identified are not forward-looking. Forward-looking statements include, but are not limited to, statements that relate to our
future revenue, margins, costs, earnings, profitability, product development, demand, acceptance and market share,
competitiveness, market opportunities and performance, levels of research and development, or R&D, the success of our
marketing, sales and service efforts, outsourced activities, operating expenses, anticipated manufacturing, customer and
technical requirements, the ongoing viability of the solutions that we offer and our customers’ success, tax expenses, our
management’s plans and objectives for our current and future operations and business focus, the impact of the COVID 19
pandemic, the expected benefits and other statements relating to our divestures and acquisitions, the material weaknesses
identified in our internal control over financial reporting, including the impact thereof and our remediation plan, our
adoption of newly issued accounting guidance, the levels of customer spending, general economic conditions, the
sufficiency of financial resources to support future operations, and capital expenditures. Such statements are based on
current expectations and are subject to risks, uncertainties, and changes in condition, significance, value and effect,
including without limitation those discussed within Item 1A, “Risk Factors” and elsewhere in this report and other
documents we file from time to time with the Securities and Exchange Commission, or SEC, such as our quarterly reports
on Form 10-Q and our current reports on Form 8-K. Such risks, uncertainties and changes in condition, significance, value
and effect could cause our actual results, performance or achievements to differ materially from those expressed in this
report and in ways we cannot readily foresee. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof and are based on information currently and reasonably known to us.
We do not undertake any obligation to release revisions to these forward-looking statements, to reflect events or
circumstances that occur after the date of this report or to reflect the occurrence or effect of anticipated or unanticipated
events. Precautionary statements made herein should be read as being applicable to all related forward-looking statements
wherever they appear in this report.
Unless the context indicates otherwise, references in this report to “we”, “us”, “our” and other similar references mean
Brooks Automation, Inc. and its consolidated subsidiaries.
PART I
Item 1. Business
Overview
We are a leading global provider of manufacturing automation solutions for the semiconductor industry, and life
science sample-based services and solutions for the life sciences market. In the semiconductor manufacturing market, we
provide precision robotics, integrated automation systems, and contamination control solutions to semiconductor
fabrication plants, or fabs and original equipment manufacturers, or OEMs, worldwide. In the life sciences market, we
offer a full suite of services and solutions for analyzing, managing, and storing biological and chemical compound samples
to advance research and development for clinical, pharmaceutical, and other scientific endeavors. Our life sciences
solutions include gene sequencing and synthesis, a broad suite of high-throughput automated cryogenic storage products,
related consumables, sample inventory software, as well as fully outsourced solutions for sample storage, transport, and
inventory management. Our leadership positions and our global support capability in each of these markets make us a
valued business partner to the largest semiconductor and semiconductor capital equipment manufactures, and
pharmaceutical and life sciences research institutions in the world. In total, we employ approximately 3,200 full-time
employees worldwide and have sales in more than 50 countries. We are headquartered in Chelmsford, Massachusetts and
have operations in North America, Asia, and Europe.
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Semiconductor
Since our founding in 1978, we have been a leading automation provider and partner to the global semiconductor
manufacturing industry. We provide advanced, high precision, high throughput robots, vacuum automation systems,
contamination control systems, and reticle storage solutions to the global semiconductor capital equipment industry. We
sell our semiconductor products and services both to OEMs and directly to global semiconductor chip manufacturers.
We have significant investments in the engineering disciplines to design and advance capabilities in precise
automation, high-speed, contaminant-free and vacuum environments, and contamination elimination. Our engineering
organization develops new automation capabilities and product offerings, and partners with customers to integrate our
offerings into their tools which are part of the semiconductor manufacturing process.
In April 2018, we supplemented our portfolio of offerings with the acquisition of Tec-Sem Group AG, a Switzerland-
based manufacturer of reticle storage management systems that support the needs for advanced lithography. The reticle
storage business is managed and reported as a part of our Contamination Controls Solutions reporting unit.
On July 1, 2019, we completed the sale of our semiconductor cryogenics business to Edwards Vacuum LLC (a
member of the Atlas Copco Group) for approximately $675 million in cash subject to adjustments for working capital and
other items.
Our semiconductor equipment business provided approximately 57% of our revenue in the fiscal year 2020. The
semiconductor capital equipment market has delivered overall long-term growth in excess of global gross domestic product
(GDP) while also experiencing short-term cycles of sequential decreases and increases of sales. The cycles are influenced
by the technological trends of the semiconductor industry and sometimes by the economic trends of the global economy.
Life Sciences
We are a leading provider of life sciences services and products supporting the analysis, storage, and management of
biological and chemical compound samples for pharmaceutical, biotech, clinical, healthcare and academic institutions
worldwide. We offer advanced automated solutions for cryogenic sample storage, capable of efficiently handling and
managing both small and immense populations of biological samples to ensure end-to-end “cold chain of custody” of
customer samples. We are a leading commercial provider of fully outsourced storage and transport of biological samples.
We offer a broad range of genomic services including sequencing, synthesis and gene editing.
We are a leading provider of automated cold sample storage systems, consumables, and instruments, and informatics
solutions, enabling or enhancing our customers’ visibility into their sample inventories and help them to manage their
laboratory workflows. We are also a leading life sciences service provider of outsourced sample storage and management,
as well as genomic services which include Sanger sequencing, high throughput/next generation sequencing,
bioinformatics, gene synthesis, molecular biology, and good laboratory practices, or GLP, regulatory services. Taken all
together, we believe our life sciences sample management product and services offerings allow our customers to maintain
a complete “cold chain of custody” and enhance efficiency of related workflows for their samples. With our genomic
services offering, we can add more value to the samples under our care to assist our customers in advancing their research
and discoveries.
Our research and development teams and our services teams possess significant specialized expertise in cryogenics,
refrigeration, automation, biological and molecular sciences, and expertise for preparing and processing biological samples
for analysis and testing. Our teams develop new products, enhanced workflow solutions, sample management software
solutions, and innovative sample preparation protocols. As a result of these innovations, the business holds significant
intellectual property and has enabled many loyal customer relationships.
Our life sciences portfolio includes products and services that we acquired to bring together a comprehensive
capability to service our customers’ needs in the sample-based services arena. We continue to develop the acquired
products and services offerings through the combined expertise of the newly acquired teams and our existing research and
development resources. This acquisition, investment, and integration approach has allowed us to accelerate our internal
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development and that of the acquired entity, significantly decreasing our time to market. Our recent acquisitions include
the following:
•
•
In November 2018, we acquired GENEWIZ Group, or GENEWIZ, a leading provider of gene sequencing
and gene synthesis services to pharmaceutical, biotechnology and academic institutions around the world.
GENEWIZ is headquartered in New Jersey and has a network of genomics laboratories spanning the United
States, China, Japan, Germany, and the United Kingdom. The GENEWIZ services, combined with our core
capabilities in sample management services, position us to add more value to samples under our care and
provide more comprehensive solutions to our customer base.
In February 2020, we acquired RURO, Inc., or RURO, an informatics software company based in Maryland.
RURO offers cloud-based software solutions that manage laboratory workflow and bio-sample data for a
broad range of customers in the biotech, healthcare, and pharmaceutical sectors. RURO's capabilities and
offerings enable us to offer enhanced on-site and off-site management of biological sample inventories and
integration solutions for customers’ distributed workflow.
For further information on our acquisitions, please refer to Note 4, “Acquisitions” to our Consolidated Financial
Statements included under Item 8, “Financial Statements and Supplementary Data” of this Form 10-K. Our life sciences
businesses provided approximately 43% of our revenue in fiscal 2020.
As the market of cell-based research is vast and growing, it is driving continued growth in the services and product
offerings for the analysis and management of samples. Our customer list numbers in the thousands and we address only
a fraction of the industry. We serve the largest customers in the pharmaceutical industry, the most advanced research
hospitals performing clinical research and therapy development, as well as some of the newest and leading-edge start-ups
in the biotech space. We also serve academic and government institutions. We believe that the sample-based services and
products business will continue to demonstrate a high growth trajectory and we do not observe cyclical characteristics in
demand for these offerings.
Segments
We serve the semiconductor capital equipment market through one operating and reportable segment, our
Semiconductor Solutions Group segment. We serve the life sciences market through two operating and reportable
segments: Brooks Life Sciences Products and Brooks Life Sciences Services. Prior to the fiscal year 2020, we had only
two reportable segments that consisted of the Brooks Semiconductor Solutions Group segment and the Brooks Life
Sciences segment. The Brooks Life Sciences segment consisted of two operating segments, Sample Management and
GENEWIZ. During the fiscal year 2020, we realigned our life sciences businesses to combine the sample management
services offerings under the leadership of our GENEWIZ genomic services business to form the Brook Life Sciences
Services operating and reportable segment. By combining these two service-based businesses we believe we can more
effectively leverage the potential for synergies as customers engage us to manage a broad variety of sample-based services
including gene sequencing, gene synthesis, lab analysis, sample kitting and preparation, transportation, and storage. In the
realignment we also formed our Brooks Life Sciences Products operating and reportable segment composed of product
offerings of large automated ultra-cold stores, automated cryogenic storage systems, and consumables and instruments,
and related product support services.
For further information on our reportable and operating segments, please refer to Note 20, “Segment and Geographic
Information” to our Consolidated Financial Statements included under Item 8, “Financial Statements and Supplementary
Data” of this Form 10-K.
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Brooks Semiconductor Solutions Group Segment
Brooks Semiconductor Solutions Group is a leader in wafer automation, contamination controls solutions, and related
support services. Our offerings are designed to enhance capabilities and efficiencies of the manufacturing process of
semiconductor fabs through improved throughput, yield, and cost of ownership of complex processing equipment. Our
product offerings include vacuum and atmospheric robots, turnkey vacuum and atmospheric wafer handling systems, as
well as wafer carrier cleaning and reticle storage systems. Our service network of expert application and field engineers,
who are generally located close to our customers, provides rapid refurbishment of robots to stringent specifications,
upgrades to improve equipment productivity, and proactive monitoring and diagnostics for predictive risk management
and improved up-time of the installed base.
Markets and Customers
The demand for semiconductors and semiconductor manufacturing equipment is cyclical, resulting in periodic
expansions and contractions. While our semiconductor business services element is generally more stable, the cyclical
nature of the capital equipment business causes sales from products to vary quarterly based on short-term market demands.
It is not unusual for these variations in sales to be up or down 10% to 20% in sequential quarters. As a result, our quarterly
and yearly semiconductor business sales have sometimes fluctuated. We expect future sales in this market will continue
to fluctuate between quarters and year-over-year.
The principal markets served by the Brooks Semiconductor Solutions Group segment include the following:
•
Semiconductor capital equipment market
Each year, the global semiconductor industry makes significant capital investments to keep up with advancements in
technology, to add manufacturing capacity and to improve productivity within existing fabs. While the global market for
semiconductor capital equipment is cyclical, we believe that it possesses a long-term growth profile driven by the demand
for increasingly sophisticated consumer electronics, automotive and smart appliance products, growth in data centers, the
expansion of the Internet-of-Things which increasingly connects various appliances and devices to servers, and mobile
communications infrastructure such as 5G networks. The expansion of innovative applications in the market translates to
higher demand for semiconductor devices that typically require higher performance, lower power consumption and
reduced size. The increase in manufacturing capacity and advancements of the chip technology are ultimately enabled by
advancements in the processes and technology utilized to produce these chips. We believe this trend continues to provide
market opportunities for the Brooks Semiconductor Solutions Group to be a valued partner supporting the industry’s needs.
We have been a long-term partner to device manufacturers and OEMs who are the providers of tools to fabs. We
maintain collaborative relationships with our customers for the innovative design of solutions that enable their equipment
to have a process advantage and deliver improved cost of ownership in the fab. Our global network of technical specialists
provides extensive support to our customers in all regions, including the key semiconductor markets in South Korea,
Taiwan, China, Japan, Europe and the United States. We are recognized as a market leader in three critical sub-segments:
vacuum automation for wafer handling; wafer automation for advanced packaging; and contamination control solutions.
The production of advanced semiconductor chips requires many complex and logistically challenging manufacturing
activities. Silicon wafers must go through hundreds of process steps to create billions of microscopic transistors
interconnected by a complex network of horizontal and vertical conducting layers to produce a functioning integrated
circuit. These initial fabrication steps, which are referred to in the industry as front-end processes, are repeated many times
on a single wafer to create the desired pattern on the silicon wafer. Up to 50% of these processes are performed in tools
that operate under vacuum conditions, such as removing, depositing, or measuring materials on wafer surfaces. As
semiconductors’ complexity has increased, the number of process steps that occur in a vacuum environment has also
increased, resulting in a greater need for vacuum automation technology solutions.
The increase in packing density of components in mobile devices has led the industry to devise advanced packaging
techniques for chip interconnectivity using what is called wafer level packaging, or WLP. This advanced packaging
technology combines multiple wafers before cutting them into pieces and then forming them onto a packaging substrate
where they are ultimately divided into a multitude of chips. The recent increased adoption of WLP has increased the need
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for a contaminant free and high purity manufacturing environment, resulting in higher demand for our semiconductor
offerings tailored to handle full wafer forms. It is the handling of these packaging substrates, which are often more complex
to handle than standard silicon wafers, which require our sophisticated advanced packaging automation systems that are
often customized for a specific customer substrate.
There is an increased demand for equipment that performs cleaning and conditioning of the wafer carriers which are
used in all advanced semiconductor fabs. These cleaning tools remove microscopic particles, molecular contaminates and
moisture attracted to the inside surface of the carrier. Automated cleaning and conditioning of the wafer carriers and EUV
reticle carriers are also in demand as customers look to improve overall manufacturing yields. Similarly, as lithography
also requires cleaner controlled environments, our reticle solutions provide contamination control for highly valued reticles
or masks used in standard and EUV lithography for printing the technological features onto the wafer.
• Adjacent capital equipment markets
There are a few adjacent capital equipment markets that employ manufacturing processes similar to the semiconductor
manufacturing industry. These markets include microelectromechanical systems, or MEMs devices, light-emitting diodes,
or LEDs, Organic Light Emitting Diodes, or OLEDs, and touch screen technology. These markets and the semiconductor
capital equipment market share common customers and utilize similar technology applications. For example, LEDs are
manufactured using vacuum systems and handling processes similar to those used in semiconductor manufacturing.
We believe the desire for efficient, higher throughput and extremely clean manufacturing for semiconductor wafer
fabs, the chip packaging process and other industrial or high performance electronic-based products and processes have
created a substantial market for us in the following offerings: (i) substrate handling automation, which is related to moving
the wafers in a semiconductor fab, (ii) tool automation, which moves wafers from station-to-station, (iii) vacuum systems
technology to create and sustain the clean environment necessary for fabricating various products, and (iv) automated
contamination control systems to clean and condition substrate carriers.
Product and Service Offerings
The principal offerings of the Brooks Semiconductor Solutions Group segment consist of: (i) wafer handling robotics
and integrated systems and (ii) semiconductor contamination control solutions. The segment also provides support
services, including repair and refurbishment, diagnostics and installation, and spare parts and enhancement upgrades to
optimize tool productivity.
Wafer handling robotics and integrated systems - include vacuum robots, atmospheric robotic modules, and tool
automation systems that provide precision handling and clean wafer environments. In the semiconductor industry, wafer
handling represents a critical technology that is an integral component of highly complex production tools that run in the
world’s most advanced wafer fabs. A typical customer tool is designed and built around a process chamber and uses
automation technology to move wafers in and out of the chamber. We specialize in developing and building these
automated handling systems and the vacuum technologies used in these tools. We provide individual automation
components within an OEM customer system as well as complete integrated handling systems. We provide automation
products designed to improve manufacturing performance and productivity for both atmospheric pressure and vacuum-
based tools.
Contamination control solutions - include automated cleaning and inspection systems for wafer carriers, reticle pod
cleaners, and stockers, which are automated systems that store wafers or reticles. Our products are used to remove
contaminants that result from critical airborne contamination within the workflow of the manufacturing process. Our
solutions contribute to improved yields, productivity and process stability in the manufacturing process which requires an
ultra-clean manufacturing environment for leading-edge chips with geometries below 20 nanometers.
We sell our products and services to the world’s major semiconductor chip makers and to OEMs, who provide process
tools to those same chip makers. Our customers outside the semiconductor industry are broadly diversified. We have major
customers in North America, Europe and Asia. Although we ship much of our equipment to OEMs in the United States,
many of these OEM tools are ultimately installed in semiconductor fabs that are outside of North America. Thus, we also
provide support services to leading OEMs, fabs and foundries across the globe.
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Brooks Life Sciences Products and Brooks Life Sciences Services
Our life sciences businesses are comprised of two reportable segments, Life Sciences Products segment and Life
Sciences Services segment.
Our Life Sciences Products business is a leading provider of automated ultra-cold storage solutions for biological and
chemical compound samples. Our storage systems provide reliable automation and sample inventory management at
temperatures down to -196°C and can store anywhere from thousands to millions of samples. Our sample management
solutions include consumable vials and tubes, PCR plates, instruments for supporting workflow, and informatics, all of
which focus on providing customers with the highest level of sample quality, security, availability, intelligence and
integrity throughout the lifecycle of samples providing customers with complete end-to-end “cold-chain of custody”
capabilities.
Our Life Sciences Services business is a leading provider of solutions addressing the many needs of customers in the
area of genomic analysis and the management and care of biological samples used in pharmaceutical, biotech, healthcare,
clinical, and academic R&D markets. Millions of samples are processed every year, each containing valuable information
that must be preserved with the sample. Through our genomic services we provide a broad capability to customers for
sequencing and synthesis of genes. Our sample management services include off-site storage services, transport services,
laboratory services, and interactive informatics solutions. We also provide expert-level consultation services to our clients
throughout their experimental design and implementation. Our services also include short- and long-term sample storage
and management of the “cold chain of custody” from collection, to storage, to retrieving the sample which ultimately may
go back into the customer’s research workflow.
As referenced above, in November 2018, we completed the acquisition of GENEWIZ, a leading global provider of
genomic analysis and gene synthesis services. In February 2020, we acquired RURO, a software company providing
innovative solutions for managing biological sample inventory and workflows for the life sciences market. We believe
the combination of our broad sample-based offerings, including genomic analysis, sample management services,
automated storage systems, and informatic solutions has meaningfully enhanced our ability to meet our customers’
demands with a single and more comprehensive relationship.
Life Sciences Market
Our life sciences businesses serve a broad range of end markets within the life sciences industry to address a
confluence of life sciences trends, such as technology, information management and new sophisticated tools and
applications. With the advent of biologics and personalized medicine, biological samples have become critical assets to
the success of drug and therapy pipelines, and the proper management and protection of these samples has gained increased
importance to our customers. We believe this trend has created a sizable market opportunity for Brooks to provide
comprehensive sample management and genomic solutions.
Since the successful mapping of the full human genome at the turn of this century, the market for genomic services
has grown in support of research in biologic drug development, personalized medicine and cell/gene therapy. Top
pharmaceutical and biotechnology companies can use their in-house laboratory resources to sequence the millions of genes
needed as part of their research workflow. Still, many companies look to outsource their gene sequencing to independent
laboratories that provide expedited results and expert consultative services. Other companies and institutions have fewer
or no in-house options and make use of outsourced capabilities as their primary solution. GENEWIZ participates in this
market as a value-added laboratory services provider, offering high quality genetic testing services with fast turnaround
time.
The Brooks life sciences businesses currently serve customers worldwide, including all of the top-20 global bio-
pharmaceutical companies. Due to the comprehensive nature of our sample management and genomic services solutions,
we are continuing to expand our customer base and geographic reach. We have more than 7,000 customers globally, and
we continue to add new customers each quarter.
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Brooks Life Sciences Products Offerings
The principal offerings of the Brooks Life Sciences Products segment include the following:
Automated ultra-cold storage systems – provides stand-alone systems that typically store one to two million samples
each in temperature ranges from +4°C to -196°C. Our systems provide high throughput capability and optimized storage
of multi-format tubes and plates and increased storage capacity while maintaining consistent temperature profiles across
stored samples. We also offer support services for our installed base of storage systems.
Consumables and Instruments - includes a complete range of consumables, including multiple formats of racks, tubes,
caps, plates and foils, which are used for storage and handling of samples in ambient and ultra-cold storage environments.
A comprehensive range of instruments used for labeling, bar coding, capping, de-capping, auditing, sealing, peeling, and
piercing tubes and plates complement our consumables. Our offerings include a range of products aimed at the genomic
sample preparation and services market for polymerase chain reactions, or PCR, & sequencing, imaging, plate sealing,
liquid handling, and sample processing.
Brooks Life Sciences Services Offerings
The principal offerings of the Brooks Life Sciences Services segment include the following:
Genomic Services - provides gene sequencing and gene synthesis services, enabling the fast-expanding research of
gene-based healthcare discoveries and therapies. These service offerings include Next Generation sequencing, or NGS,
Sanger sequencing, gene synthesis, bioinformatics, and GLP regulatory services. The sequencing services are available
with both standard and custom services for extraction, library preparation, sequencing, and bioinformatics, supported by
Ph.D.-level project managers providing consultations, updates, and post-delivery assistance. The gene synthesis offerings
provide production of a wide range of sequence lengths and structural complexity, DNA cloning, gene fragment synthesis,
and oligo synthesis.
Sample Repository Solutions - includes a complete range of services consisting of on-site and off-site sample storage,
cold chain logistics, sample transport and collection relocation, bio-processing solutions (inclusive of sample preparation,
and genomic and cell culture analysis), disaster recovery and business continuity, as well as project management and
consulting.
Informatics - provides sample intelligence software solutions and integration of customer technology. Our informatics
suite supports laboratory workflow scheduling for life science tools and instrument work cells, sample inventory and
logistics, environmental and temperature monitoring, clinical trial and consent management, and planning, data
management, virtualization, and visualization of sample collections. The addition of RURO's capabilities and offerings
enables us to offer enhanced on-site and off-site management of biological sample inventories and integration solutions to
our customers for their increasingly distributed workflow.
Sales, Marketing and Customer Support
We market and sell most of our semiconductor products and services in Asia, Europe, the Middle East and North
America through our direct sales organization. The sales process for our products is often multilevel, involving a team
comprised of individuals from sales, marketing, engineering, operations and senior management. In many cases we assign
a team to a customer who engages the customer at different levels of its organization to facilitate planning, provide product
customization when required, and ensure open communication and support.
The majority of our life sciences sales are completed through our direct Brooks Life Sciences sales force, particularly
our store systems, storage services, and genomic services. We supplement the sale of consumables and instruments with
distributors that reach a broad range of customers. In regions with emerging life science industries such as China, India
and the Middle East, we leverage local distributors to assist with the sales process for store systems. Our larger sample
management systems sales process may take months to complete and may involve a team from sales, marketing, and
engineering. Sales of genomic services are generally generated with on-line orders from the customer lab and delivered
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via a courier service, with the simplest of sequencing completed in less than 24 hours and more complex synthesis tasks
within weeks.
We typically provide product warranties for a period of one to two years depending on the product type.
Our marketing activities include participation in trade shows, seminars, participation in industry forums, creation and
distribution of sales literature and white papers, publication of press releases and articles in business and industry
publications. We maintain sales and service centers in Asia, Europe, the Middle East and North America to enhance our
customers’ support and communication.
Competition
Brooks’ Semiconductor Solutions Group segment operates in various market segments of varying breadth with
differing competitors and competitive dynamics. The semiconductor and adjacent technology markets, and process
equipment manufacturing industries, are highly competitive and characterized by continual changes and technology
improvements. A significant portion of equipment automation is still done by the OEMs themselves. Our competitors
among merchant vacuum robot automation suppliers include primarily Japanese companies, such as Daihen Corporation,
Daikin Industries, Ltd., Rorze Corporation, and Sumitomo Heavy Industries, as well as Korea-based RaonTech.
Atmospheric tool automation is typically less demanding technologically, has fewer barriers to entry and has a larger field
of competitors. We compete directly with other equipment automation suppliers of atmospheric modules and systems,
such as Hirata Corporation, Kawasaki Heavy Industries, Ltd., Genmark Automation, Inc., Rorze Corporation, Sankyo
Seisakusho Co., Ltd., TDK Corporation and Sinfonia Technology Co., Ltd. Our Contamination Control Solutions business
competes with suppliers of automated wafer carrier cleaning equipment such as Device Engineering and Hugle.
We believe our customers will purchase our equipment, automation products and vacuum subsystems as long as our
products continue to provide the necessary throughput, reliability, contamination control and accuracy at an acceptable
price. We believe our semiconductor offerings are competitive with respect to all of these factors. However, we cannot
guarantee that we will be successful in selling our products to OEMs who currently satisfy a portion of their automation
needs in-house or from other independent suppliers, regardless of the performance or price of our products.
Given the breadth of the sample management solutions and genomic services offered by the Brooks Life Sciences
segments, there are no direct competitors for the comprehensive set of product and service solutions we provide to our
customers. Each of the business lines within the Brooks Life Sciences segments, however, has unique competitors in their
area of offerings. This includes Hamilton Company and Liconic AG for automation systems, Thermo-Fisher for
consumables and services, Covance and LabCorp for storage services, and BGI, Eurofins, GenScript, Integrated DNA
Technologies, and Twist for genomic services.
Research and Development
Our research and development efforts are focused on developing new products and enhancing the functionality, degree
of integration, reliability and performance of our existing products and service offerings. Our engineering, marketing,
operations and management personnel leverage their close collaborative relationships with their counterparts in customer
organizations to proactively identify market demands that helps us refocus our research and development investment to
match our customers’ demands. With the rapid pace of change that characterizes the markets we serve, it is essential for
us to provide high-performance, reliable products in order to maintain our leadership position in our Brooks Semiconductor
Solutions Group and Brooks Life Sciences segments.
Within our Brooks Semiconductor Solutions Group we invest in research and development initiatives to maintain our
leadership positions in the market we serve as well as to expand our market opportunity. Our investments in Vacuum
Automation and Contamination Control include ramping our intelligent vacuum robot platform, MagnaTran LEAP, with
new designs at customers releasing tools for 10 nanometers and below. In addition, our new PuroMaxx LEAP carrier clean
initiative is well positioned to handle the contamination challenges at 5 nanometers and below, while having modularity
to address the emerging need for carrier clean in the memory markets. As the demand for extreme ultraviolet (EUV)
lithography expands, Brooks continues investment in EUV POD cleaning and reticle storage. Our initiatives with
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Guardian LEAP for EUV reticle storage will provide new innovation to solve many contamination challenges with EUV
reticles.
Within our Life Sciences Products segment, we have developed and continue to develop automated biological sample
storage solutions for operating in ultra-low temperature environments. We have a complete line up of automated storage
from -20°C to -190°C. Our BioStore™ II’s unique design allows controlled temperature storage down to -80°C with the
industry’s highest throughput of sample retrieval. We recently launched the BioStore™ III V that compliments the
BioStore™ III Cryo product line and offers improved data management and sample security for vaccines and biologics
stored at -80°C. Within our Life Sciences Services segment, our GENEWIZ business advances research and development
activities in gene sequencing, synthesis and related services to meet market demands. Recently, enabled by newly
developed proprietary technologies, GENEWIZ launched a portfolio of new services, targeting analysis of adeno-
associated virus, a common vector used in cell and gene therapy. We will continue to focus on developing processes and
technologies that can streamline sample to data workflow.
Manufacturing and Service
Our manufacturing operations include product assembly, integration and testing. We implement quality assurance
procedures that include standard design practices, reliability testing and analysis, supplier and component selection
procedures, vendor controls, manufacturing process controls, and service processes that ensure high-quality performance
of our products. Our major manufacturing facilities are located in Chelmsford, Massachusetts; Yongin-City, South Korea;
and Manchester, United Kingdom. Our manufacturing operations are designed to provide high quality, optimal cost,
differentiated products to our customers in short lead times through responsive and flexible processes and sourcing
strategies. We utilize lean manufacturing techniques for a large portion of our manufacturing, including the manufacture
of assemblies that we have outsourced to competitive regions, including Asia. We also believe the continued sourcing of
portions of our manufacturing processes in these regions allows us to better serve our customers who have operations in
these regions.
We have service and support locations near our customers to provide rapid response to their service needs. Our
principal product service and support locations include Chelmsford, Massachusetts; Fremont, California; Chu Bei City,
Taiwan; Yongin-City, South Korea; Yokohama, Japan; Shanghai, China; Singapore; Manchester, United Kingdom; and
Kiryat-Gat, Israel.
Our Brooks Life Sciences segments provide sample management storage and transportation services in Indianapolis,
Indiana; Fresno, California; El Segundo, California; Torrance, California; Bronx, New York; Canada, Germany, China,
and Singapore. We have a network of 13 laboratories that provide genomic services, including seven in the United States,
three in China, and one each in Japan, Germany, and the United Kingdom.
Patents and Proprietary Rights
We rely on patents, trade secret laws, confidentiality procedures, copyrights, trademarks and licensing agreements to
protect our technology. Due to the rapid technological change that characterizes the life sciences, semiconductor, adjacent
technology markets and related process equipment industries, we believe that the improvement of existing technology,
reliance upon trade secrets, unpatented proprietary know-how and the development of new products may be as important
as patent protection in establishing and maintaining a competitive advantage. Our policy is to require all employees to
enter into proprietary information and nondisclosure agreements to protect trade secrets and know-how. We cannot
guarantee that these efforts will meaningfully protect our trade secrets.
As of September 30, 2020, we owned approximately 360 issued U.S. patents, with various corresponding patents
issued in foreign jurisdictions. We also had approximately 100 pending U.S. patent applications, with foreign counterparts
of some of these applications having been filed or which may be filed at the appropriate time. Our patents will expire at
various dates through 2038.
Backlog
Backlog for the Brooks Semiconductor Solutions Group segment offerings totaled approximately $175 million as of
September 30, 2020, as compared to approximately $127 million at September 30, 2019. Backlog for the Brooks
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Semiconductor Solutions Group segment includes all purchase orders for which our customers have scheduled delivery,
regardless of the expected delivery date, and consists principally of orders for products and service agreements.
Substantially all of this backlog consists of orders scheduled to be delivered within the next 12 months.
Backlog for the Brooks Life Sciences Products segment offerings totaled $92 million as of September 30, 2020, as
compared to approximately $51 million at September 30, 2019. Backlog for the Brooks Life Sciences Products segment
includes all purchase orders for which customers have scheduled delivery, regardless of the expected delivery date, and
consists of orders for products and service agreements.
Backlog for the Brooks Life Sciences Services segment offerings totaled $235 million as of September 30, 2020, as
compared to approximately $252 million at September 30, 2019. Backlog for the Brooks Life Sciences Services segment
includes all purchase orders for which customers have scheduled delivery, regardless of the expected delivery date, and
consists of orders for products and service agreements. In addition, it includes estimated revenue for future services related
to our BioStorage business for which contracts have been secured. Final revenue realized will vary based on volumes,
prices, duration, and other factors. Storage contracts vary in length of time, with some being short term and some
indefinite. We include the estimated value for time periods in the contract up to a maximum of 5 years.
Environmental Matters
We are subject to federal, state, local environmental laws and regulations, and the environmental laws and regulations
of the foreign national and local jurisdictions in which we have manufacturing facilities. We believe we are in compliance
in all material respects with such laws and regulations.
Compliance with foreign, federal, state, and local laws and regulations has not had, and is not expected to have, an
adverse effect on our capital expenditures, competitive position, financial condition or results of operations.
Employees
At September 30, 2020, we had 3,159 full time employees. In addition, we employ part time workers and contractors.
We consider our relationships with our employees to be good.
Available Information
We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings
are available to the public over the internet at the SEC’s website at http://www.sec.gov. We also maintain a website at
www.brooks.com, through which you can access our SEC filings. The information found on our website is not part of this
or any other report we file with or furnish to the SEC.
Item 1A. Risk Factors
Factors That May Affect Future Results
You should carefully consider the risks described below and the other information in this report before deciding to
invest in shares of our common stock. These are the risks and uncertainties we believe are most important for you to
consider. Additional risks and uncertainties not presently known to us, which we currently deem immaterial or which are
similar to those faced by other companies in our industry or business in general, may also impair our business operations.
If any of the following risks or uncertainties actually occurs, our business, financial condition and operating results would
likely suffer. In that event, the market price of our common stock could decline and you could lose all or part of your
investment.
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Risks Relating to the COVID-19 pandemic
Our financial condition and results of operations could be adversely affected by the COVID-19 Pandemic.
In December 2019, a novel strain of coronavirus, causing a disease referred to as COVID-19, was first identified in
Wuhan, Hubei Province, China, resulting in shutdowns of manufacturing and commerce in the months that have followed.
Since then, COVID-19 has spread worldwide, including in the United States, and has resulted in authorities implementing
numerous measures to try to contain the disease, such as travel bans and restrictions, quarantines, shelter-in-place orders
and shutdowns. We have followed the guidelines from the U.S. Center for Disease Control (CDC) and implemented the
recommended safety protocols, and the spread of COVID-19 has also caused us to modify our business practices (including
curtailing employee travel and mandatory work-from-home policies where necessary), and we may take further actions as
required by government authorities or that we determine are in the best interests of our employees, customers, partners
and suppliers. There is no certainty that such measures will be sufficient to mitigate the risks posed by the disease, and our
ability to perform critical functions could be harmed.
As a result of the COVID-19 pandemic and the measures designed to contain its spread, our suppliers may not have
the materials, capacity, or capability to supply our components according to our schedule and specifications. Further, there
may be logistics issues, including our ability and our supply chain’s ability to maintain production, as well as transportation
demands that may cause further delays. If our suppliers’ operations are curtailed, we may need to seek alternate sources
of supply, which may be more expensive. Alternate sources may not be available or may result in delays in shipments to
us from our suppliers and subsequently to our customers. In addition, the COVID-19 pandemic and the measures designed
to stop the spread of the virus may have similar effects on our customers. The current pandemic may also give rise to
force majeure contractual protections being asserted by customers and/or suppliers that we maintain contracts with,
potentially relieving contractual obligations these parties have to us. In any case, any disruption of our suppliers’ or
customers’ businesses would likely negatively impact our sales and operating results.
While the disruptions and restrictions on the ability to travel, quarantines and other measures taken as a result of the
COVID-19 pandemic are expected to be temporary, the duration of any of these measures, and related financial impact,
cannot be estimated at this time. Should these measures continue for an extended period of time, the impact on our supply
chain and customers could have a material adverse effect on our results of operations and cash flows. Further, while the
potential impact and duration of the COVID-19 pandemic on the global economy and our business in particular may be
difficult to assess or predict, the COVID-19 pandemic has resulted in, and may continue to result in, significant disruption
of global financial markets and an economic downturn that may affect demand for our products and services, reduce our
ability to access capital or our customers’ ability to pay us for past or future purchases, impact our operating results, and
have a negative impact on our liquidity and stock price. In addition, an extended recession or an additional financial market
correction resulting from the spread of COVID-19 could decrease overall technology manufacturing spending, adversely
affecting demand for our products and services, in particular in the Brooks Semiconductor Solutions Group segment, our
business and the value of our common stock. The global pandemic of COVID-19 continues to rapidly evolve, and we will
continue to monitor the COVID-19 situation closely. Although the magnitude of the impact of the pandemic on our
business and operations remains uncertain, the continued spread of COVID-19 and actions taken to mitigate such spread
or the occurrence of other outbreaks of contagious diseases could adversely impact our business, financial condition,
operating results and cash flows.
Risks Relating to Our Industries
Due in part to the cyclical nature of the semiconductor manufacturing industry and related industries, as well as due
to volatility in worldwide capital and equity markets, we have previously incurred operating losses and may have future
losses.
A significant portion of our business is largely dependent on capital expenditures in the semiconductor manufacturing
industry and other businesses employing similar manufacturing technologies. The semiconductor manufacturing industry
in turn depends on current and anticipated demand for integrated circuits and the products that use them. These businesses
have experienced unpredictable and volatile business cycles due in large part to rapid changes in demand and
manufacturing capacity for semiconductors, and these cycles have had an impact on our business, sometimes causing
declines in revenue and operating losses. We could experience future operating losses during an industry downturn. If an
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industry downturn continues for an extended period of time, our business could be materially harmed. Conversely, in
periods of rapidly increasing demand, we could have insufficient inventory and manufacturing capacity to meet our
customers’ needs on a timely basis, which could result in the loss of customers and various other expenses that could
reduce gross margins and profitability.
We face competition which may lead to price pressure and otherwise adversely affect our sales.
We face competition throughout the world in each of our product and service areas, including from the competitors
discussed in Part I, Item 1, “Business - Competition” as well as from internal automation capabilities at larger OEMs and
other internal capabilities at our other customers and potential customers. Many of our competitors have substantial
engineering, manufacturing, marketing and customer support capabilities. In addition, in our semiconductor business,
strategic initiatives in China to encourage local semiconductor manufacturing and supply chain could increase competition
from domestic equipment manufacturers in China. We expect our competitors to continue to improve the performance of
their current products and services and to introduce new products, services and technologies that could adversely affect
sales of our current and future products and services. New products, services and technologies developed by our
competitors or more efficient production of their products or provisions of their services as well as increased and more
efficient internal capabilities at our customers and potential customers could require us to make significant price reductions
or decide not to compete for certain business. If we fail to respond adequately to pricing pressures or fail to develop
products with improved performance or better-quality services with respect to the other factors on which we compete, we
could lose customers or orders. If we are unable to compete effectively, our business and prospects could be materially
harmed.
Risks Relating to Our Operations
Our operating results could fluctuate significantly, which could negatively impact our business.
Our revenue, operating margins and other operating results could fluctuate significantly from quarter-to-quarter and
year-to-year depending upon a variety of factors, including:
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demand for our products as a result of the cyclical nature of the semiconductor manufacturing industry and the
markets upon which the industry depends or otherwise;
changes in the timing and terms of product orders by our customers as a result of our customer concentration or
otherwise;
changes in the demand for the mix of products and services that we offer;
timing and market acceptance of our new product and services introductions;
delays or problems in the planned introduction of new products or services, or in the performance of any such
products following delivery to customers or the quality of such services;
new products, services or technological innovations by our competitors increased and more efficient internal
capabilities at our customers and potential customers, which can, among other things, render our products and
services less competitive due to the rapid technological changes in the markets in which we provide products and
services;
the timing and related costs of any acquisitions, divestitures or other strategic transactions;
our ability to reduce our costs in response to decreased demand for our products and services;
our ability to accurately estimate customer demand, including the accuracy of demand forecasts used by us;
disruptions in our manufacturing process or in the supply of components to us;
• write-offs for excess or obsolete inventory;
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competitive pricing pressures; and
increased amount of investment into the infrastructure to support our growth, including capital equipment,
research and development, as well as selling and marketing initiatives to support continuous product innovation,
technological capability enhancements and sales efforts. The timing of revenue generation coupled with the
increased amount of investment may result in operating losses.
As a result of these risks, we believe that reference to past performance for comparisons of our revenue and operating
results may not be meaningful, and that these comparisons may not be an accurate indicator of our future performance.
If we do not continue to introduce new products and services that reflect advances in technology in a timely and effective
manner, our products and services may become obsolete and our operating results will suffer.
Our success is dependent on our ability to respond to the technological changes present in the markets we serve. The
success of our product development and introduction of products and services to market depends on our ability to:
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identify and define new market opportunities, products and services in accurate manner;
obtain market acceptance of our products and services;
innovate, develop, acquire and commercialize new technologies and applications in a timely manner;
adjust to changing market conditions;
differentiate our offerings from our competitors’ offerings;
obtain and maintain intellectual property rights where necessary;
continue to develop a comprehensive, integrated product and service strategy;
price our products and services appropriately; and
design our products to high standards of manufacturability so that they meet customer requirements.
If we cannot succeed in responding in a timely manner to technological and/or market changes or if the new products
and services that we introduce do not achieve market acceptance, our competitive position would diminish which could
materially harm our business and our prospects.
The global nature of our business exposes us to multiple risks.
During fiscal years ended September 30, 2020, 2019 and 2018, approximately 62%, 58% and 63% of our revenue was
derived from sales outside of North America. We expect that international sales, including increased sales in Asia, will
continue to account for a significant portion of our revenue for the foreseeable future, and that in particular, the proportion
of our sales to customers in China will continue to increase, due in large part to our acquisition of GENEWIZ, which
maintains a significant presence in China. Additionally, we intend to invest additional resources in facilities in China,
which will increase our global footprint of sales, service and repair operations. As a result of our international operations,
we are exposed to many risks and uncertainties, including:
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longer sales-cycles and time to collection;
tariff and international trade barriers;
fewer or less certain legal protections for intellectual property and contract rights abroad;
different and changing legal and regulatory requirements in the jurisdictions in which we operate;
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government currency control and restrictions on repatriation of earnings;
a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker
expectations, and differing employment practices and labor issues;
fluctuations in foreign currency exchange and interest rates, particularly in Asia and Europe; and
political and economic instability, changes, hostilities and other disruptions in regions where we operate.
Negative developments in any of these areas in one or more countries could result in a reduction in demand for our
products, the cancellation or delay of orders already placed, threats to our intellectual property, difficulty in collecting
receivables, and a higher cost of doing business, any of which could materially harm our business and profitability.
Our business could be materially harmed if we fail to adequately integrate the operations of the businesses that we have
acquired or may acquire.
We have made in the past, and may make in the future, acquisitions or significant investments in businesses with
complementary products, services and/or technologies. Our acquisitions, including the acquisition of GENEWIZ in
November 2018, present numerous risks, including:
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difficulties in integrating the operations, technologies, products and personnel of the acquired companies and
realizing the anticipated synergies of the combined businesses;
defining and executing a comprehensive product strategy;
• managing the risks of entering markets or types of businesses in which we have limited or no direct experience;
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the potential loss of key employees, customers and strategic partners of ours or of acquired companies;
unanticipated problems or latent liabilities, such as problems with the quality of the installed base of the target
company’s products or infringement of another company’s intellectual property by a target company’s activities
or products;
problems associated with compliance with the acquired company’s existing contracts;
difficulties in managing geographically dispersed operations; and
the diversion of management’s attention from normal daily operations of the business.
If we acquire a new business, we may expend significant funds, incur additional debt or issue additional securities,
which may negatively affect our operations and be dilutive to our stockholders. In periods following an acquisition, we
will be required to evaluate goodwill and acquisition-related intangible assets for impairment. If such assets are found to
be impaired, they will be written down to estimated fair value, with a charge against earnings. The failure to adequately
address these risks or the impairment of any assets could materially harm our business and financial results.
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Expanding within current markets introduces new competitors and commercial risks.
A key part of our growth strategy is to continue expanding within the life sciences sample management and genomic
services markets. As part of this strategy, we expect to diversify our product sales and service revenue by leveraging our
core technologies, which requires investments and resources which may not be available on favorable terms or at all when
needed. We cannot guarantee that we will be successful in leveraging our capabilities into the life sciences sample
management and genomic services markets to meet all the needs of new customers and to compete favorably. Because a
significant portion of our growth potential may be dependent on our ability to increase sales within each of the Brooks
Life Sciences Product and Brooks Life Sciences Services segments, our inability to successfully expand within the markets
serviced by these segments may adversely impact future financial results.
Changes in key personnel could impair our ability to execute our business strategy.
The continuing service of our executive officers and essential engineering, technical and management personnel,
together with our ability to attract and retain such personnel, is an important factor in our continuing ability to execute our
strategy. There is substantial competition to attract such employees and the loss of any such key employees could have a
material adverse effect on our business and operating results. The same could be true if we were to experience a high
turnover rate among engineering and technical personnel and we were unable to replace them.
Our failure to protect our intellectual property could adversely affect our future operations.
Our ability to compete is significantly affected by our ability to protect our intellectual property. We rely upon patents,
trade secret laws, confidentiality procedures, copyrights, trademarks and licensing agreements to protect our technology.
Existing trade secret, trademark and copyright laws offer only limited protection. Our success depends in part on our ability
to obtain and enforce patent protection for our products both in the United States and in other countries. We own numerous
U.S. and foreign patents, and we intend to file additional applications, as appropriate, for patents covering our products
and technology. Any issued patents owned by or licensed to us may be challenged, invalidated or circumvented, and the
rights under these patents may not provide us with competitive advantages. In addition, the laws of some countries in
which our products are or may be developed, manufactured or sold may not fully protect our products. Due to the rapid
technological change that characterizes the semiconductor and adjacent technology markets, we believe that the
improvement of existing technology, reliance upon trade secrets and unpatented proprietary know-how and the
development of new products may be as important as patent protection in establishing and maintaining competitive
advantage. To protect trade secrets and know-how, it is our policy to require all technical and management personnel to
enter into nondisclosure agreements.
We cannot guarantee that the steps we have taken to protect our intellectual property will be adequate to prevent the
misappropriation of our technology. Other companies could independently develop similar or superior technology without
violating our intellectual property rights. In the future, it may be necessary to engage in litigation or like activities to
enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of proprietary
rights of others, including our customers. This could require us to incur significant expenses and to divert the efforts and
attention of our management and technical personnel from our business operations.
The expiration of our patents over time could lead to an increase of competition and a decline in our revenue.
One of our main competitive strengths is our technology, and we are dependent on our patent rights and other
intellectual property rights to maintain our competitive position. Our current patents will expire from time to time through
2038 which could result in increased competition and declines in product and service revenue.
We may be subject to claims of infringement of third-party intellectual property rights, or demands that we license
third-party technology, which could result in significant expense and prevent us from using our technology.
There has been substantial litigation regarding patent and other intellectual property rights in the industries in which
we do business. We have in the past been, and may in the future be, notified that we may be infringing intellectual property
rights possessed by third parties. We cannot guarantee that infringement claims by third parties or other claims for
indemnification by customers or end-users of our products and services resulting from infringement claims will not be
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asserted in the future or that such assertions, whether or not proven to be true, will not materially and adversely affect our
business, financial condition and results of operations.
We cannot predict the extent to which we might be required to seek licenses or alter our products or services so that
they no longer infringe the rights of others. We also cannot guarantee that licenses will be available or the terms of any
licenses we may be required to obtain will be reasonable. Similarly, changing our products, services or processes to avoid
infringing the rights of others may be costly or impractical and could detract from the value of our products and services.
If a judgment of infringement were obtained against us, we could be required to pay substantial damages and a court could
issue an order preventing us from selling one or more of our products or offering certain of our services. Further, the cost
and diversion of management attention brought about by such litigation could be substantial, even if we were to prevail.
Any of these events could result in significant expense to us and may materially harm our business and our prospects.
Unexpected events could disrupt our sample storage operations and adversely affect our reputation and results of
operations.
Unexpected events, including fires or explosions at our facilities, natural disasters, such as tornadoes, hurricanes and
earthquakes, war or terrorist activities, unplanned power outages, supply disruptions and failure of equipment or systems,
could adversely affect our reputation and results of operations. Our Brooks Life Sciences’ service customers rely on us to
securely store and timely retrieve and transport their critical samples, and these events could result in service disruptions,
physical damage to one or more key storage facilities and the customer samples stored in those facilities, the temporary
closure of one or more key operating facilities or the temporary disruption of service, each of which could negatively
impact our reputation and results of operations. Our primary storage facility is located in Indianapolis, Indiana, an area of
the United States that can be prone to tornado and other severe weather events.
If our manufacturing sites were to experience a significant disruption in operations, our business could be materially
harmed, while the failure to estimate customer demand accurately could result in excess or obsolete inventory.
We have a limited number of manufacturing facilities for our products and we have moved portions of our
manufacturing to third parties, including some in lesser developed countries. If the operations at any one of these facilities
were disrupted as a result of a natural disaster, fire, power or other utility outage, work stoppage or other similar event,
our business could be seriously harmed because we may be unable to manufacture and ship products and parts to our
customers in a timely fashion. The impact of any disruption at one of our facilities may be exacerbated if the disruption
occurs at a time when we need to rapidly increase our manufacturing capabilities to meet increased demand or expedited
shipment schedules.
Moreover, if actual demand for our products is different than expected, we may purchase more/fewer component parts
than necessary or incur costs for canceling, postponing or expediting delivery of such parts. If we purchase inventory in
anticipation of customer demand that does not materialize, or if our customers reduce or delay orders, we may incur excess
inventory charges. Any or all of these factors could materially and adversely affect our business, financial condition and
results of operations.
Our business could be materially harmed if one or more key suppliers fail to continuously deliver key components of
acceptable cost and quality.
We currently obtain many of our key components on an as-needed, purchase order basis from numerous suppliers. In
some cases we have only a single source of supply for key components and materials used in the manufacturing of our
products. Further, we are increasing our sourcing of products in Asia, and particularly in China, and we do not have a
previous history of dealing with many of these suppliers. Our inability to obtain components or materials in required
quantities or of acceptable cost and quality and with the necessary continuity of supply could result in delays or reductions
in product shipments to our customers. In addition, if a supplier or sub-supplier suffers a production stoppage or delay for
any reason, including natural disasters such as the tsunamis that affected Japan in 2011 and Thailand in 2004, this could
result in a delay or reduction in our product shipments to our customers. Any of these contingencies could cause us to lose
customers, result in delayed or lost revenue and otherwise materially harm our business.
18
Our business could be adversely affected by a decline in the availability of raw materials.
We are dependent on the availability of certain key raw materials and natural resources used in our products and
various manufacturing processes, and we rely on third parties to supply us with these materials in a cost-effective and
timely manner. Our access to raw materials may be adversely affected if our suppliers’ operations were disrupted as a
result of limited or delayed access to key raw materials and natural resources which may result in increased cost of these
items. While most of the raw materials used in our products and various manufacturing processes are commercially
available, we rely in some cases on materials that have a limited supply and are considered rare Earth elements. If the
supply of these elements is drastically reduced, it may lead to price increases which could result in higher costs of our
products and corresponding revenue declines and have a material adverse impact on our business, financial condition and
results of operations.
Our outsource providers may fail to perform as we expect.
Outsource providers have played and will continue to play a key role in our manufacturing operations and in many of
our transactional and administrative functions, such as information technology and facilities management. Many of these
outsourced service providers, including certain hosted software applications that we use for confidential data storage,
employ cloud computing technology for such storage. These providers’ cloud computing systems may be susceptible to
“cyber incidents,” such as intentional cyber-attacks aimed at theft of sensitive data or inadvertent cyber-security
compromises, which are outside of our control. Although we attempt to select reputable providers and secure their
performance on terms documented in written contracts, it is possible that one or more of these providers could fail to
perform or adequately protect our data from cyber-related security breaches as we expect and any such failure could have
an adverse impact on our business.
Our business relies on certain critical information systems and a failure or breach of such a system could harm our
business and results of operations and, in the event of unauthorized access to a customer’s data or our data, incur
significant legal and financial exposure and liabilities.
We maintain and rely upon certain critical information systems for the effective operation of our business. These
information systems include telecommunications, the internet, our corporate intranet, various computer hardware and
software applications, network communications and e-mail. These information systems may be owned and maintained by
us, our outsource providers or third parties such as vendors and contractors. These information systems are subject to
attacks, failures, and access denials from a number of potential sources including viruses, destructive or inadequate code,
power failures, and physical damage to computers, hard drives, communication lines and networking equipment. To the
extent that these information systems are under our control, we have implemented security procedures, such as virus
protection software and emergency recovery processes, to mitigate the outlined risks. However, security procedures for
information systems cannot be guaranteed to be failsafe and our inability to use or access these information systems at
critical points in time, or unauthorized releases of confidential information, could unfavorably impact the timely and
efficient operation of our business.
Confidential information stored on these information systems could also be compromised. If a third party gains
unauthorized access to our data, including any information regarding our customers, such security breach could expose us
to a risk of loss of this information, loss of business, litigation and possible liability. These security measures may be
breached as a result of third-party action, including intentional misconduct by computer hackers, employee error,
malfeasance or otherwise. Additionally, third parties may fraudulently attempt to induce employees or customers into
disclosing sensitive information such as user names, passwords or other information in order to gain access to our
customers’ data or our data, including our intellectual property and other confidential business information, or our
information technology systems. Because the techniques used to obtain unauthorized access, or to sabotage systems,
change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these
techniques or to implement adequate preventative measures. Any security breach could result in a loss of confidence by
our customers, damage our reputation, disrupt our business, lead to legal liability and negatively impact our future sales.
19
Our goodwill and intangible assets may become impaired.
As of September 30, 2020, we had $501.5 million of goodwill and $218.3 million in net intangible assets as a result
of our acquisitions. We periodically review our goodwill and the estimated useful lives of our identifiable intangible assets,
taking into consideration any events or circumstances that might result in either a diminished fair value, or for intangible
assets, a revised useful life. These events and circumstances include significant changes in the business climate, legal
factors, operating performance indicators, advances in technology and competition. Any impairment or revised useful life
could have a material and adverse effect on our financial position and results of operations and could harm the trading
price of our common stock.
Changes in tax rates or tax regulation could affect results of operations.
As a global company, we are subject to taxation in the United States and various other countries. Significant judgment
is required to determine and estimate worldwide tax liabilities. Our future annual and quarterly effective tax rates could
be affected by numerous factors, including changes in the following: applicable tax laws; composition of pre-tax income
in countries with differing tax rates; and/or establishment of a valuation allowance against deferred tax assets based on the
assessment of their realizability prior to expiration. In addition, we are subject to regular examination by the U.S. Internal
Revenue Service and state, local and foreign tax authorities. We regularly assess the likelihood of favorable or unfavorable
outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Although we
believe our tax estimates are reasonable, there can be no assurance that any final determination will not be materially
different from the treatment reflected in our historical income tax provisions and accruals, which could materially and
adversely affect our financial condition and results of operations.
International trade disputes could result in additional or increased tariffs, export controls or other trade restrictions
that may have a material impact on our business.
We sell a significant number of products outside the United States, including in China, Taiwan, Japan and South
Korea. Based on the complex relationships among these countries and the United States, there is inherent risk that political,
diplomatic and national security influences might lead to trade disputes, impacts and/or disruptions, in particular, with
respect to those affecting the semiconductor industry. The United States and other countries have imposed and may
continue to impose trade restrictions and have also levied tariffs and taxes on certain goods. Increases in tariffs, additional
taxes or other trade restrictions and retaliatory measures may increasingly impact customer demand and customer
investment in manufacturing equipment, increase our manufacturing costs, decrease margins, reduce the competitiveness
of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies, which could have a
material adverse effect on our business, results of operations, or financial condition.
In particular, China is a significant market for the semiconductor equipment industry, and the ongoing “trade war”
between the United States and China is unpredictable. The U.S. may impose more restrictive measures, including
increasing the requirement to obtain export licenses, and the Chinese government may impose measures against the U.S.
through its own import and export-related regulations. If export licenses are required for any of the Company’s products,
or for shipment of products to any particular customers in China, the failure of the U.S. government to approve such export
licenses could adversely affect our business, financial condition and results of operations, and may decrease our
competitive position with our non-U.S. competitors.
We are subject to numerous governmental regulations.
We are subject to federal, state, local and foreign regulations, including environmental regulations, regulations relating
to the design and operation of our products and control systems and regulations relating to certain of our service offerings
in the Brooks Life Sciences segments. We might incur significant costs as we seek to ensure that our products meet safety
and emissions standards, many of which vary across the states and countries in which our products are used. In the past,
we have invested significant resources to redesign our products to comply with these directives. Compliance with future
regulations, directives, and standards could require us to modify or redesign some products, change our service offerings,
20
make capital expenditures, or incur substantial costs. If we do not comply with current or future regulations, directives,
and standards:
• we could be subject to fines;
•
our production or shipments could be suspended; and
• we could be prohibited from offering particular products or services in specified markets.
Any of these events could materially and adversely affect our business, financial condition and results of operations.
Regulations and customer demands related to conflict minerals may adversely affect us.
The Dodd-Frank Wall Street Reform and Consumer Protection Act imposes disclosure requirements regarding the
use in components of our products of “conflict minerals” mined from the Democratic Republic of Congo and adjoining
countries, whether the components of our products are manufactured by us or third parties. This requirement could affect
the pricing, sourcing and availability of minerals used in the manufacture of components we use in our products. In
addition, there are additional costs associated with complying with the disclosure requirements and customer requests,
such as costs related to our due diligence to determine the source of any conflict minerals used in our products. We may
face difficulties in satisfying customers who may require that all of the components of our products are certified as conflict
mineral free and/or free of numerous other hazardous materials.
Unfavorable currency exchange rate fluctuations may lead to lower operating margins, or may cause us to raise prices,
which could result in reduced sales.
Currency exchange rate fluctuations could have an adverse effect on our sales and results of operations, and we could
experience losses with respect to forward exchange contracts into which we may enter. Unfavorable currency fluctuations
could require us to increase prices to foreign customers, which could result in lower net sales by us to such customers.
Alternatively, if we do not adjust the prices for our products and services in response to unfavorable currency fluctuations,
our results of operations could be materially and adversely affected. In addition, most sales made by our foreign
subsidiaries are denominated in the currency of the country in which these products are sold or these services are provided
and the currency they receive in payment for such sales could be less valuable as compared to the U.S. dollar at the time
of receipt as a result of exchange rate fluctuations. From time to time, we enter into forward exchange contracts to reduce
currency exposure. However, we cannot be certain that our efforts will be adequate to protect us against significant
currency fluctuations or that such efforts will not expose us to additional exchange rate risks, which could materially and
adversely affect our results of operations.
Our indebtedness may adversely affect our ability to operate our business, generate cash flows and make payments on
such indebtedness
On October 4, 2017, we entered into a $200.0 million Senior Secured Term Loan Facility, or term loan, with Morgan
Stanley Senior Funding, Inc., JPMorgan Chase Bank, N.A. and Wells Fargo Securities, LLC pursuant to the terms of a
credit agreement with the lenders. At September 30, 2020, the outstanding term loan principal balance was $50.4 million,
excluding unamortized deferred financing costs of $0.4 million. The term loan matures and becomes fully payable on
October 4, 2024. We are required to redeem the term loan at the principal amount then outstanding upon occurrence of
certain events, as described in the credit agreement. For further information on this transaction, please refer to Note 11,
"Debt" to our Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data" of
this Form 10-K.
Our ability to pay interest and repay the principal for our indebtedness, including the term loan, is dependent upon
our ability to manage our business operations and maintain sufficient liquidity to service such debt. The loan borrowings
are subject to variable interest rates which create exposure to interest rate risk. Interest rate increases may result in higher
cost of servicing our loans and reduce our profitability and cash flows. The terms of our debt covenants in the credit
agreement for the term loan could limit our ability to raise additional funds and the manner in which we conduct our
business. We have the ability to refinance the term loan and obtain additional indebtedness as long as we maintain a certain
level of liquidity and earnings, as specified in the credit agreement for the term loan. If our liquidity and earnings are
21
reduced below a certain level, we will have limited ability to service the term loan and obtain additional debt financing.
Our failure to comply with the restrictive covenants under the term loan and our other indebtedness could also result in an
event of default under the term loan which, if not cured or waived, could result in the acceleration of all or a portion of our
indebtedness, including under the term loan. Accordingly, a default under the term loan would have a material adverse
effect on our business and our lender would have the right to exercise its rights and remedies to collect, which would
include the right to foreclose on our assets.
Risks Relating to Our Customers
Because we rely on a limited number of customers for a large portion of our revenue, the loss of one or more of these
customers could materially harm our business.
We receive a significant portion of our revenue in each fiscal period from a relatively limited number of customers,
and that trend is likely to continue. Sales to our ten largest customers accounted for approximately 33%, 28% and 34%,
respectively, of our total revenue in the fiscal years ended September 30, 2020, 2019 and 2018. The loss of one or more
of these major customers, a significant decrease in orders from one of these customers, or the inability of one or more
customers to make payments to us when they are due could materially affect our revenue, business and reputation. In
addition, there has been and may continue to be significant consolidation among some of our largest OEM customers,
which could lead to increased pressure to reduce the price of our semiconductor products and/or decreased market share
of our semiconductor products with the combined companies.
Because of the lengthy sales cycles of many of our products, we may incur significant expenses before we generate any
revenue related to those products.
Our customers may need several months to test and evaluate our products. This increases the possibility that a
customer may decide to cancel an order or change its plans, which could reduce or eliminate our sales to that customer.
The impact of this risk can be magnified during the periods in which we introduce a number of new products, as has been
the case in recent years. As a result of this lengthy sales cycle, we may incur significant research and development
expenses, and selling, general and administrative expenses before we generate the related revenue for these products, and
we may never generate the anticipated revenue if our customer cancels an order or changes its plans.
In addition, many of our semiconductor products will not be sold directly to the end-user but will be components of
other products manufactured by OEMs. As a result, we rely on OEMs to select our semiconductor products from among
alternative offerings to be incorporated into their equipment at the design stage; so-called design-ins. The OEMs’ decisions
often precede the generation of volume sales, if any, by a year or more. Moreover, if we are unable to achieve these design-
ins from an OEM, we would have difficulty selling our semiconductor products to that OEM because changing suppliers
after design-ins involves significant cost, time, effort and risk on the part of that OEM.
Customers generally do not make long term commitments to purchase our products and our customers may cease
purchasing our products at any time.
Sales of our products are often made pursuant to individual purchase orders and not under long-term commitments
and contracts. Our customers frequently do not provide any assurance of minimum or future sales and are not prohibited
from purchasing products from our competitors at any time. Accordingly, we are exposed to competitive pricing pressures
on each order. Our customers also engage in the practice of purchasing products from more than one manufacturer to avoid
dependence on sole-source suppliers for certain of their needs. The existence of these practices makes it more difficult for
us to increase price, gain new customers and win repeat business from existing customers.
We may face claims for liability related to damages of customer materials attributed to the failure of our products or
services, exposing us to significant financial or reputational harm.
Our automation products for the semiconductor manufacturing market are used in the handling and movement of
silicon wafers at various points in the production process, and our automated cold storage systems for the life sciences
sample management market are used in the handling, movement and storage of biological and chemical samples. We also
provide sample storage services to customers where we store their biological and chemical samples at our facilities and
other genomic services at our facilities. In any case, inaccurate or faulty testing services or damage to our customers’
22
materials attributed to a failure of our products or services could lead to claims for damages made by our customers and
could also harm our relationship with our customers and damage our reputation in each of these industries, resulting in
material harm to our business.
Risks Relating to Owning Our Securities
Our stock price is volatile.
The market price of our common stock has fluctuated widely. From the beginning of fiscal year 2019 through the end
of fiscal year 2020, our stock price fluctuated between a high of $56.69 per share and a low of $22.69 per share.
Consequently, the current market price of our common stock may not be indicative of future market prices, and we may
be unable to sustain or increase the value of an investment in our common stock. Factors affecting our stock price may
include:
•
•
•
variations in operating results from quarter-to-quarter and year-to-year;
changes in earnings estimates by analysts or our failure to meet analysts’ expectations;
changes in the market price per share of our public company customers;
• market conditions in the semiconductor, life sciences sample management and genomic services and other
industries into which we sell products and services;
•
•
•
•
global economic conditions;
political changes, hostilities, the COVID 19 pandemic or similar events, or natural disasters such as hurricanes
and floods;
low trading volume of our common stock; and
the number of firms making a market in our common stock.
In addition, the stock market has in the past experienced significant price and volume fluctuations. These fluctuations
have particularly affected the market prices of the securities of high technology companies like ours. These market
fluctuations could adversely affect the market price of our common stock.
We may not pay dividends on our common stock.
Holders of our common stock are only entitled to receive dividends when and if they are declared by our Board of
Directors. Although we have declared cash dividends on our common stock for the past several years, we are not required
to do so and may reduce or eliminate our cash dividends in the future. This could adversely affect the market price of our
common stock.
Provisions in our charter documents and Delaware law may delay or prevent an acquisition of us, which could decrease
the value of your shares.
Our restated certificate of incorporation and by-laws and Delaware law contain provisions that could make it harder
for a third party to acquire us without the consent of our Board of Directors. These provisions include limitations on actions
by our stockholders by written consent, the inability of stockholders to call special meetings and the potential for super
majority votes of our stockholders in certain circumstances. In addition, as discussed below, our Board of Directors has
the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a
potential hostile acquirer.
Our restated certificate of incorporation makes us subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law. In general, Section 203 prohibits publicly held Delaware corporations to which it
applies from engaging in a “business combination” with an “interested stockholder” for a period of three years after the
23
date of the transaction in which the person became an interested stockholder, unless the business combination is approved
in a prescribed manner. This provision could discourage others from bidding for our shares of common stock and could,
as a result, reduce the likelihood of an increase in the price of our common stock that would otherwise occur if a bidder
sought to buy our common stock.
Although we believe these provisions provide for an opportunity to receive a higher bid by requiring potential
acquirers to negotiate with our Board of Directors, these provisions apply even if the offer may be considered beneficial
by stockholders. If a change of control or change in management is delayed or prevented, the market price of our common
stock could decline.
Our restated certificate of incorporation authorizes the issuance of shares of blank check preferred stock.
Our restated certificate of incorporation provides that our Board of Directors is authorized to issue from time to time,
without further stockholder approval, up to 1,000,000 shares of preferred stock in one or more series and to fix and
designate the rights, preferences, privileges and restrictions of the preferred stock, including dividend rights, conversion
rights, voting rights, redemption rights and terms of redemption and liquidation preferences. Such shares of preferred stock
could have preferences over our common stock with respect to dividends and liquidation rights. Our issuance of preferred
stock may have the effect of delaying or preventing a change in control. Our issuance of preferred stock could decrease
the amount of earnings and assets available for distribution to the holders of common stock or could adversely affect the
rights and powers, including voting rights, of the holders of common stock. The issuance of preferred stock could have
the effect of decreasing the market price of our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate headquarters and primary manufacturing/research and development facilities are currently located in
three buildings in Chelmsford, Massachusetts.
We maintained the following principal facilities as of September 30, 2020:
Location
Functions
Corporate headquarters, training,
manufacturing, R&D and sales & support
Chelmsford, Massachusetts . .
Indianapolis, Indiana . . . . . . . . Sample storage, sales & support
Suzhou, China . . . . . . . . . . . . . Laboratory & office
South Plainfield, New Jersey . Laboratory & office
Square Footage Ownership Status/Lease
(Approx.)
Expiration
298,000 Owned
116,800 September 2038
105,000
73,300
June 2021
January 2030
Our Brooks Semiconductor Solutions Group segment utilizes facilities in Chelmsford, Massachusetts; Fremont,
California; South Korea, Germany and Taiwan. Our two Life Sciences segments utilize facilities in Manchester, United
Kingdom; Indianapolis, Indiana; South Plainfield, New Jersey; Suzhou, China; Chelmsford, Massachusetts; Bronx, New
York; and Fremont, California.
We maintain additional sales, support and training offices in Texas, Europe (France and Germany), Asia (China, Japan
and Singapore) and the Middle East (Israel). We also maintain sample storage facilities in China, Germany and Singapore.
Item 3. Legal Proceedings
We are subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course of business.
We cannot predict the ultimate outcome of such legal proceedings or in certain instances provide reasonable ranges of
potential losses. However, as of the date of this report, we believe that none of these claims will have a material adverse
effect on our consolidated financial condition or results of operations. In the event of unexpected subsequent developments
and given the inherent unpredictability of these legal proceedings, there can be no assurance that our assessment of any
24
claim will reflect the ultimate outcome and an adverse outcome in certain matters could, from time-to-time, have a material
adverse effect on our consolidated financial condition or results of operations in particular quarterly or annual periods.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock is traded on the Nasdaq Stock Market LLC under the symbol “BRKS.”
Number of Holders
As of November 5, 2020, there were 515 holders of record of our common stock.
Dividend Policy
Dividends are declared at the discretion of our Board of Directors and depend on actual cash flow from operations,
our financial condition, capital requirements and any other factors our Board of Directors may consider relevant. Future
dividend declarations, as well as the record and payment dates for such dividends, will be determined by our Board of
Directors on a quarterly basis. We intend to pay quarterly cash dividends in the future; however, the amount and timing of
these dividends may be impacted by the cyclical nature of certain markets we serve. We may reduce, delay or cancel a
quarterly cash dividend based on the severity of a cyclical downturn.
On November 5, 2020, our Board of Directors approved a cash dividend of $0.10 per share payable on December 17,
2020 to common stockholders of record on December 4, 2020.
Comparative Stock Performance
The following graph compares the cumulative total shareholder return (assuming reinvestment of dividends) from
investing $100 on September 30, 2015, and plotted at the last trading day of each of the fiscal years ended September 30,
2016, 2017, 2018, 2019 and 2020, in each of (i) our Common Stock; (ii) the Nasdaq/NYSE American/NYSE Index of
companies; and (iii) a peer group for the fiscal year ended September 30, 2020 (“Peer Group”).
The Peer Group for the year ended September 30, 2020 is comprised of Advanced Energy Industries, Inc., Axcelis
Technologies Inc., Bio Rad Laboratories Inc., Bruker Corp., Cabot Microelectronics Corp., Coherent Inc., Entegris, Inc.,
Formfactor Inc., Haemonetics Corp., MKS Instruments, Inc., MTS Instruments, Inc., Novanta Inc., Onto Innovation Inc.,
Ultra Clean Holdings, Inc., Varex Imaging Corp. and Veeco Instruments Inc.
25
The stock price performance on the graph below is not necessarily indicative of future price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Brooks Automation, Inc., the NASDAQ/NYSE American/NYSE Index,
and a Peer Group
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
9/30/2015
9/30/2016
9/30/2017
9/30/2018
9/30/2019
9/30/2020
Brooks Automation, Inc.
NASDAQ/NYSE American/NYSE
Peer Group
*$100 invested on 9/30/15 in stock or index, including reinvestment of dividends.
Fiscal year ending September 30.
9/30/2015 9/30/2016 9/30/2017 9/30/2018 9/30/2019 9/30/2020
Brooks Automation, Inc. . . . . . . . . . . . . . . . . . . . . $ 100.00 $ 120.41 $ 273.51 $ 319.90 $ 342.26 $ 431.74
176.49
Nasdaq/NYSE American/NYSE . . . . . . . . . . . . .
313.93
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
156.69
279.94
113.95
136.80
135.67
220.33
154.47
238.42
100.00
100.00
The information included under the heading “Comparative Stock Performance” in Item 5 of "this report" shall not be
deemed to be “soliciting material” or subject to Regulation 14A, shall not be deemed “filed” for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities of that
section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or
under the Exchange Act.
Issuer’s Purchases of Equity Securities
On September 29, 2015, our Board of Directors approved a share repurchase program for up to $50.0 million worth
of our common stock. The timing and amount of any shares to be repurchased under this program will be based on market
and business conditions, legal requirements and other factors and may be commenced or suspended at any time at our
discretion. There were no shares repurchased under this program during the fiscal year ended September 30, 2020.
26
Item 6. Selected Financial Data
The selected consolidated financial data (1)(4) set forth below should be read in conjunction with our Consolidated
Financial Statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” appearing elsewhere in this report.
2020
2019
Year Ended September 30,
2018
(2)
(In thousands, except per share data)
2017
2016
(2)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 897,273 $ 780,848 $ 631,560 $ 527,499 $ 434,012
156,689
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(17,054)
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .
(85,457)
Income (loss) from continuing operations . . . . . . . . . . . . .
15,981
Income (loss) from discontinued operations, net of tax . .
Net income (loss) attributable to Brooks Automation,
Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic net income (loss) per share attributable to
Brooks Automation, Inc. common stockholders:
198,887
14,319
10,687
51,925
246,081
31,409
67,717
48,747
380,024
78,458
65,035
(182)
316,260
46,038
9,554
427,862
62,612
116,575
437,416
64,853
(69,476)
Income (loss) from continuing operations . . . . . . . . . . . .
Income (loss) from discontinued operations, net of tax . .
0.88
(0.00)
0.13
5.95
0.96
0.69
0.15
0.75
(1.25)
0.23
Basic net income (loss) per share attributable to
Brooks Automation, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted net income (loss) per share attributable to
Brooks Automation, Inc. common stockholders:
0.88 $
6.08 $
1.65 $
0.90 $
(1.01)
Income (loss) from continuing operations . . . . . . . . . . . . $
Income (loss) from discontinued operations, net of tax . .
0.88 $
(0.00)
0.13 $
5.91
0.95 $
0.69
0.15 $
0.74
(1.25)
0.23
Diluted net income (loss) per share attributable to
Brooks Automation, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dividend declared per share . . . . . . . . . . . . . . . . . . . . . . . . $
0.88 $
0.40 $
6.04 $
0.40 $
1.64 $
0.40 $
0.89 $
0.40 $
(1.01)
0.40
2020
2019
2018
2017
2016
As of September 30,
(In thousands)
Cash and cash equivalents and marketable
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 298,817 $ 338,611 $ 251,227 $ 104,292 $ 91,221
Working capital (3)(5) . . . . . . . . . . . . . . . . . . . . . . . . .
59,996
685,905
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
553,690
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
143,446
1,559,125
1,213,614
109,799
1,095,257
717,832
36,409
1,515,999
1,138,954
61,385
766,628
607,644
Year Ended September 30, 2020
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(In thousands, except per share data)
220,350
$
92,788
19,099
220,227
90,281
14,572
$
$
246,196
111,969
34,121
9,127
0.12
0.12
13,696
0.19
0.19
28,973
0.39
0.39
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Brooks Automation,
Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic net income per share . . . . . . . . . . . . . . . . . . .
Diluted net income per share . . . . . . . . . . . . . . . . .
210,500
84,986
10,666
13,057
0.18
0.18
27
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Brooks Automation,
Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic net income per share . . . . . . . . . . . . . . . . . . .
Diluted net income per share . . . . . . . . . . . . . . . . .
Year Ended September 30, 2019
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
179,368
72,081
5,333
(In thousands, except per share data)
203,880
$
83,510
16,423
198,390
80,516
13,672
$
14,415
0.20
0.20
3,421
0.05
0.05
7,254
0.10
0.10
$
199,210
80,153
10,610
412,326
5.71
5.68
(1) We make acquisitions from time to time and the selected financial data includes the operation results from these
acquisitions in the results of operations from the dates of the acquisitions. Please refer to Note 4, “Acquisitions” to
our Consolidated Financial Statements for additional information.
(2) Operating income (loss) and net income (loss) includes a charge of $76.5 million during fiscal year 2016 related to an
additional valuation allowance against our U.S. net deferred tax assets and a benefit of $77.2 million during fiscal
year 2018 due to the partial reversal of the valuation allowance against U.S. net deferred tax assets. Please refer to
Note 12, “Income Taxes” to our Consolidated Financial Statements for additional information.
(3) The calculation of working capital excludes "Cash and cash equivalents" and "Marketable securities”.
(4) On August 27, 2018, we entered into an agreement to sell our semiconductor cryogenics business. We determined
that the semiconductor cryogenics business met the criteria of being reported as a discontinued operation as of
September 30, 2018. As a result, the selected financial data presented for current period and prior periods have been
revised to reflect the discontinued operation classification. Please refer to Note 3, “Discontinued Operations” to our
Consolidated Financial Statements for additional information. The sale was completed in the fourth quarter of fiscal
year 2019. Net income attributable to Brooks Automation, Inc. for the fourth quarter and full fiscal year of 2019
includes the net gain on the sale of the business of $408.6 million.
(5) In connection with the closing of the sale of the semiconductor cryogenics business in the fourth quarter of fiscal
2019, we recorded accrued taxes payable of approximately $95 million as of September 30, 2019, which reduce our
working capital for fiscal year 2019.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, describes
principal factors affecting the results of our operations, financial condition and liquidity, as well as our critical accounting
policies and estimates that require significant judgment and thus have the most significant potential impact on our
Consolidated Financial Statements included elsewhere in this Form 10-K. Our MD&A is organized as follows:
• Overview. This section provides a general description of our business and operating segments, recent
developments, as well as a brief discussion and overall analysis of our business and financial performance,
including key developments affecting us during fiscal years ended September 30, 2020, 2019 and 2018.
• Critical Accounting Policies and Estimates. This section discusses accounting policies and estimates that require
us to exercise subjective or complex judgments in their application. We believe these accounting policies and
estimates are important to understanding the assumptions and judgments incorporated in our reported financial
results.
• Results of Operations. This section provides an analysis of our financial results for the fiscal year ended
September 30, 2020 compared to the fiscal year ended September 30, 2019. For the discussion covering the fiscal
year ended September 30, 2018, please refer to Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our Form 10-K for the fiscal year ended September 30, 2019.
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• Liquidity and Capital Resources. This section provides an analysis of our liquidity and changes in cash flows, as
well as a discussion of available borrowings and contractual commitments.
You should read the MD&A in conjunction with our Consolidated Financial Statements and related notes in this
Form 10-K. In addition to historical information, the MD&A contains forward-looking statements that involve risks and
uncertainties. You should read “Information Related to Forward-Looking Statements” and Item 1A, “Risk Factors"
included above in this Form 10-K for a discussion of important factors that could cause our actual results to differ
materially from our expectations.
OVERVIEW
General
We are a leading global provider of manufacturing automation solutions for the semiconductor industry, and life
science sample-based services and solutions for the life sciences market. In the semiconductor manufacturing market, we
provide precision robotics, integrated automation systems, and contamination control solutions to semiconductor fabs and
OEMs worldwide. In the life sciences market, we offer a full suite of services and solutions for analyzing, managing, and
storing biological and chemical compound samples to advance research and development for clinical, pharmaceutical, and
other scientific endeavors. Our life sciences solutions include gene sequencing and synthesis, a broad suite of high-
throughput automated cryogenic storage products, related consumables, sample inventory software, as well as fully
outsourced solutions for sample storage, transport, and inventory management. Our leadership positions and our global
support capability in each of these markets make us a valued business partner to the largest semiconductor and
semiconductor capital equipment manufacturers and pharmaceutical and life sciences research institutions in the world.
In the semiconductor capital equipment market, equipment productivity and availability are critical factors for our
customers, who typically operate equipment under demanding temperature and/or pressure environments. We are a leader
in wafer automation and contamination controls solutions and services that are designed to improve throughput, yield, and
cost of ownership of tools in semiconductor fabs. Our product offerings include vacuum and atmospheric robots, turnkey
vacuum and atmospheric wafer handling systems, as well as wafer carrier cleaning and reticle storage systems. We also
capture the complete life cycle of value through our global service network of expert application and field engineers who
are located close to our customers. Our services include rapid refurbishment of robots to stringent specifications, upgrades
to improve equipment productivity, and proactive monitoring and diagnostics for predictive risk management and
improved up-time of the installed base. Although the demand for semiconductors and semiconductor manufacturing
equipment is cyclical resulting in periodic expansions and contractions, we expect the semiconductor equipment market
to remain one of our principal markets as we continue making investments to maintain and grow our semiconductor product
and service offerings. A majority of our research and development spending advances our current product lines and drives
innovations for new product offerings. We invest in research and development initiatives within the Brooks Semiconductor
Solutions Group segment to maintain continued leadership position in the markets we serve. Our investments in Vacuum
Automation and Contamination Control include ramping our intelligent vacuum robot platform, MagnaTran LEAP, with
new designs at customers releasing tools for 10 nanometers and below. In addition, our new PuroMaxx LEAP carrier clean
product line is well positioned to handle the contamination challenges at 5 nanometers and below. As the market for EUV
lithography expands, we will continue our investment in EUV pod cleaning and reticle storage. Our initiatives with
Guardian LEAP for EUV reticle storage will provide new innovation to solve many contamination challenges with EUV
reticles. In April 2018, we acquired Tec-Sem, a Switzerland-based provider of semiconductor fabrication automation
equipment with a focus on reticle management. The acquisition has enhanced our contamination controls solutions
offerings.
In the life sciences sample management market, we utilize our core technology competencies and capabilities in
automation and cryogenics to provide comprehensive bio-sample management solutions to a broad range of end markets
within the life sciences industry. Our offerings include automated ultra-cold storage freezers, consumable sample storage
containers, instruments which assist in the workflow of sample management, and both on-site and off-site full sample
management services. We expect the life sciences sample management market to remain one of our principal markets for
our product and service offerings and provide favorable opportunities for the growth of our overall business. Over the past
several years, we have acquired and developed essential capabilities required to strategically address the sample
management needs across multiple end markets within the life sciences industry.
29
Our life sciences portfolio includes products and services that we acquired to bring together a comprehensive
capability to service our customers’ needs in the sample-based services arena. We continue to develop the acquired
products and services offerings through the combined expertise of the newly acquired teams and our existing research and
development resources. This approach of acquisition, investment, and integration has allowed us to accelerate our internal
development and that of the acquired entity, significantly decreasing our time to market. Our recent acquisitions are as
follows:
•
•
In November 2018, we acquired GENEWIZ, a leading global genomics service provider headquartered in
South Plainfield, New Jersey. GENEWIZ is a global leader in genomics services that enable research
scientists to advance their discoveries within the pharmaceutical, academic, biotechnology, agriculture and
other markets. GENEWIZ 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 services platform
which we can leverage, along with our core capabilities, to add even more value to samples under our care.
In February 2020, we acquired RURO, an informatics software company based in Frederick, Maryland.
RURO provides cloud-based software solutions to manage laboratory workflow and bio-sample data for a
broad range of customers in the biotech, healthcare, and pharmaceutical sectors. The addition of RURO's
capabilities and offerings has enabled the Company to offer enhanced on-site and off-site management of
biological sample inventories as well as integration solutions to its customers for their increasingly
distributed workflow.
We have also strengthened and broadened our product portfolio and market reach by investing in internal product
development. For the fiscal years ended 2020, 2019 and 2018, more than 29% of our cumulative research and development
spending was focused on innovating and advancing solutions in the life sciences market. We expect to continue investing
in research and development and making strategic acquisitions with the objective of expanding our offerings in the life
sciences market. Within our Life Sciences Products segment, we have developed and continue to develop automated
biological sample storage solutions for operating in ultra-low temperature environments. We have a complete line up of
automated storage from -20°C to -196°C. Our BioStore™ II’s unique design allows dual temperature storage down
to -80°C with the industry’s highest throughput of sample retrieval. We recently launched the BioStore™ III V that
compliments the BioStore™ III Cryo product line and offers improved data management and sample security for vaccines
and biologics stored at -80°C. Within our Life Sciences Services segment, our GENEWIZ business advances research
and development activities in gene sequencing, synthesis and related services to meet market demands. Recently, enabled
by newly developed proprietary technologies, GENEWIZ launched a portfolio of new services, targeting analysis
of adeno-associated virus, a common vector used in cell and gene therapy. We will continue to focus on developing
processes and technologies that can streamline sample to data workflow.
Sale of the Semiconductor Cryogenics Business
In the fourth quarter of fiscal year 2018, we entered into a definitive agreement to sell our semiconductor cryogenics
business to Edwards Vacuum LLC (a member of the Atlas Copco Group) for approximately $675.0 million in cash, subject
to customary adjustments. We originally acquired the cryogenics business in 2005 as part of the acquisition of Helix
Technology Corporation. The semiconductor cryogenics business has been classified as discontinued operations and,
unless otherwise noted, the description of our business in this report relates solely to our continuing operations and does
not include the operations of our semiconductor cryogenics business.
On July 1, 2019, we completed the sale of the semiconductor cryogenics business for $661.5 million which excludes
$6.3 million retained by the buyer at closing based on an estimate of net working capital adjustments, which are currently
pending finalization. Net proceeds from the sale were $553.1 million, net of taxes and closing costs paid and remaining
taxes payable. As part of this sale, we transferred our intellectual property, for our cryogenics pump products, but not our
intellectual property related to our semiconductor automation or life sciences businesses.
On July 1, 2019, in connection with the completion of the sale of our semiconductor cryogenics business, we used
$495.3 million of the cash proceeds to extinguish debt. As a result of the debt extinguishment we recorded a loss on
30
extinguishment of debt of $5.2 million in the fourth quarter of fiscal year 2019. Refer to “Liquidity and Capital Resources”
for further discussion of the debt extinguishment.
Segments
We serve the semiconductor capital equipment market through one operating and reportable segment, our
Semiconductor Solutions Group segment. We serve the life sciences market through two operating and reportable
segments: Brooks Life Sciences Products and Brooks Life Sciences Services. Prior to the fiscal year 2020, we had only
two reportable segments that consisted of the Brooks Semiconductor Solutions Group segment and the Brooks Life
Sciences segment. The Brooks Life Sciences segment consisted of two operating segments, Sample Management and
GENEWIZ. During the fiscal year 2020, we realigned our life sciences businesses to combine the sample management
services offerings under the leadership of our GENEWIZ genomic services business to form the Brook Life Sciences
Services operating and reportable segment. By combining these two service-based businesses we believe we can more
effectively leverage the potential for synergies as customers engage us to manage a broad variety of sample-based services
including gene sequencing, gene synthesis, lab analysis, sample kitting and preparation, transportation, and storage. In the
realignment we also formed our Brooks Life Sciences Products operating and reportable segment composed of product
offerings of large automated ultra-cold stores, automated cryogenic storage systems, and consumables and instruments,
and related product support services.
Our prior period reportable segment information has been reclassified to reflect the current segment structure and
conform to the current period presentation.
For additional information on our segment revenues and their operating results, please refer to Note 20, "Segment and
Geographic Information" to our Consolidated Financial Statements included in Item 8, "Financial Statements and
Supplementary Data" of this Form 10-K.
The Brooks Semiconductor Solutions Group segment provides a variety of products, services and solutions that enable
improved throughput and yield in controlled operating environments, as well as an extensive range of support services.
The solutions include atmospheric and vacuum robots, robotic modules, tool automation systems, and contamination
control of wafer carriers. The support services include repair services, diagnostic support services, and installation services
in support of the products, which enable our customers to maximize process tool uptime and productivity. This segment
also provides end-user customers with spare parts and productivity enhancement upgrades to maximize tool productivity.
The Brooks Life Sciences Products and Brooks Life Sciences Services segments provide comprehensive life cycle
sample management solutions to life science and bioscience customers including complete end-to-end “cold chain of
custody” solutions and sample-based lab services such as genomic sequencing and gene synthesis to advance scientific
research and support drug development. The Brooks Life Sciences Products segment’s offerings include automated cold
sample management systems for compound and biological sample storage, equipment for sample preparation and handling,
consumables and instruments that help customers manage samples throughout their research discovery and development
workflows. The Brooks Life Sciences Services segment’s offerings include sample storage services, genomic sequencing,
gene synthesis, lab processing services, lab analysis, informatics and other support services provided to a wide range of
life science customers, including pharmaceutical companies, biotechnology companies, biorepositories and research
institutes.
Business and Financial Performance
Fiscal Year Ended September 30, 2020 Compared to Fiscal Year Ended September 30, 2019
Results of Operations - We reported revenue of $897.3 million for fiscal year 2020 compared to $780.8 million for
fiscal year 2019, an increase of $116.4 million, or 15%. Gross margin was 42.4% for fiscal year 2020 compared to 40.5%
for fiscal year 2019, an increase in gross profit of $63.8 million. Operating expenses were $301.6 million for fiscal year
2020 compared to $270.2 million for fiscal year 2019, an increase of $31.3 million. Operating income was $78.5 million
for fiscal year 2020 compared to $46.0 million for fiscal year 2019, an increase of $32.4 million, which was primarily
attributable to the revenue growth and gross margin improvement, partially offset by higher operating expenses. We
generated income from continuing operations of $65.0 million during fiscal year 2020 as compared to $9.6 million in fiscal
31
year 2019. This increase was primarily attributable to our increase in operating income as well as a loss on extinguishment
of debt of $14.3 million and higher interest expense of $19.3 million in fiscal year 2019. Please refer to the “Results of
Operations” section below for a detailed discussion of our financial results for the fiscal year 2020 compared to fiscal
year 2019.
Cash Flows and Liquidity - Cash and cash equivalents, restricted cash and marketable securities were $305.7 million
at September 30, 2020 as compared to $342.1 million at September 30, 2019. The decrease of $36.4 million was primarily
comprised of outflows of $39.9 million for capital expenditures, $15.7 million for acquisitions, and $29.5 million for
dividends, partially offset by cash inflows from operating activities of $37.9 million. Cash flows from operating activities
was comprised of $64.9 million of net income and $77.2 million of adjustments to net income for non-cash items, partially
offset by $91.5 million of cash taxes paid for the gain on the sale of the semiconductor cryogenics business and $12.7
million uses of cash from the changes in operating assets and liabilities. The prior fiscal year cash flows included $661.6
million related to proceeds from the sale of our semiconductor cryogenics business and cash inflows of $90.9 million
generated from our operating activities, partially offset by net cash outflows of $442.7 million to acquire GENEWIZ, net
cash outflows of $163.8 million related to principal payments made on and proceeds received from our term loans, cash
dividends paid of $28.9 million and capital expenditures of $23.9 million. Please refer to the “Liquidity and Capital
Resources” section below for a detailed discussion of our liquidity and changes in cash flows for fiscal year 2020 compared
to fiscal year 2019.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the Consolidated Financial Statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On
an ongoing basis, we evaluate our estimates, including those related to revenue, intangible assets, goodwill, inventories,
income taxes, and stock-based compensation. We base our estimates on historical experience and various other
assumptions that are believed to be reasonable under the circumstances. We evaluate current and anticipated worldwide
economic conditions, both in general and specifically in relation to the semiconductor and life science industries, that serve
as a basis for making judgments about the carrying values of assets and liabilities that are not readily determinable based
on information from other sources. Actual results may differ from these estimates under different assumptions or
conditions that could have a material impact on our financial condition and results of operations.
We believe that the assumptions and estimates associated with the following critical accounting policies involve
significant judgment and thus have the most significant potential impact on our Consolidated Financial Statements.
Revenue Recognition
We generate revenue from the sale of products and services. A description of our revenue recognition policies is
included in the Note 2, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial
Statements included in Item 8, "Financial Statements and Supplementary Data" of this Form 10-K.
Although most of our sales agreements contain standard terms and conditions, certain agreements contain multiple
performance obligations or non-standard terms and conditions. For customer contracts that contain more than one
performance obligation, we allocate the total transaction consideration to each performance obligation based on the relative
stand-alone selling price of each performance obligation within the contract. We rely on either observable standalone sales
or an expected cost-plus margin approach to determine the standalone selling price of offerings, depending on the nature
of the performance obligation. Performance obligations whose standalone selling price is estimated using an expected
cost-plus margin approach relate to the sale of customized automated cold sample management systems and service-type
warranties within the Brooks Life Sciences Products segment.
Revenue from the sales of certain products that involve significant customization, which primarily include automated
cold sample management systems is recognized over time as the asset created by our performance does not have alternative
use to us and an enforceable right to payment for performance completed to date is present. We recognize revenue as work
progresses based on a percentage of actual labor hours incurred on the project to-date and total estimated labor hours
expected to be incurred on the project. The selection of the method to measure progress towards completion requires
judgment. We have concluded that using the percentage of labor hours incurred to estimated labor hours needed to
32
complete the project most appropriately depicts our efforts towards satisfaction of the performance obligation. We develop
profit estimates for long-term contracts based on total revenue expected to be generated from the project and total costs
anticipated to be incurred in the project. These estimates are based on a number of factors, including the degree of required
product customization and the work required to be able to install the product in the customer’s existing environment, as
well as our historical experience, project plans and an assessment of the risks and uncertainties inherent in the contract
related to implementation delays or performance issues that may or may not be within our control. We estimate a loss on
a contract by comparing total estimated contract revenue to the total estimated contract costs and recognize a loss during
the period in which it becomes probable and can be reasonably estimated. We review profit estimates for long-term
contracts during each reporting period and revise the estimate based on changes in circumstances.
If our judgment regarding revenue recognition proves incorrect, our revenue in particular periods may be adversely
affected and could have a material impact on our financial condition and results of operations.
Business Combinations
We account for business acquisitions using the purchase method of accounting, in accordance with which assets
acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair value of the
consideration paid, including contingent consideration, is assigned to the assets acquired and liabilities assumed based on
their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of the assets
acquired and liabilities assumed.
Significant judgment is used in determining fair values of assets acquired and liabilities assumed, as well as intangibles
and their estimated useful lives. Fair value and useful life determinations are based on, among other factors, estimates of
future expected cash flows, royalty cost savings and appropriate discount rates used in computing present values.
Particularly for GENEWIZ, management applied significant judgment in estimating the fair value of the acquired
intangible assets, which involved significant estimates and assumptions with respect to forecast revenue growth rates,
gross margin percentage, selling, general and administrative expense percentage and the discount rate. These judgments
may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities
assumed, as well as our current and future operating results. Actual results may vary from these estimates that may result
in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a
final determination of asset and liability fair values, whichever occurs first. Adjustments to fair values of assets and
liabilities made after the end of the measurement period are recorded within our operating results.
Changes in the fair value of contingent consideration resulting from a change in the underlying inputs are recognized
in results of operations until the arrangement is settled.
Intangible Assets, Goodwill and Other Long-Lived Assets
We have identified intangible assets and generated significant goodwill as a result of our acquisitions. Intangible assets
other than goodwill are valued based on estimated future cash flows and amortized over their estimated useful lives.
Goodwill is tested for impairment annually or more often if impairment indicators are present, at the reporting unit level.
Intangible assets other than goodwill and long-lived assets are subject to impairment testing if events and circumstances
indicate that the carrying amount of an asset or a group of assets may not be recoverable.
The goodwill impairment test is performed at the reporting unit level. A reporting unit is either an operating segment
or one level below it, which is referred to as a “component.” The level at which the impairment test is performed requires
an assessment of whether the operations below an operating segment constitute a self-sustaining business, in which case
testing is generally performed at this level.
We have three operating and three reportable segments consisting of Brooks Semiconductor Solutions Group, Brooks
Life Sciences Products and Brooks Life Sciences Services. We have six reporting units, including three reporting units
within the Brooks Semiconductor Solutions Group operating segment, one reporting unit within Brooks Life Sciences
Products operating segment and two reporting units within the Brooks Life Sciences Services operating segment.
We perform our annual goodwill impairment assessment on April 1st of each fiscal year. We evaluate a reporting
unit’s goodwill for impairment between annual tests if events occur or circumstances change that would more likely than
33
not reduce the fair value of such reporting unit below its carrying value. In accordance with ASC 350, Intangibles-
Goodwill and Other, we initially assess qualitative factors to determine whether the existence of events or circumstances
indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value. If we determine,
based on this assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying
value, we perform a quantitative goodwill impairment test by comparing the reporting unit’s fair value with its carrying
value. An impairment loss is recognized for the amount by which the reporting unit’s carrying value exceeds its fair value,
up to the total amount of goodwill allocated to the reporting unit. No impairment loss is recognized if the fair value of the
reporting unit exceeds its carrying value.
We determine fair values of our reporting units based on an income approach in accordance with the discounted cash
flow method, or DCF Method. The DCF Method is based on projected future cash flows and terminal value estimates
discounted to their present values. Terminal value represents a present value an investor would pay on the valuation date
for the rights to the cash flows of the business for the years subsequent to the discrete cash flow projection period. We
consider the DCF Method to be the most appropriate valuation technique since it is based on management’s long-term
financial projections. In addition to determining the fair value of our reporting units based on the DCF method, we also
compare the aggregate values of our net corporate assets and reporting unit fair values to our overall market capitalization
and use certain market-based valuation techniques to assess the reasonableness of the reporting unit fair values determined
in accordance with the DCF Method. The key inputs used in the DCF Method include revenue growth rates, gross margin
percentage, selling, general and administrative expense percentage and discount rates that are at or above our weighted-
average cost of capital. We derive discount rates that are commensurate with the risks and uncertainties inherent in the
respective reporting units and our internally developed projections of future cash flows.
Application of the goodwill impairment test requires judgment based on market and operational conditions at the time
of the evaluation, including management’s best estimates of the reporting unit’s future business activity and the related
estimates and assumptions of future cash flows from the assets that include the associated goodwill. Different assumptions
of revenue growth rates, gross margin percentage, selling, general and administrative expense percentage and the discount
rate used in the DCF model could results in different estimates of the reporting unit’s fair value as of each testing date.
We completed our annual goodwill impairment test as of April 1, 2020 for our six reporting units: Automation
Solutions, Contamination Control Solutions and Global Semiconductor Services within the Brooks Semiconductor
Solutions Group segment, as well Life Sciences Products, Sample Repository Solutions and GENEWIZ within the life
sciences businesses. Based on the test results, we determined that no adjustment to goodwill was necessary. We conducted
a qualitative assessment for the three reporting units within the Brooks Semiconductor Solutions Group segment and
determined that it was more likely than not that their fair values were more than their carrying values. As a result of the
analysis, we did not perform the quantitative assessment for these reporting units and did not recognize any impairment
losses. We performed the quantitative goodwill impairment test for the three reporting units within the life sciences
businesses. We determined that no adjustment to goodwill was necessary for these three reporting units. The Life Sciences
Products and the Sample Repository Solutions unit’s fair values significantly exceeded book value. The GENEWIZ
reporting unit, which was acquired in the first quarter of fiscal year 2019, also had a fair value in excess of its book value.
We are required to test long-lived assets, other than goodwill, for impairment when impairment indicators are present.
For purposes of this test, long-lived assets are grouped with other assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If we determine that
indicators of potential impairment are present, we assess the recoverability of the long-lived asset group by comparing its
undiscounted future cash flows to its carrying value. If the carrying value of the long-lived asset group exceeds its future
cash flows, we determine fair values of the individual net assets within the long-lived asset group to assess potential
impairment. If the aggregate fair values of the individual net assets of the group are less than their carrying values, an
impairment loss is recognized for an amount in excess of the group’s aggregate carrying value over its fair value. The loss
is allocated to the assets within the group based on their relative carrying values, with no asset reduced below its fair value.
We did not test our long-lived assets for impairment during fiscal years 2020 and 2019 since no events indicating
impairment occurred during the periods then ended.
34
Inventory
We state our inventory at the lower of cost or market amount and make adjustments to reduce the inventory cost to its
net realizable value by providing estimated reserves for obsolete or unmarketable inventory. The reserves are established
for the difference between the cost of inventory and its estimated market value based on assumptions related to future
demand and market conditions. We fully reserve for inventories and non-cancelable purchase orders for inventory deemed
obsolete. We perform periodic reviews of our inventory to identify excess inventories on hand. We compare on-hand
inventory balances to anticipated inventory usage based on our recent historical activity and anticipated or forecasted
demand for our products developed through our planning systems and sales and marketing inputs.
We adjust the reserves for obsolete or unmarketable inventory and record additional inventory write downs based on
unfavorable changes in estimated customer demand or actual market conditions that may differ from management
projections.
Deferred Income Taxes
We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be
realized. We consider recent historical income, estimated future taxable income, carry-forward periods of tax attributes,
the volatility of the semiconductor industry and ongoing tax planning strategies in assessing the need for the valuation
allowance. We evaluate the realizability of our deferred tax assets by tax-paying component and assess the need for a
valuation allowance on an annual and quarterly basis. We evaluate the profitability of each tax-paying component on a
historic cumulative basis and on a forward-looking basis while performing this analysis. After evaluating all the relevant
positive and negative evidence as of March 31, 2018, we concluded that it was more likely than not that a substantial
portion of the U.S. deferred tax assets would be realized. In the second quarter of fiscal year 2018 we reached a significant
level of cumulative profitability in the U.S., coupled with an improved outlook of U.S. earnings. During the full fiscal year
2018, we reduced our U.S. valuation allowance against our U.S. net deferred tax assets resulting in a tax benefit of $77.2
million. In the fourth quarter of fiscal year 2020 we reduced our U.S. valuation allowance by an additional $1.0 million
based on our conclusion that it is more likely than not that there will be sufficient future foreign source income to realize
the foreign tax credit carryover balance held in the U.S. The remaining portion of our U.S. valuation allowance is related
to the realizability of certain state tax credits and net operating loss carry-forwards. We also continue to maintain valuation
allowances against net deferred tax assets in certain foreign tax-paying components as of the end of fiscal year 2020.
Stock-Based Compensation
We measure compensation cost for all employee stock awards at fair value on the date of grant and recognize
compensation expense over the service period for awards expected to vest. The fair value of restricted stock units is
determined based on the number of shares granted and the closing price of our common stock quoted on Nasdaq on the
date of grant, and the fair value of stock options is determined using the Black-Scholes valuation model. Such fair values
are recognized as expense over the service period, net of estimated forfeitures. The estimation of stock awards that will
ultimately vest requires significant judgment. We consider many factors when estimating expected forfeitures, including
types of awards, employee class, and historical experience. In addition, for stock-based awards where vesting is dependent
upon achieving certain operating performance goals, we estimate the likelihood of achieving the performance goals. Actual
results, and future changes in estimates, may differ from our current estimates.
Recently Issued Accounting Pronouncements
For a summary of recently issued accounting pronouncements applicable to our Consolidated Financial Statements
which is incorporated here by reference, please refer to Note 2, “Summary of Significant Accounting Policies” in the
Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data” of
this Form 10-K.
35
RESULTS OF OPERATIONS
Fiscal Year Ended September 30, 2020 Compared to Fiscal Year Ended September 30, 2019
Revenue
We reported revenue of $897.3 million for fiscal year 2020 compared to $780.8 million for fiscal year 2019, an
increase of $116.4 million, or 15%. The COVID-19 pandemic has had varying impacts on our business for the fiscal year
ended September 30, 2020. Further discussion of the impacts by each segment are discussed below.
Our Brooks Semiconductor Solutions Group segment reported revenue of $508.7 million for fiscal year 2020
compared to $446.7 million for fiscal year 2019, an increase of $62.1 million or 14%. We reported increases in
contamination control solutions revenue of $39.2 million, automation revenue of $22.4 million, and services revenue of
$0.4 million. The semiconductor markets are cyclical and may fluctuate significantly from quarter to quarter. Demand for
our Brooks Semiconductor Solutions Group products and services is affected by these cycles and a prolonged effect of the
COVID-19 pandemic could negatively impact demand for our products and services in this segment. To date, we have
experienced some disruption in our supply chain as a result of the COVID-19 pandemic, which constrained our ability to
ship some of the orders in our backlog during the second and third quarters of fiscal 2020. However, we do not believe
that COVID-19 pandemic has impacted our bookings or demand for our semiconductor equipment products.
Our Brooks Life Sciences Products segment reported revenue of $129.8 million for fiscal year 2020 compared to
$119.0 million for fiscal year 2019, an increase of $10.7 million or 9%. The increase in revenue was driven by consumables
and instruments, which delivered record revenue levels driven by COVID-19 related demand, and an increase in revenue
for our BioStore III Cryo systems, partially offset by decreases in revenue from automated cold sample management
systems and infrastructure services revenue which were both impacted by customer site restrictions and schedule delays
due to COVID-19.
Our Brooks Life Sciences Services segment reported revenue of $258.8 million for fiscal year 2020 compared to
$215.2 million for fiscal year 2019, an increase of $43.6 million or 20%. We reported an increase of $40.2 million from
GENEWIZ, which was composed of $20.0 million from the additional weeks of ownership for the twelve months ended
September 30, 2020, and $20.2 million from organic growth. We reported an increase in Sample Repository Solutions
revenue of $3.4 million primarily driven by informatics services and storage services, partially offset by declines in
outsourced genomic services and transportation services, which were negatively impacted by COVID-19. Informatics
revenue was primarily driven by the acquisition of RURO in February 2020.
We estimate that the impact of the COVID-19 pandemic on our two life sciences segments’ revenue for the fiscal year
ended September 30, 2020 was a net reduction of approximately $11 million in the aggregate primarily attributable to a
slow-down in the marketplace, reflecting the absence of a portion of the workforces within our customers. This slow-
down was first present in the China market in the early part of the second quarter ended March 31, 2020 and began
surfacing in the rest of the world in the latter part of March 2020. Partially offsetting these declines, we experienced an
increase in demand for gene synthesis services and consumables and instruments, in support of numerous activities
including research and development in the areas of virus detection and vaccines. During the fourth quarter of fiscal year
2020, demand and shipments for certain products and services in our life sciences businesses which were impacted by
COVID-19 recovered to levels we experienced prior to the pandemic.
We anticipate continued growth in revenue from our Brooks Life Sciences Products segment and our Brooks Life
Sciences Services segment through our internally-developed products and services and through our acquired businesses.
We will continue to seek opportunities to expand our market share in the semiconductor and adjacent technology markets
served by our Brooks Semiconductor Solutions Group segment. Our sales into the semiconductor and adjacent technology
markets are substantially driven by our customers’ significant capital investments. These markets are cyclical, often
fluctuating significantly from quarter to quarter. Demand for our Brooks Semiconductor Solution Group products is
affected by these cycles.
Revenue generated outside the United States amounted to $559.9 million, or 62% of total revenue, for fiscal year 2020
compared to $455.6 million, or 58% of total revenue, for fiscal year 2019.
36
Operating Income
We reported operating income of $78.5 million for fiscal year 2020 compared to $46.0 million for fiscal year 2019.
The increase of 70% was driven by higher revenue and gross profit, partially offset by an increase in both research and
development expenses and selling, general and administrative expenses compared to the prior fiscal year. Drivers of the
increases to research and development and selling, general and administrative expenses are described below.
Operating income for our Brooks Semiconductor Solutions Segment was $80.0 million for fiscal year 2020 compared
to $66.2 million for fiscal year 2019. Operating income includes charges for amortization related to completed technology
of $2.9 million and $3.6 million for fiscal years 2020 and 2019, respectively. Fiscal year 2019 also includes inventory
step-up charges of $0.2 million. There were no such charges in fiscal year 2020. Adjusted operating income for our Brooks
Semiconductor Solutions Group segment, which excludes the charges mentioned above, was $83.0 million for fiscal year
2020 compared to $70.0 million in fiscal year 2019. Please refer to Note 20, “Segment and Geographic Information”.
Operating income for our Brooks Life Sciences Products segment was $8.2 million for fiscal year 2020 compared to
an operating loss of $3.1 million for fiscal year 2019. Operating income for our Brooks Life Sciences Products segment
includes charges for amortization related to completed technology of $1.2 million in each of the fiscal years 2020 and
2019. Adjusted operating income for our Brooks Life Sciences Products segment, which excludes the charges mentioned
above, was $9.4 million for fiscal year 2020 compared to an operating loss of $1.8 million in fiscal year 2019. Please refer
to Note 20, “Segment and Geographic Information”.
Operating income for our Brooks Life Sciences Services segment was $21.6 million for fiscal year 2020 compared to
$16.6 million for fiscal year 2019. Operating income for our Brooks Life Sciences Services segment includes charges for
amortization related to completed technology of $6.9 million and $5.6 million for fiscal years 2020 and 2019, respectively,
and restructuring related charges of $0.3 million in each of the fiscal years 2020 and 2019. Adjusted operating income for
our Brooks Life Sciences Services segment, which excludes the charges mentioned above, was $28.8 million for fiscal
year 2020 compared to $22.5 million in fiscal year 2019. Please refer to Note 20, “Segment and Geographic Information”.
Gross Margin
We reported gross margins of 42.4% for fiscal year 2020 compared to 40.5% for fiscal year 2019, an increase of 1.9
points. Gross margin increased 6.3 points in the Brooks Life Sciences Products segment, 2.7 points in the Brooks Life
Sciences Services segment and 0.2 points in the Brooks Semiconductor Solutions segment. Cost of revenue for fiscal year
2020 included $11.0 million of charges for amortization related to completed technology as compared to $10.4 million
incurred during fiscal year 2019. Cost of revenue for both fiscal year 2020 and 2019 included $0.3 million of restructuring
related charges. Additionally, fiscal year 2019 included $0.2 million of inventory step-up charges from acquisitions. There
were no such charges in the current year period. Excluding these charges, margins expanded 1.7 percentage points in
fiscal year 2020, as compared to fiscal year 2019.
Our Brooks Semiconductor Solutions Group segment reported gross margins of 40.9% for fiscal year 2020 compared
to 40.7% for fiscal year 2019. The gross margin improvement of 0.2 percentage points was primarily driven by volume
leverage and lower amortization expense related to completed technology, partially offset by adverse impact from product
mix. Cost of revenue during fiscal year 2020 included $2.9 million of amortization related to completed technology as
compared to $3.6 million during fiscal year 2019. During fiscal year 2019, cost of revenue included $0.2 million of
inventory step-up charges, which were attributable to the acquisition of Tec-Sem. There were no such charges in fiscal
year 2020. Excluding these charges, margins declined 0.1 percentage points in fiscal year 2020, as compared to fiscal year
2019, primarily due to adverse product mix.
Our Brooks Life Sciences Products segment reported gross margins of 42.9% for fiscal year 2020 compared to 36.6%
for fiscal year 2019. The improvement of 6.3 points was driven by material and labor cost reductions related to large stores
and BIII Cryo systems, efficiencies realized installing large stores and performing infrastructure services, and volume
leverage. Cost of revenue in each of the fiscal years 2020 and 2019 included $1.2 million of amortization related to
completed technology. Excluding these charges, margins expanded 6.2 percentage points in fiscal year 2020, as compared
to fiscal year 2019.
37
Our Brooks Life Sciences Services segment reported gross margins of 45.0% for fiscal year 2020 compared to 42.3%
for fiscal year 2019. The improvement of 2.7 points is due to volume leverage, cost performance, and favorable service
mix. Cost of revenue during fiscal year 2020 included $6.9 million of amortization related to completed technology as
compared to $5.6 million incurred during fiscal year 2019. Cost of revenue for both fiscal year 2020 and 2019 included
$0.3 million of restructuring related charges. Excluding these charges, margins expanded 2.8 percentage points in fiscal
year 2020, as compared to fiscal year 2019.
Research and Development Expenses
Research and development expenses were $59.1 million in fiscal year 2020 compared to $56.4 million in fiscal year
2019. The increase of $2.7 million was due to increased expense of $2.5 million within the Brooks Life Sciences Services
segment and $2.2 million within the Brooks Semiconductor Solutions segment, partially offset by a decline of $2.0 million
within our Brooks Life Sciences Products segment.
Research and development expenses in our Brooks Semiconductor Solutions Group segment were $41.3 million in
fiscal year 2020 compared to $39.1 million in fiscal year 2019. Higher research and development expenses were primarily
attributable to employee related costs and outside services, driven by product development initiatives related to our vacuum
robotics platform, contamination control solutions for lower technology nodes and reticle storage for EUV.
Research and development expenses in our Brooks Life Sciences Products segment were $8.8 million in fiscal 2020
compared to $10.8 million in fiscal year 2019. The decline in research and development expenses were primarily
attributable to lower outside service costs and lower temporary employee costs supporting product development initiatives.
Research and development expenses in our Brooks Life Sciences Services segment were $9.1 million in fiscal 2020
compared to $6.5 million in fiscal year 2019. The increase of $2.5 million was primarily driven by acquisitions. The
timing of the GENEWIZ acquisition added an additional $1.1 million of expense in fiscal year 2020 and the RURO
acquisition added $0.6 million of additional expense. Investments in employee related costs and outside services to support
development initiatives in our service offerings drove the remainder of the increase.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $241.1 million in fiscal year 2020 as compared to $212.0 million
in fiscal year 2019. The increase of $29.2 million was due to increased expense of $17.9 million within the Brooks Life
Sciences Services segment, $10.2 million within the Brooks Semiconductor Solutions segment, and $2.9 million within
the Brooks Life Sciences Products segment. Our segment selling general and administrative expenses include allocations
for Corporate general and administrative functions which drove $15.1 million of the $29.2 million increase. The increase
in Corporate expenses were driven by legal and audit fees, and finance and IT department expenses. Corporate expenses,
not allocated to segments, were $30.0 million in fiscal year 2020, compared to $31.8 million in fiscal year 2019.
Unallocated corporate expenses included amortization expense related primarily to customer relationships of $30.8 million
and $24.7 million, during fiscal years 2020 and 2019, respectively, and merger and acquisition related expenses of $0.5
million and $6.7 million, during fiscal years 2020 and 2019, respectively.
Selling, general and administrative expenses in our Brooks Semiconductor Solutions Group segment were $86.6
million in fiscal year 2020 as compared to $76.4 million in fiscal year 2019. The increase of $10.2 million was primarily
due to an increase in corporate allocated costs and segment employee payroll costs, partially offset by decreases in
employee travel, trade shows and conferences.
Selling, general and administrative expenses in our Brooks Life Sciences Products segment were $38.8 million in
fiscal year 2020 as compared to $35.9 million in fiscal year 2019. The increase of $2.9 million is primarily due to higher
corporate allocated costs and higher sales commissions partially offset by decreases in employee related costs as a result
of restructuring actions taken in 2019 and 2020 and decreases in expenses related to employee travel, trade shows, and
conferences.
Selling, general and administrative expenses in our Brooks Life Sciences Services segment were $85.8 million in
fiscal year 2020 as compared to $67.9 million in fiscal year 2019. The increase of $17.9 million is primarily related to
acquisitions, corporate allocations, and bad debt expense, partially offset by lower employee travel expense. The timing
38
of the GENEWIZ acquisition added an additional $5.1 million of expense in fiscal year 2020 and the RURO acquisition
added $1.2 million of additional expense in fiscal year 2020.
Non-Operating Income (Expenses)
Interest income – During fiscal years 2020 and 2019, we recorded interest income of $0.8 million and $1.5 million
respectively, which primarily represented interest earned on our marketable securities.
Interest expense – During fiscal years 2020 and 2019, we recorded interest expense of $2.9 million and $22.2 million,
respectively. The decrease in interest expense in the current fiscal year compared to the prior fiscal year is due to carrying
less debt. We extinguished $495.3 million of debt during the fourth quarter of fiscal year 2019.
Loss on extinguishment of debt - During fiscal year 2019, we recorded losses on extinguishment of debt of $14.3
million of which $9.1 million was in connection with the syndication of the incremental term loan secured during the first
quarter of fiscal 2019. The syndication to a new group of lenders during the second quarter of fiscal 2019 met the criteria
of a debt extinguishment and therefore the amortization of the deferred financing costs associated with the origination of
the incremental term loan was accelerated and recorded as a loss on extinguishment of debt in our statement of operations.
In addition, as a result of the $495.3 million extinguishment of debt during the fourth quarter of fiscal year 2019, we
recorded an additional $5.2 million loss on extinguishment of debt.
Other expenses, net – During fiscal years 2020 and 2019 we recorded other expenses, net of $1.4 million and $1.5
million, respectively.
Income Tax Provision
We recorded an income tax provision on continuing operations of $9.9 million in fiscal year 2020 compared to an
income tax benefit of $0.1 million in fiscal year 2019. The income tax expense for fiscal year 2020 was primarily driven
by the provision on earnings from operations during the year. The expense was partially offset by a $6.4 million stock
compensation windfall benefit for tax deductions that exceeded the associated compensation expense, a $2.0 million
benefit from research tax credits, and a benefit of $0.5 million from a reduction of deferred tax liabilities related to the
extension of a tax rate incentive in China.
The income tax benefit during fiscal year 2019 was driven primarily by benefits in the U.S. jurisdiction related to
continuing operations losses, research tax credits, and stock compensation deductions in excess of book expenses. We also
recorded a $1.4 million benefit due to a state tax change that resulted from the acquisition of GENEWIZ. We also recorded
a tax provision of $3.0 million during the year related to changes in the toll charge based on a change in tax legislation and
the completion of all accounting of the charge under SAB 118. The overall benefit for fiscal year 2019 was partially offset
by the tax provisions on earnings in our foreign jurisdictions during the year.
Discontinued Operations
On July 1, 2019, we completed the sale of the semiconductor cryogenics business which we include as a discontinued
operation. We recorded $0.2 million of net loss from discontinued operations for fiscal year 2020. We recorded revenue
of $109.5 million and $427.9 million of net income from discontinued operations for fiscal year 2019, which includes the
net gain on sale of the business of $408.6 million. The net income is also inclusive of income from the ULVAC
Cryogenics, Inc. joint venture in 2019. The income from discontinued operations only includes direct operating expenses
incurred that (1) are clearly identifiable as costs being disposed of upon completion of the sale and (2) will not be continued
by the Company on an ongoing basis. Indirect expenses which supported the semiconductor cryogenics business, and
which remained as part of the continuing operations, are not reflected in income from discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
A considerable portion of our revenue is dependent on the demand for semiconductor capital equipment which
historically has experienced periodic downturns. We believe that we have adequate resources to satisfy our working
capital, financing activities, debt service and capital expenditure requirements for the next twelve months. The cyclical
nature of our served markets and uncertainty in the current global economic environment, including the uncertainty related
39
to the COVID-19 pandemic, make it difficult for us to predict longer-term liquidity requirements with sufficient certainty.
We may be unable to obtain any required additional financing on terms favorable to us, if at all. If adequate funds are not
available to us on acceptable terms or otherwise, we may be unable to successfully develop or enhance products and
services, respond to competitive pressure or take advantage of acquisition opportunities, any of which could have a material
adverse effect on our business, financial condition and operating results.
The discussion of our cash flows and liquidity that follows does not include the impact of the disposition of the
semiconductor cryogenics business, unless otherwise noted, and is stated on a total company consolidated basis.
Overview of Cash Flows and Liquidity
Our cash and cash equivalents, restricted cash and marketable securities as of September 30, 2020 and 2019 consist
of the following (in thousands):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 295,649 $ 301,642
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,529
34,124
Short-term marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,845
Long-term marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 305,694 $ 342,140
6,877
67
3,101
Year Ended September 30,
2020
2019
Our cash and cash equivalents, restricted cash and marketable securities were $305.7 million as of September 30,
2020. Our cash balances are held in numerous locations throughout the world, with the substantial majority of those
amounts located outside of the United States. As of September 30, 2020, we had cash and cash equivalents of $295.7
million, of which $241.1 million was held outside of the United States. If these funds are needed for the United States
operations, we would need to repatriate these funds. As a result of recent changes in U.S. tax legislation, any repatriation
in the future would likely not result in U.S. federal income tax. Our intent is to reinvest these funds outside of the United
States and our current operating plans do not demonstrate a need to repatriate these funds for our U.S. operations. We had
marketable securities of $3.2 million and $37.0 million as of September 30, 2020 and 2019, respectively. Our marketable
securities are generally readily convertible to cash without an adverse impact.
Fiscal Year Ended September 30, 2020 Compared to Fiscal Year Ended September 30, 2019
Overview
Cash Flows and Liquidity - Cash and cash equivalents, restricted cash and marketable securities were $305.7 million
at September 30, 2020 as compared to $342.1 million at September 30, 2019. The decrease of $36.4 million was comprised
of outflows of $39.9 million for capital expenditures, $15.7 million for acquisitions, and $29.5 million for dividends,
partially offset by cash inflows from operating activities of $37.9 million. Cash inflows from operating activities was
$37.9 million and was comprised of $64.9 million of net income and $77.2 million of adjustments to net income for non-
cash items, partially offset by $91.5 million of cash taxes paid for the gain on the sale of the semiconductor cryogenics
business and $12.7 million uses of cash from the changes in operating assets and liabilities.
Divestiture and Extinguishment of Debt
In the fiscal year 2019, we completed the sale of the semiconductor cryogenics business for $661.5 million which
excludes $6.3 million retained by the buyer at closing to preliminarily settle net working capital adjustments. Net proceeds
from the sale were $553.1 million, net of estimated taxes payable and closing costs. In connection with the completion of
the sale of our semiconductor cryogenics business, we used $348.3 million of the cash proceeds from the sale to extinguish
the total remaining outstanding balance of the incremental term loan and $147.0 million of the cash proceeds from the sale
40
to extinguish a portion of the outstanding balance of the term loan. The total amount of debt extinguished was $495.3
million.
Operating Activities
Cash flows from operating activities can fluctuate significantly from period to period as earnings, working capital
needs and the timing of payments for income taxes, restructuring activities and other charges impact reported cash flows.
Cash flows provided by operating activities were $37.9 million during fiscal year 2020 and were comprised primarily
of $50.5 million of earnings, which included $64.9 million of net income and a $77.2 million impact of non-cash related
items, partially offset by $91.5 million of cash taxes paid for the gain on the sale of the semiconductor cryogenics business.
Cash flows provided by operating activities also included $12.7 million in uses of cash from the changes in operating
assets and liabilities. The changes in operating assets and liabilities that resulted in a use of cash consisted primarily of an
increase in accounts receivable and inventory levels. These uses of cash were partially offset by an increase in accrued
expenses and other liabilities, accrued compensation and tax withholdings and increased prepaid expenses and other assets.
Cash flows provided by operating activities were $90.9 million during fiscal year 2019 and comprised primarily of earnings
of $84.6 million and sources of cash provided by changes in operating assets and liabilities of $6.3 million. Earnings of
$84.6 million consists of net income of $437.4 million offset by the impact of non-cash related charges of $352.8 million
which includes the net gain on the sale of our semiconductor cryogenics business of $408.6 million and $13.4 million of
contingent transaction fees paid related to the closing of the sale of the cryogenics business. The changes in operating
assets and liabilities which results in sources of cash consisted primarily of an increase in accrued expenses and other
liabilities which includes accrued taxes of approximately $95.0 million related to the sale of our semiconductor cryogenics
business, as well as decreases in accounts receivable, prepaid expenses and other current assets and an increase of deferred
revenue. These sources of cash were partially offset by decreased accrued compensation and tax withholdings.
Discontinued operations contributed $0.2 million loss and $427.9 million gain for fiscal years ended 2020 and 2019,
respectively, in the net income referenced for the respective periods above. Net income for fiscal year 2019 includes the
net gain on sale of the semiconductor cryogenics business of $408.6 million. The sale of the semiconductor cryogenics
business was completed on July 1, 2019.
Investing Activities
Cash flows from investing activities consist primarily of cash used for acquisitions, proceeds from divestitures, capital
expenditures and purchases of marketable securities as well as cash proceeds generated from sales and maturities of
marketable securities. Cash used in investing activities was $22.7 million during fiscal year 2020 and consisted of $39.9
million for capital expenditures and $15.7 million for acquisitions, partially offset by $33.9 million of net proceeds from
the purchases, sales and maturities of marketable securities. Cash provided by investing activities was $211.3 million
during fiscal year 2019 and consisted of $661.6 million related to the proceeds from the sale of our semiconductor
cryogenics business, partially offset by net cash outflows of $442.7 million to acquire GENEWIZ, $23.9 million of capital
expenditures, and net purchases, sales and maturities of marketable securities of $16.2 million.
Capital expenditures were $39.9 million during fiscal year 2020 as compared to $23.9 million during the fiscal year
2019. Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product
development and improving information technology infrastructure. Capital expenditures for the fiscal year 2020 included
$8.3 million for construction in process of a building site in Suzhou, China. The site is intended to replace space currently
leased in three different buildings in the same city and to allow for growth.
Financing Activities
Cash used for financing activities was $27.0 million during fiscal year 2020 and included net cash outflows for cash
dividends paid of $29.5 million. Cash used for financing activities was $191.2 million during fiscal year 2019 and included
net cash outflows of $163.8 million primarily related to the extinguishment of debt and principal payments on our term
loans totaling $850.2 million offset by proceeds of $686.4 million. Proceeds from the incremental term loan in the first
quarter of fiscal year 2019 were $340.5 million. In the second quarter of fiscal year 2019, we syndicated the incremental
term loan which resulted in an extinguishment of the incremental term loan of $349.1 million and proceeds from
syndication of $345.2 million. Cash outflows also included cash dividends paid of $28.9 million.
41
China Facility
In April 2019, we committed to construct a facility in Suzhou China, to consolidate the Suzhou operations of the
GENEWIZ business and provide infrastructure to support future growth. The facility is being constructed in two
phases. We have incurred $9.0 million of capital expenditures to date related to the construction of the facility, which
includes $8.3 million and $0.7 million, respectively, for fiscal years 2020 and 2019. We expect to incur an additional $41
to $46 million of capital expenditures related to this facility over the next four years.
Capital Resources
Term Loans
On October 4, 2017, we entered into a $200.0 million term loan with Morgan Stanley Senior Funding, Inc., JPMorgan
Chase Bank, N.A. and Wells Fargo Securities, LLC pursuant to the terms of a credit agreement with the lenders. The term
loan was issued at $197.6 million, or 98.8% of its par value, resulting in a discount of $2.4 million, or 1.2%, which
represented loan origination fees paid at the closing. The loan principal amount may be increased by an aggregate amount
equal to $75.0 million plus any voluntary repayments of the term loan plus any additional amount such that our secured
leverage ratio is less than 3.00 to 1.00.
The term loan matures and becomes fully payable on October 4, 2024. Installment principal payments equal to 0.25%
of the initial principal amount of the term loan are payable on the last day of each quarter, with any remaining principal
amount becoming due and payable on the maturity date. Subject to certain conditions stated in the credit agreement, we
may redeem the term loan at any time at our option without a significant premium or penalty, except for a repricing
transaction, as defined in the credit agreement. We are required to redeem the term loan at the principal amount then
outstanding upon the occurrence of certain events, as set forth in the credit agreement.
On November 15, 2018, we entered into an incremental amendment to the credit agreement under which we obtained
an incremental term loan in an aggregate principal amount of $350.0 million, issued at $340.5 million. The proceeds of
the incremental term loan were used to pay a portion of the purchase price for our acquisition of GENEWIZ. On
February 15, 2019, we entered into the second amendment to the credit agreement and syndicated the incremental term
loan to a group of new lenders. The syndicated incremental term loan was issued at $345.2 million. Except as provided for
in the amendments, the incremental term loan was subject to the same terms and conditions of the initial term loan.
On July 1, 2019, in connection with the completion of the sale of our semiconductor cryogenics business, we used
$348.3 million of the cash proceeds from the transaction to extinguish the outstanding balance at July 1, 2019 of the
incremental term loan and $147.0 million of the cash proceeds from the transaction to extinguish a portion of the
outstanding balance at July 1, 2019 of the term loan. The total amount of debt extinguished on July 1, 2019 was $495.3
million.
The credit agreement, as amended, for contains certain customary representations and warranties, covenants and
events of default. As of September 30, 2020, we were in compliance with all covenants and conditions under the credit
agreement, as amended.
In connection with our acquisition of GENEWIZ in November 2018, we assumed three five-year term loans and two
one-year term loans. At September 30, 2020, we had an aggregate outstanding principal balance of $0.8 million under the
three five-year term loans. The two one-year short term loans matured and were repaid in full as of September 30, 2019.
At September 30, 2020, the aggregate outstanding principal balance of all outstanding term loans was $50.4 million,
excluding unamortized deferred financing costs of $0.4 million. Borrowings under the term loans bear variable interest
rates. As a result, we may experience exposure to interest rate risk due to the potential volatility associated with the variable
interest rates on the term loans. If rates increase, we may be subject to higher costs of servicing the loans which could
reduce our profitability and cash flows. During the year ended September 30, 2020, the weighted average stated interest
rate on the term loans was 4.1%. During the year ended September 30, 2020, we incurred aggregate interest expense of
$2.4 million on the term loans, including $0.2 million of deferred financing costs amortization. Our debt service
requirements are expected to be funded through our existing sources of liquidity and operating cash flows.
42
Line of Credit Facility
We maintain a revolving line of credit under a credit agreement with Wells Fargo Bank, N.A. and JPMorgan Chase
Bank, N.A that provides for a revolving credit facility of up to $75.0 million, subject to borrowing base availability, as
defined in the credit agreement. The line of credit matures on October 4, 2022. The proceeds from the line of credit are
available for permitted acquisitions and general corporate purposes.
As of September 30, 2020, we had approximately $45.5 million available for borrowing under the line of credit. There
were no amounts outstanding pursuant to the line of credit as of September 30, 2020. The amount of funds available for
borrowing under the credit agreement may fluctuate each period based on our borrowing base availability. The credit
agreement contains certain customary representations and warranties, a financial covenant, affirmative and negative
covenants, as well as events of default. We were in compliance with the credit agreement as of September 30, 2020.
Although we believe we will be able to generate sufficient cash in the United States and foreign jurisdictions to fund future
operating costs, we secured the revolving line of credit as an additional assurance for maintaining liquidity in the United
States during potentially severe downturns of the cyclical semiconductor market, as well as for strategic investments and
acquisitions.
Dividends
Our Board of Directors declared the following dividends during the fiscal years 2020 and 2019 (in thousands, except
per share data):
Declaration Date
Fiscal Year Ended September 30, 2020
Dividend
per
Share
Record
Date
Payment
Date
Total
November 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 24, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 29, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 29, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year Ended September 30, 2019
0.10 December 6, 2019 December 20, 2019 $ 7,362
7,375
7,376
7,383
0.10 March 6, 2020
0.10 June 5, 2020
0.10 September 4, 2020 September 25, 2020
March 27, 2020
June 26, 2020
November 6, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.10 December 2, 2018 December 20, 2018 $ 7,191
7,212
January 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,222
April 26, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,230
July 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.10 March 1, 2019
0.10 June 7, 2019
0.10 September 6, 2019 September 27, 2019
March 22, 2019
June 28, 2019
On November 5, 2020, our Board of Directors approved a cash dividend of $0.10 per share of our common stock. The
total dividend of approximately $7.4 million will be paid on December 17, 2020 to shareholders of record at the close of
business on December 4, 2020. Dividends are declared at the discretion of our Board of Directors and depend on actual
cash flow from operations, our financial condition, debt service and capital requirements and any other factors our Board
of Directors may consider relevant. We intend to pay quarterly cash dividends in the future; however, the amount and
timing of these dividends may be impacted by the cyclical nature of certain markets we serve or the impact of the
COVID-19 pandemic. We may reduce, delay or cancel a quarterly cash dividend based on the severity of a cyclical
downturn or if the effects of the COVID-19 pandemic are prolonged.
Share Repurchase Program
On September 29, 2015, our Board of Directors approved a share repurchase program for up to $50.0 million worth
of our common stock. The timing and amount of any shares repurchased are based on market and business conditions,
legal requirements and other factors and may be commenced or suspended at any time at our discretion. There were no
shares repurchased under this program during fiscal year 2020.
43
Contractual Obligations and Requirements
Our contractual obligations were as follows at September 30, 2020 (in thousands):
Contractual Cash Obligations:
Total
Less than One to
One Year Three Years Five Years Thereafter
Four to
Pension and other post-retirement benefit plans . . . . . . . . .
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory purchase commitment . . . . . . . . . . . . . . . . . . . . .
IT-related commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China facility commitments . . . . . . . . . . . . . . . . . . . . . . . . .
Other commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,689
—
—
318
—
—
Total contractual cash obligations . . . . . . . . . . . . . . . . . . . . . $ 221,248 $ 134,078 $ 26,184 $ 55,979 $ 5,007
Other Commercial Commitments:
6,944
50,415
127,900
22,607
13,153
229
538
827
116,047
6,921
9,516
229
867
49,588
—
5,524
—
—
850
—
11,853
9,844
3,637
—
Letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,267 $
—
Total commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 222,515 $ 134,823 $ 26,706 $ 55,979 $ 5,007
745 $
522 $
— $
The letters of credit of approximately $1.3 million are related primarily to customer advances and other performance
obligations at September 30, 2020. These arrangements guarantee the refund of advance payments received from our
customers in the event that the product is not delivered or warranty obligations are not fulfilled in accordance with the
contract terms. These obligations could be called by the beneficiaries at any time before the expiration date of the particular
letter of credit if we fail to meet certain contractual requirements. None of these obligations were called during fiscal year
2020, and we currently do not anticipate any of these obligations to be called in the near future.
As of September 30, 2020, the total amount of net unrecognized tax benefits for uncertain tax positions and the accrual
for the related interest was $19.2 million, all of which represents a potential future cash outlay, in comparison to
September 30, 2019 where the balance was $18.3 million. The increase in the balance over the year was primarily driven
by normal interest accruals on our preexisting unrecognized tax benefits for uncertain tax positions. We are unable to make
a reasonably reliable estimate of the timing of the cash settlement for these liabilities since the timing of future tax
examinations by various tax jurisdictions and the related resolution is uncertain, however, $15.3 million of this liability is
indemnified by the sellers of GENEWIZ.
Off-Balance Sheet Arrangements
As of September 30, 2020, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of
SEC Regulation S-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a variety of market risks, including changes in interest rates affecting the return on our cash and
cash equivalents, restricted cash and short-term and long-term investments and fluctuations in foreign currency exchange
rates.
Interest Rate Exposure
Our term loan bears variable interest rates which subjects us to interest rate risk. Our primary interest rate risk exposure
results from changes in the short-term LIBOR rate, the federal funds effective rate and the prime rate. As of
September 30, 2020, the weighted average stated interest rate on all of our term loans, including the three five-year term
loans assumed in connection with our acquisition of GENEWIZ in November 2018, was 4.1%. At September 30, 2020,
the outstanding term loan principal balance was $50.4 million, excluding unamortized deferred financing costs of $0.4
million. During fiscal year 2020, we incurred aggregate interest expense of $2.4 million on all of our term loans.
A hypothetical 100 basis point change in interest rates would result in a $0.5 million change in interest expense incurred
during fiscal year 2020.
44
Our cash and cash equivalents and restricted cash consist principally of money market securities which are short-term
in nature. At September 30, 2020 and 2019, our aggregate short-term and long-term investments were $3.2 million and
$37.0 million, respectively, and consisted mostly of highly rated corporate debt securities and municipal securities. At
September 30, 2020 and 2019, the unrealized loss position on marketable securities was insignificant, which is included
in “Accumulated other comprehensive income” in the Consolidated Balance Sheets. A hypothetical 100 basis point change
in interest rates would result in an annual change of approximately $0.2 million and $0.3 million, respectively, in interest
income earned in fiscal years 2020 and 2019.
Currency Rate Exposure
We have 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. Sales in currencies other than the
U.S. dollar were 38% and 35%, respectively, of our total sales for fiscal years ended September 30, 2020 and 2019. These
sales were made primarily by our foreign subsidiaries, which have cost structures that substantially align with the currency
of sale.
In the normal course of our business, we have liquid assets denominated in non-functional currencies which include
cash, short-term advances between our legal entities and accounts receivable which are subject to foreign currency
exposure. Such balances were approximately $142.9 million and $117.7 million, respectively, at September 30, 2020 and
2019, and related to the Euro, British Pound and a variety of Asian currencies. We mitigate the impact of potential currency
translation losses on these short-term intercompany advances by the timely settlement of each transaction, generally within
30 days. We also utilize forward contracts to mitigate our exposures to currency movement. We incurred foreign currency
losses of $3.4 million and $1.8 million, respectively, in fiscal years 2020 and 2019, which related to the currency
fluctuation on these balances between the time the transaction occurred and the ultimate settlement of the transaction. A
hypothetical 10% change in foreign exchange rates would result in a change of $1.4 million and $0.2 million, respectively,
in our net income during fiscal years 2020 and 2019.
45
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of September 30, 2020 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the years ended September 30, 2020, 2019 and 2018 . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income for the years ended September 30, 2020, 2019 and 2018 . . . . .
Consolidated Statements of Cash Flows for the years ended September 30, 2020, 2019 and 2018 . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Equity for the years ended September 30, 2020, 2019 and 2018 . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47
50
51
52
53
54
55
The supplementary quarterly financial information required by this Item 8 is included in Part II, Item 6, “Selected Financial
Data”, and is incorporated herein by reference.
46
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Brooks Automation, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Brooks Automation, Inc. and its subsidiaries (the
“Company”) as of September 30, 2020 and 2019, and the related consolidated statements of operations, of comprehensive
income, of changes in equity and of cash flows for each of the three years in the period ended September 30, 2020,
including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the
Company's internal control over financial reporting as of September 30, 2020, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of September 30, 2020 and 2019, and the results of its operations and its cash flows for each
of the three years in the period ended September 30, 2020 in conformity with accounting principles generally accepted in
the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of September 30, 2020, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts
for leases effective October 1, 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our
responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal
control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
47
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts
or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill Impairment Assessment – GENEWIZ Reporting Unit
As described in Notes 2, 4 and 8 to the consolidated financial statements, the Company’s consolidated goodwill balance
was $502 million as of September 30, 2020, of which $235 million relates to the GENEWIZ 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 1st as its annual goodwill impairment assessment date. If the existence of events or circumstances indicates
that it is more likely than not that fair values of the reporting units are below their carrying values, the Company performs
additional impairment tests during interim periods to evaluate goodwill for impairment. As disclosed by management, the
fair values of the reporting units are determined based on an income approach in accordance with the discounted cash flow
method, or DCF method. The DCF method is based on projected future cash flows and terminal value estimates discounted
to their present values. Application of the goodwill impairment test requires judgment based on market and operational
conditions at the time of the evaluation, including management’s best estimates of the reporting unit’s future business
activity and the related estimates and assumptions of future cash flows from the assets that include the associated goodwill.
Different assumptions of revenue growth rates, gross margin percentage, selling, general and administrative expense
percentage and discount rates used in the DCF model could result in different estimates of the reporting unit’s fair value
as of each testing date.
The principal considerations for our determination that performing procedures relating to the goodwill impairment
assessment of the GENEWIZ reporting unit is a critical audit matter are the significant judgment by management when
determining the fair value of the GENEWIZ reporting unit, which in turn led to a high degree of auditor judgment,
subjectivity, and effort in performing procedures and evaluating audit evidence relating to management’s significant
assumptions related to revenue growth rates, gross margin percentage, selling, general and administrative expense
percentage and discount rate. In addition, the audit effort involved the use of professionals with specialized skill and
knowledge.
48
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the goodwill impairment assessment, including controls over management’s determination of the revenue
growth rates, gross margin percentage, selling, general and administrative expense percentage and discount rate. These
procedures also included, among others, (i) testing management’s process for determining the fair value of the GENEWIZ
reporting unit, (ii) evaluating the appropriateness of the DCF model, (iii) testing the completeness and accuracy of the
underlying data used in the model, and (iv) evaluating the reasonableness of significant assumptions used by management
related to revenue growth rates, gross margin percentage, selling, general and administrative expense percentage and
discount rate. Evaluating management’s assumptions related to the revenue growth rates, gross margin percentage and
selling, general and administrative expense percentage involved evaluating whether the assumptions used were reasonable
considering the past performance of the reporting unit and industry data. Professionals with specialized skill and
knowledge were used to assist in evaluating the appropriateness of the DCF model and the reasonableness of the discount
rate.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 18, 2020
We have served as the Company’s auditor since 2016.
49
BROOKS AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
2020
September 30,
2019
(In thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued warranty and retrofit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term tax reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term pension liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 22)
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, 87,293,710 shares issued
and 73,831,841 shares outstanding at September 30, 2020, 85,759,700 shares issued and
72,297,831 shares outstanding at September 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost - 13,461,869 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$
$
$
295,649
67
188,291
114,834
50,612
649,453
117,665
3,101
4,979
501,536
218,325
64,066
1,559,125
827
61,758
31,357
8,201
43,267
181
10,094
55,433
211,118
49,588
19,168
17,798
6,406
31,855
9,578
345,511
301,642
34,124
165,602
99,445
46,332
647,145
100,669
2,845
5,064
488,602
251,168
20,506
1,515,999
829
58,919
29,435
7,175
31,375
1,040
99,263
44,234
272,270
50,315
18,274
20,636
5,338
—
10,212
377,045
—
—
873
1,942,850
21,919
(200,956)
(551,072)
1,213,614
1,559,125
$
857
1,921,954
3,511
(200,956)
(586,412)
1,138,954
1,515,999
The accompanying notes are an integral part of these consolidated financial statements.
50
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
2020
Year Ended September 30,
2018
2019
(In thousands, except per share data)
Revenue
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 573,876 $ 504,029 $
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
276,819
780,848
323,397
897,273
Cost of revenue
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net loss attributable to noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Brooks Automation, Inc. . . . . . . . . . . . . . . . . . . . $
Basic net income per share attributable to Brooks Automation, Inc.:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . .
Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted net income per share attributable to Brooks Automation, Inc.:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . .
Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average shares used in computing net income per share:
337,442
179,807
517,249
380,024
302,237
162,351
464,588
316,260
59,063
241,137
1,366
301,566
78,458
849
(2,944)
—
(1,391)
74,972
9,937
65,035
(182)
56,368
211,960
1,894
270,222
46,038
1,449
(22,250)
(14,339)
(1,455)
9,443
(111)
9,554
427,862
64,853 $ 437,416 $
—
—
64,853 $ 437,416 $
0.88 $
(0.00)
0.88 $
0.13 $
5.95
6.08 $
0.88 $
(0.00)
0.88 $
0.13 $
5.91
6.04 $
482,389
149,171
631,560
288,323
97,156
385,479
246,081
46,936
167,022
714
214,672
31,409
1,881
(9,520)
—
(3,304)
20,466
(47,251)
67,717
48,747
116,464
111
116,575
0.96
0.69
1.65
0.95
0.69
1.64
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,557
73,850
71,992
72,386
70,489
70,937
The accompanying notes are an integral part of these consolidated financial statements.
51
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
2020
Year Ended September 30,
2019
(In thousands)
2018
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,853 $ 437,416 $ 116,464
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized (losses) gains on marketable securities, net of tax effects of $0,
($1) and $0 for fiscal years 2020, 2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . .
Actuarial gains (losses), net of tax effects of $27, $13 and ($49) for fiscal
136
years 2020, 2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,626)
Total other comprehensive income, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
114,838
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive loss attributable to noncontrolling interest . . . . . . . . . . . . . . . . .
111
Comprehensive income attributable to common stockholders . . . . . . . . . . . . . . . $ 83,261 $ 427,340 $ 114,949
(847)
(10,076)
427,340
—
(476)
18,408
83,261
—
18,877
(9,333)
(1,651)
(111)
104
7
The accompanying notes are an integral part of these consolidated financial statements.
52
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
2020
Year Ended September 30,
2019
(In thousands)
2018
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
$
64,853
$
437,416
$
116,464
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of premium on marketable securities and deferred financing costs . . . . . . . . . . . . . . . . . . . .
Earnings of equity method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss recovery on insurance claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other losses on disposals of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on sale of divestiture, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent transaction fees paid stemming from divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes paid stemming from divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities, net of acquisitions and divestiture:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued warranty and retrofit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and tax withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from recovery on insurance claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of marketable securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturities of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of a note receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities
65,496
—
16,317
233
—
—
(5,407)
—
226
319
—
(91,500)
(18,755)
(13,144)
25,642
792
(139)
760
11,097
(865)
—
(18,059)
37,866
(39,924)
(10,894)
2,492
42,328
—
(15,744)
(1,000)
—
—
(22,742)
54,454
285
20,113
1,121
(6,188)
—
(15,161)
14,339
209
(408,575)
(13,388)
—
(11,445)
(2,933)
(16,009)
4,695
4,213
1,109
(6,453)
399
1,082
31,615
90,898
(23,861)
(35,225)
48,903
2,557
661,642
(442,704)
—
—
—
211,312
37,429
—
19,822
710
(6,788)
(1,103)
(45,217)
—
(758)
—
—
—
(28,463)
(24,365)
(3,676)
5,457
2,791
(157)
5,978
(1,080)
—
(3,080)
73,964
(12,787)
(69,692)
1,584
17,482
—
(85,755)
—
200
500
(148,468)
Proceeds from term loans, net of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (decrease) increase in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Supplemental disclosures:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term restricted cash included in prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . .
Long-term restricted cash included in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows . . . . . . . .
$
$
$
—
4,595
—
(828)
(1,277)
(29,513)
(27,023)
9,254
(2,645)
305,171
302,526 $
2,159
102,010
295,649
3,567
3,310
302,526
$
$
$
686,386
3,422
(687)
(850,190)
(1,197)
(28,895)
(191,161)
(3,586)
107,463
197,708
305,171 $
20,799
16,990
301,642
3,529
—
305,171
$
$
$
197,554
2,826
(318)
(1,500)
—
(28,285)
170,277
313
96,086
101,622
197,708
6,537
21,051
197,708
—
—
197,708
The accompanying notes are an integral part of these consolidated financial statements.
53
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54
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business
Brooks Automation, Inc. (“Brooks”, or the “Company”) is a leading global provider of manufacturing automation
solutions for the semiconductor industry, and life science sample-based services and solutions for the life sciences market.
In the semiconductor manufacturing market, the Company provides precision robotics, integrated automation systems, and
contamination control solutions to semiconductor fabrication plants and original equipment manufacturers (“OEMs”)
worldwide. In the life sciences market, the Company offers a full suite of services and solutions for analyzing, managing,
and storing biological and chemical compound samples to advance research and development for clinical, pharmaceutical,
and other scientific endeavors. The Company’s life sciences solutions include gene sequencing and synthesis, a broad
suite of high-throughput automated cryogenic storage products, related consumables, sample inventory software, as well
as fully outsourced solutions for sample storage, transport, and inventory management. The Company’s leadership
positions and its global support capability in each of these markets make it a valued business partner to the largest
semiconductor and semiconductor capital equipment manufacturers, and pharmaceutical and life sciences research
institutions in the world.
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 (please
refer to Note 3, “Discontinued Operations” for further information about the discontinued business). 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.
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 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. In connection with the closing the
parties entered into Amendment No. 2 to the Asset Purchase Agreement. As part of this amendment, liabilities assumed
by Edwards were revised to include accounts payable related to the semiconductor cryogenics business. As of
September 30, 2018, the Company revised its accounts payable balance on a continuing operations basis to exclude
accounts payable related to the semiconductor cryogenics business and revised its current liabilities held for sale balance
to include accounts payable related to the semiconductor cryogenics business on its Consolidated Balance Sheets.
Accounts payable and total liabilities of the discontinued operation had also been revised in Note 3, “Discontinued
Operations”. As of September 30, 2018 and 2017, the accounts payable balance related to the semiconductor cryogenics
business was $11.1 million and $10.6 million, respectively. The Company also revised these balances in previously
reported historical periods in the event those periods are presented in any filings.
Risks and Uncertainties
The Company is subject to risks common to companies in the markets it serves, including, but not limited to, global
economic and financial market conditions, fluctuations in customer demand, acceptance of new products, development
by its competitors of new technological innovations, risk of disruption in its supply chain, the implementation of tariffs
and export controls, dependence on key personnel, protection of proprietary technology, and compliance with domestic
and foreign regulatory authorities and agencies.
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the COVID-19 pandemic, the Company’s facilities have remained operational with only required personnel
on site, and the balance of employees working from home. Both business segments fall within the classification of an
“Essential Critical Infrastructure Sector” as defined by the U.S. Department of Homeland Security and have continued
operations during the COVID-19 pandemic. The Company has followed government guidance in each region and has
implemented Centers for Disease Control social distancing guidelines and other best practices to protect the health and
safety of the Company’s employees. The COVID-19 pandemic has not had a substantial impact on our financial results
and a portion of this impact has been mitigated by our realignment of resources to satisfy incremental orders related to
virus research. Future impacts on the Company’s financial results will depend on multiple variables which are not fully
determinable, as the full impact of the pandemic on the economy and markets which the Company serves is as yet
unknown. The variables are many, but fundamentally include reduced demand from the Company’s customers, the degree
that the supply chain may be constrained to impact the Company’s delivery of product, the potential impact to our
operations if there is a significant outbreak among our employees, as well as the amount of incremental demand caused
by research and treatments in the areas of COVID-19 or related threats.
2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The accompanying Consolidated Financial Statements include the accounts of the Company and its majority-owned
subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company applies the
equity method of accounting to investments that provide it with the ability to exercise significant influence over the entities
in which it lacks controlling financial interest and is not a primary beneficiary.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America (“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 financial statements,
as well as 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 assesses the estimates on an
ongoing basis and records changes in estimates in the period they occur and become known. Actual results could differ
from these estimates.
The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business -
including results of operations and financial condition, sales, expenses, reserves and allowances, manufacturing and
employee-related amounts - will depend on future developments that are highly uncertain. This includes results from new
information that may emerge concerning COVID-19 and any actions taken to contain or treat COVID-19, as well as the
economic impact on local, regional, national and international customers and markets. The Company has made estimates
of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods.
Business Combinations
The Company accounts for business acquisitions using the acquisition method of accounting, in accordance with
which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair
value of the consideration paid, including contingent consideration, is assigned to the assets acquired and liabilities
assumed based on their respective fair values. Goodwill represents excess of the purchase price over the estimated fair
values of the assets acquired and liabilities assumed.
Significant judgments are used in determining fair values of assets acquired and liabilities assumed, as well as
intangibles. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash
flows and appropriate discount rates used in computing present values. These judgments may materially impact the
estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s
current and future operating results. Actual results may vary from these estimates which may result in adjustments to
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination
of asset and liability fair values, whichever occurs first. Adjustments to fair values of assets and liabilities made after the
end of the measurement period are recorded within the Company’s operating results.
Foreign Currency Translation
Certain transactions of the Company and its subsidiaries are denominated in currencies other than their functional
currency. Foreign currency exchange gains (losses) generated from the settlement and remeasurement of these transactions
are recognized in earnings and presented within “Other expenses, net” in the Company’s Consolidated Statements of
Operations. Net foreign currency transaction and remeasurement losses totaled $3.4 million, $1.8 million and $3.3 million
for the fiscal years ended September 30, 2020, 2019 and 2018, respectively.
The determination of the functional currency of the Company’s subsidiaries is based on their financial and operational
environment and is the local currency of all of the Company’s foreign subsidiaries. The subsidiaries’ assets and liabilities
are translated into the reporting currency at period-end exchange rates, while revenue, expenses, gains and losses are
translated at the average exchange rates during the period. Gains and losses from foreign currency translations are recorded
in “Accumulated other comprehensive income” in the Company’s Consolidated Balance Sheets and presented as a
component of comprehensive income in the Company’s Consolidated Statements of Comprehensive Income.
Derivative Financial Instruments
All derivatives, whether designated as a hedging relationship or not, are recorded in the Consolidated Balance Sheets
at fair value. The accounting for changes in fair value of a derivative instrument depends on whether it has been designated
and qualifies as part of a hedging relationship and the type of hedging relationship. For those derivative instruments that
are designated and qualify as hedging instruments, the Company must designate the hedging instrument as a fair value
hedge, cash flow hedge or a hedge of a net investment in a foreign operation based on the exposure being hedged. Certain
derivatives held by the Company are not designated as hedges but are used in managing exposure to changes in foreign
exchange rates.
A fair value hedge is a derivative instrument designated for the purpose of hedging the exposure to changes in fair
value of an asset or a liability resulting from a particular risk. If the derivative is designated as a fair value hedge, the
changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are both recognized in the
results of operations and presented in the same caption in the Consolidated Statements of Operations and Consolidated
Statements of Comprehensive Income.
A cash flow hedge is a derivative instrument designated for the purpose of hedging the exposure to variability in future
cash flows resulting from a particular risk. If the derivative is designated as a cash flow hedge, the effective portions of
changes in the fair value of the derivative are recorded in accumulated other comprehensive income and recognized in the
results of operations when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow
hedges are recognized in the results of operations.
A hedge of a net investment in a foreign operation is achieved through a derivative instrument designated for the
purpose of hedging the exposure of changes in value of investments in foreign subsidiaries. If the derivative is designated
as a hedge of a net investment in a foreign operation, the effective portions of changes in the fair value of the derivative
are recorded in other comprehensive income as a part of the foreign currency translation adjustment. Ineffective portions
of net investment hedges are recognized in the results of operations.
For derivative instruments not designated as hedging instruments, changes in fair value are recognized in the
Consolidated Statements of Operations as gains or losses consistent with the classification of the underlying risk.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash deposits
and cash equivalents, marketable securities, derivative instruments and accounts receivable. All of the Company’s cash
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and cash equivalents, restricted cash, marketable securities and derivative instruments are maintained by major financial
institutions.
The Company invests cash not used in operations in investment grade, high credit quality securities in accordance
with the Company’s investment policy which provides guidelines and limits regarding investments type, concentration,
credit quality and maturity terms aimed at maintaining liquidity and reducing risk of capital loss.
The Company regularly monitors the creditworthiness of its customers and believes that it has adequately provided
for exposure to potential credit losses. The Company’s ten largest customers accounted for approximately 33%, 28% and
34% of its consolidated revenue for the fiscal years ended September 30, 2020, 2019 and 2018, respectively. No customers
accounted for more than 10% of the Company’s consolidated revenue for fiscal years 2020, 2019 and 2018.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, marketable securities,
derivative instruments, the term loan, accounts receivable, and accounts payable. Marketable securities and derivative
instruments are measured at fair value based on quoted market prices or observable inputs other than quoted market prices
for identical or similar assets or liabilities. The carrying amounts of cash and cash equivalents, restricted cash, accounts
receivable and accounts payable approximate their fair value due to their short-term nature.
Cash and Cash Equivalents, and Restricted Cash
Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash. At September 30, 2020 and 2019, cash equivalents were $0.1
million and $16.2 million, respectively. Cash equivalents are reported at fair value.
The Company classifies short term restricted cash balances within prepaid expenses and other current assets and long
term restricted cash balances with in other assets on the accompanying consolidated balance sheets based upon the term
of the remaining restrictions.
Accounts Receivable, Allowance for Doubtful Accounts and Sales Returns
Trade accounts receivable do not bear interest and are recorded at the invoiced amount. The Company maintains an
allowance for doubtful accounts representing its best estimate of probable credit losses related to its existing accounts
receivable and their net realizable value. The Company determines the allowance based on a number of factors, including
an evaluation of customer credit worthiness, the age of the outstanding receivables, economic trends and historical
experience. The Company reviews its allowance for doubtful accounts on a quarterly basis and adjusts the balance based
on the Company’s estimates of the receivables’ recoverability in the period the changes in estimates occur and become
known. Accounts receivable balances are written off against the allowance for doubtful accounts when the Company
determines that the balances are not recoverable. Provisions for doubtful accounts are recorded in "Selling, general and
administrative expenses" in the Consolidated Statements of Operations. The Company determines the allowance for sales
returns based on its best estimate of probable customer returns. Provisions for sales returns are recorded in "Revenue" in
the Consolidated Statements of Operations. The Company does not have any off-balance-sheet credit exposure related to
its customers.
Inventories
Inventories are stated at the lower of cost or net realizable value determined on a first-in, first-out basis and include
the cost of materials, labor and manufacturing overhead. The Company reports inventories at their net realizable value and
provides reserves for excess, obsolete or damaged inventory based on changes in customer demand, technology and other
economic factors.
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fixed Assets, Intangible Assets and Impairment of Long-lived Assets
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation expense is computed
based on the straight-line method and charged to results of operations to allocate the cost of the assets over their estimated
useful lives, as follows:
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 - 40 years
3 - 7 years
Computer equipment and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2 - 10 years
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 - 10 years
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining terms of the
respective leases. Equipment used for demonstrations to customers is included in machinery and equipment and
depreciated over its estimated useful life. Repair and maintenance costs are expensed as incurred.
The Company has developed software for internal use. Internal and external labor costs incurred during the application
development stage of a project are capitalized. Costs incurred prior to application development and post implementation
are expensed as incurred. Training and data conversion costs are expensed as incurred. As of September 30, 2020, and
2019, the Company had cumulative capitalized direct costs of $18.2 million and $11.6 million, respectively, associated
with the development of software for its internal use. As of September 30, 2020, this balance included $4.4 million
associated with software still in the development stage which are included within "Property, plant and equipment, net" in
the accompanying Consolidated Balance Sheets. During fiscal year 2020, the Company capitalized direct costs of $6.6
million associated with the development of software for its internal use.
Cost of disposed assets and the associated accumulated depreciation are derecognized upon their retirement or at the
time of disposal, and the resulting gain or loss is included in the Company’s results of operations.
The Company identified finite-lived intangible assets other than goodwill as a result of acquisitions. Finite-lived
intangible assets are valued based on estimated future cash flows and amortized over their estimated useful lives based on
methods that approximate the pattern in which the economic benefits are expected to be realized.
Finite-lived intangibles assets and fixed assets are tested for impairment when indicators of impairment are present.
For purposes of this test, long-lived assets are grouped with other assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If the Company determines
that indicators of potential impairment are present, it assesses the recoverability of long-lived asset group by comparing
its undiscounted future cash flows to its carrying value. The future cash flow period is based on the future service life of
the primary asset within the long-lived asset group. If the carrying value of the long-lived asset group exceeds its future
cash flows, the Company determines fair values of the individual net assets within the long-lived asset group to assess
potential impairment. If the aggregate fair values of the individual net assets of the group are less than their carrying values,
an impairment loss is recognized for an amount in excess of the group’s aggregate carrying value over its fair value. The
loss is allocated to the assets within the group based on their relative carrying values, with no asset reduced below its fair
value.
Finite-lived intangible assets are amortized over their useful lives, as follows:
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Completed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 - 15 years
3 - 15 years
3 - 14 years
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.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
Goodwill
Goodwill represents the excess of purchase price over the fair value of net tangible and identifiable intangible assets
of the businesses acquired by the Company. Goodwill is tested for impairment annually or more often if impairment
indicators are present at the reporting unit level. The Company has elected April 1st as its annual goodwill impairment
assessment date. If the existence of events or circumstances indicates that it is more likely than not that fair values of the
reporting units are below their carrying values, the Company performs additional impairment tests during interim periods
to evaluate goodwill for impairment.
Application of the goodwill impairment test requires significant judgment based on market and operational conditions
at the time of the evaluation, including management’s best estimate of future business activity and the related estimates of
future cash flows from the assets and the reporting units that include the associated goodwill. These periodic evaluations
could cause management to conclude that impairment factors exist, requiring an adjustment of these assets to their then-
current fair market values. Future business conditions and/or activity could differ materially from the projections made by
management which could result in additional adjustments and impairment charges.
The goodwill impairment test is performed at the reporting unit level. A reporting unit is either an operating segment
or one level below it, which is referred to as a “component”. The level at which the impairment test is performed requires
an assessment of whether the operations below an operating segment constitute a self-sustaining business, in which case
testing is generally performed at this level.
In accordance with ASC 350, Intangibles- Goodwill and Other (“ASC 350”), the Company first assesses qualitative
factors to determine whether the existence of events or circumstances indicates that it is more likely than not that the fair
value of a reporting unit is less than its carrying value. If the Company determines, based on this assessment, that it is
more likely than not that the fair value of the reporting unit is less than its carrying value, it performs a quantitative
goodwill impairment test by comparing the reporting unit’s fair value with its carrying value. An impairment loss is
recognized for the amount by which the reporting unit’s carrying value exceeds its fair value, up to the total amount of
goodwill allocated to the reporting unit.
The Company determines fair values of its reporting units based on an income approach in accordance with the
discounted cash flow method (DCF Method). The DCF Method is based on projected future cash flows and terminal value
estimates discounted to their present values. Terminal value represents a present value an investor would pay on the
valuation date for the rights to the cash flows of the business for the years subsequent to the discrete cash flow projection
period. The observable inputs used in the DCF Method include discount rates set above the Company’s weighted-average
cost of capital. The Company derives discount rates that are commensurate with the risks and uncertainties inherent in the
respective businesses and its internally developed projections of future cash flows. The Company considers the DCF
Method to be the most appropriate valuation technique since it is based on management’s long-term financial projections.
In addition, to determining the fair value of the Company’s reporting units based on the DCF method, the Company also
compares the aggregate values of its net corporate assets and reporting unit fair values to its overall market capitalization
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and uses certain market-based valuation techniques to assess the reasonableness of the reporting unit fair values determined
in accordance with the DCF Method.
Deferred Financing Costs
The Company records commitment fees and other costs directly associated with obtaining the term loan and line of
credit financing as deferred financing costs which are presented as a reduction of Long-term debt on the Consolidated
Balance Sheets. Deferred financing costs were $0.7 million and $0.9 million at September 30, 2020 and 2019, respectively.
Such costs are amortized over the term of the related financing arrangement and included in “Interest expense” in the
accompanying Consolidated Statements of Operations. Amortization expense related to deferred financing costs was $0.2
million and $1.1 million for fiscal years ended September 30, 2020 and 2019, respectively, and was included in interest
expense in the accompanying Consolidated Statements of Operations. Please refer to Note 10, “Line of Credit” and
Note 11, “Debt” for further information on this arrangement.
Warranty Obligations
The Company offers warranties on the sales of certain of its products and records warranty obligations for estimated
future claims at the time revenue is recognized. Warranty obligations are estimated based on historical experience and
management’s estimate of the level of future claims.
Revenue Recognition
The Company generates revenue from the following sources:
• Products, including sales of tool automation and automated cold sample management systems, atmospheric and
vacuum robots, contamination control solutions, consumables, instruments, spare parts and software.
• Services, including repairs, upgrades, diagnostic support, installation, as well as biological sample services such
as DNA sequencing, gene synthesis, molecular biology, bioinformatics, biological sample storage and other
support services.
The Company recognizes revenue for the transfer of such promised products or services to customers in an amount
that reflects the consideration to which the Company expects to be entitled to in exchange for those products or services.
Under ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when or as the transfer of
control of the underlying performance obligation occurs. To determine the amount of consideration the Company expects
to be entitled to and whether transfer of control has occurred, the Company applies the following five-step model:
•
•
Identify the contract with a customer. Contracts are accounted for when approval and commitment has been
received from both parties, the rights of each party are identified, payment terms are identified, the contract has
commercial substance and collectability of the consideration to which the Company is entitled is probable.
Contracts are generally evidenced through receipt of an approved purchase order or execution of a binding
arrangement. Within the Brooks Semiconductor Solutions Group segment, contracts are typically short-term with
the exception of service-type warranty contracts, which generally have a stated contract term that is greater than
one year. Within the Brooks Life Sciences segments, contracts are both short and long-term. Long-term contracts
within the segments relate to the sale of products with attached service-type warranty contracts that generally
have a stated contract term that is greater than one year. Contracts within all operating segments may contain
acceptance provisions where the Company is required to obtain technical acceptance from the customer upon
completion of installation services and evidence of the systems functional performance within the customer’s
operating environment. The Company has concluded that acceptance criteria within its contracts can be
objectively evaluated and will not impact the Company’s transfer of control assessment under ASC 606.
Identify the performance obligations in the contract. Performance obligations include the sale of products and
services. Certain customer arrangements related to the sale of automated cold sample management systems and
contamination control solution products generally include more than one performance obligation and may include
a combination of goods and or services, such as products with installation services or service-type warranty
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
obligations. These contracts include multiple promises and as a result, the Company is required to evaluate each
promise and determine whether the promise qualifies as a performance obligation within the contract. Contracts
may contain the option to acquire additional products or services at defined prices. The Company reviews the
pricing of these options to determine whether the option would exist independently of the current contract. If the
pricing of contract options provides a material right to the customer that it would not receive without entering
into the current contract, the Company accounts for the option as a separate performance obligation.
• Determine the transaction price. The transaction price of the Company’s contracts with its customer is generally
fixed, based on the amounts to be contractually billed to the customer. Certain contracts may contain variable
consideration in the form of customer allowances and rebates that consist primarily of retrospective volume based
discounts and other incentive programs. Variable consideration is estimated at contract inception and included in
the transaction price if it is probable that a subsequent change in the estimate would not result in a significant
revenue reversal. The period between transfer of control of the performance obligations within a customer
contract and timing of payment is generally within one year. As a result, the Company’s contracts typically do
not include significant financing components.
• Allocate the transaction price to the performance obligations in the contract. For customer contracts that contain
more than one performance obligation, the Company allocates the total transaction consideration to each
performance obligation based on the relative stand-alone selling price of each performance obligation within the
contract. The Company relies on either observable standalone sales or an expected cost plus margin approach to
determine the standalone selling price of offerings, depending on the nature of the performance obligation.
Performance obligations whose standalone selling price is estimated using an expected cost plus margin approach
relate to the sale of customized automated cold sample management systems and service-type warranties within
the life sciences segments.
• Recognize revenue when or as the Company satisfies a performance obligation. The Company satisfies its
performance obligations by transferring a product or service either at a point in time or over time, when the
transfer of control of the underlying performance obligation has occurred. Control is evidenced by the customer’s
ability to direct the use of and obtain substantially all the remaining benefits from the performance obligation.
Revenue from third-party sales for which the Company does not meet the criteria for gross revenue recognition
is recognized on a net basis. All other revenue is recognized on a gross basis. The Company excludes from the
transaction price all sales taxes assessed by governmental authorities and as a result, revenue is presented net of
tax.
As a result of applying this five-step model under ASC 606, the Company recognizes revenues from its sale of
products and services as follows:
• Products: Revenue from the sale of standard products is recognized upon their transfer of control to the customer,
which is considered complete at either the time of shipment or arrival at destination, based on the agreed upon
terms within the contract. The Company’s payment terms for the sale of standard products are typically 30 to
60 days.
Revenue from the sales of certain products that involve significant customization, which include primarily
automated cold sample management systems is recognized over time as the asset created by the Company’s
performance does not have alternative use to the Company and an enforceable right to payment for performance
completed to date is present. The Company recognizes revenue as work progresses based on a percentage of
actual labor hours incurred on the project to-date and total estimated labor hours expected to be incurred on the
project. The selection of the method to measure progress towards completion requires judgment. The Company
has concluded that using the percentage of labor hours incurred to estimated labor hours needed to complete the
project most appropriately depicts the Company’s efforts towards satisfaction of the performance obligation. The
Company develops profit estimates for long-term contracts based on total revenue expected to be generated from
the project and total costs anticipated to be incurred in the project. These estimates are based on a number of
factors, including the degree of required product customization and the work required to be able to install the
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
product in the customer’s existing environment, as well as the Company’s historical experience, project plans and
an assessment of the risks and uncertainties inherent in the contract related to implementation delays or
performance issues that may or may not be within the Company’s control. The Company estimates a loss on a
contract by comparing total estimated contract revenue to the total estimated contract costs and recognizes a loss
during the period in which it becomes probable and can be reasonably estimated. The Company reviews profit
estimates for long-term contracts during each reporting period and revises the estimate based on changes in
circumstances. Revenue for certain arrangements that involve significant product customization but do not
provide the Company with an enforceable right to payment for performance completed to date are recognized at
a point in time, upon completion or substantial completion of the project, provided transfer of control has
occurred. The project is considered substantially complete when the Company receives acceptance from the
customer and remaining tasks are perfunctory or inconsequential and in control of the Company. Generally, the
terms of long-term contracts provide for progress billings based on completion of milestones or other defined
phases of work. In certain instances, payments collected from customers in advance of recognizing the related
revenue are recorded and presented as contract liabilities within “Deferred revenue” on the Company’s
Consolidated Balance Sheet. Additionally, due to certain billing constraints within contracts, the customer may
retain a portion of the contract price until completion of the contract. In these contracts, revenue recognized may
exceed billings, which the Company presents as a contract asset on the balance sheet, which is included within
the “Prepaid expenses and other current assets” on the Company’s Consolidated Balance Sheet.
•
Services: Service revenue is generally recognized ratably over time or on an output method, as the customer
simultaneously receives and consumes the benefit of these services as they are performed. Payments related to
service-type warranties may be made up front or proportionally over the contract term. Payment due or received
from the customers prior to rendering the associated services are recorded as a contract liability.
• Genomic Services: The Company’s Genomic Services are professional services which includes Sanger
Sequencing, Next Generation Sequencing, Gene Synthesis and Gene Editing-CRISPR based gene editing. In
each case, the customer realizes and consumes the benefit of these services as they are performed. Revenue from
Genomic Services is recognized over time and is based upon the fact that transfer of control takes place over time
as determined using the input method of costs incurred.
Research and Development Expense
Research and development costs are expensed as incurred. Research and development costs consist primarily of
personnel expenses related to development of new products, as well as enhancements and engineering changes to existing
products and development of hardware and software components.
Stock-Based Compensation Expense
The Company measures stock-based compensation cost at fair value on the grant date and recognizes the expense
over the service period for the awards expected to vest. The fair value of restricted stock units is determined based on the
number of shares granted and the closing price of the Company’s common stock quoted on Nasdaq on the date of grant.
For awards that vest based on service conditions, the Company recognizes stock-based compensation expense on a
straight-line basis over the requisite service period. For awards that vest subject to performance conditions, the Company
recognizes stock-based compensation expense ratably over the performance period if it is probable that performance
condition will be met and adjusted for the probability percentage of achieving the performance goals. The Company makes
estimates of stock award forfeitures and the number of awards expected to vest. The Company considers many factors in
developing forfeiture estimates, including award types, employee classes and historical experience. Each quarter, the
Company assesses the probability of achieving the performance goals. Current estimates may differ from actual results
and future changes in estimates.
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table reflects stock-based compensation expense, excluding amounts related to discontinued operations,
recorded during the fiscal years ended September 30, 2020, 2019 and 2018 (in thousands):
Restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,818
Employee stock purchase plan . . . . . . . . . . . . . . . . . . .
1,499
Total stock-based compensation expense . . . . . . . . . . $ 16,317
2020
Year Ended September 30,
2019
18,276
1,203
19,479
2018
$ 18,081
775
$ 18,856
$
$
Valuation Assumptions for an Employee Stock Purchase Plan
The fair value of shares issued under the employee stock purchase plan is estimated on the commencement date of
each offering period using the Black-Scholes option-pricing model with the following weighted average assumptions for
the fiscal years ended September 30, 2020, 2019 and 2018:
Risk-free interest rate . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . .
0.9 %
58 %
2.3 %
52 %
1.9 %
46 %
6 months
6 months
6 months
1.1 %
1.2 %
1.5 %
Year Ended September 30,
2019
2020
2018
The risk-free rate is based on the U.S. Treasury yield curve for notes with terms approximating the expected life of
the shares granted. The expected stock price volatility is determined based on the Company’s historic stock prices over a
period commensurate with the expected life of the shares granted. The expected life represents the weighted average period
over which the shares are expected to be purchased. Dividend yields are projected based on the Company’s history of
dividend declarations and management’s intention for future dividend declarations.
Income Taxes
The Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are
recognized for the future tax differences between the financial statement carrying amounts of existing assets and liabilities
and their respective income tax bases, as well as operating loss and tax credit carryforwards. The Company’s Consolidated
Financial Statements contain certain deferred tax assets that were recorded as a result of operating losses, as well as other
temporary differences between financial and tax accounting. A valuation allowance is established against deferred tax
assets if, based upon the evaluation of positive and negative evidence and the extent to which that evidence is objectively
verifiable, it is more likely than not that some or all of the deferred tax assets will not be realized.
Significant management judgment is required in determining the Company’s income tax provision, the Company’s
deferred tax assets and liabilities and any valuation allowance recorded against those net deferred tax assets. The Company
evaluates the weight of all available evidence to determine whether it is more likely than not that some portion or all of
the net deferred income tax assets will not be realized.
The calculation of the Company’s income tax liabilities involves consideration of uncertainties in the application of
complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The
first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it
is more likely than not that the position will be sustained upon an audit or an examination conducted by taxing authorities,
including resolution of related appeals or litigation processes, if any. If the Company determines that a tax position will
more likely than not be sustained, the second step requires the Company to estimate and measure the tax benefit as the
largest amount that is more likely than not to be realized upon ultimate settlement. It is inherently difficult and subjective
to estimate such amounts, as the Company has to determine the probability of various possible outcomes. The Company
re-evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors, such as changes in facts
or circumstances, tax law, new audit activity and effectively settled issues. Determining whether an uncertain tax position
is effectively settled requires judgment. A change in recognition or measurement may result in the recognition of a tax
benefit or an additional charge to the tax provision.
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Earnings Per Share
Basic income per share is determined by dividing net income by the weighted average common shares outstanding
during the period. Diluted income per share is determined by dividing net income by diluted weighted average shares
outstanding during the period. Diluted weighted average shares reflect the dilutive effect, if any, of potential common
shares. To the extent their effect is dilutive, employee equity awards and other commitments to be settled in common stock
are included in the calculation of diluted income per share based on the treasury stock method. Potential common shares
are excluded from the calculation of dilutive weighted average shares outstanding if their effect would be anti-dilutive at
the balance sheet date based on a treasury stock method or due to a net loss.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of
Reference Rate Reform on Financial Reporting. The ASU provides temporary optional expedients and exceptions to the
GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the
expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to
alternative reference rates. The provisions of this ASU are only available until December 31, 2022, when the reference
rate replacement activity is expected to be completed. The Company is currently evaluating the impact this guidance may
have on its consolidated financial statements and related disclosures.
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 currently evaluating the impact this guidance may have on its consolidated financial statements and
related disclosures.
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 this guidance may have on its consolidated financial statements and related disclosures.
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 this guidance may
have on its consolidated financial statements and related disclosures.
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
disclosure requirements related to fair value measurement. The amendments include new disclosure requirements 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
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 this guidance may have on its consolidated financial statements
and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses
on Financial Instruments. 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,
ASU 2019-05 “Financial Instruments-Credit Losses”, ASU 2019-11, Codification Improvements to Topic 326, Financial
Instruments - Credit Losses, and ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842)
to clarify and address certain items related to the amendments in ASU 2016-13. Topic 326 provides guidance for
recognizing credit losses on financial instruments based on an estimate of current expected credit losses model. 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 this guidance may have on its consolidated
financial statements and related disclosures.
Recently Adopted Accounting Pronouncements
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 liability on October 1, 2019.
The adoption of the standard did not impact the Consolidated Results of Operations or Consolidated Statement of Cash
Flows. See Note 7, “Leases” for further information.
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 $661.5 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
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
The semiconductor cryogenics business consists 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 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.
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the financial results of discontinued operations (in thousands):
2020
Year Ended September 30,
2019
2018
Revenue
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (loss), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes and earnings of equity
method investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before equity in earnings of equity method
-
-
-
-
-
-
-
-
(171)
-
(171)
171
(410)
(239)
(57)
$
76,227 $
33,291
109,518
47,148
19,016
66,164
43,354
6,605
20,889
24
27,518
15,836
539,948
555,784
134,110
investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of equity method investment . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(182)
-
(182) $
421,674
6,188
427,862 $
150,365
45,731
196,096
85,350
22,834
108,184
87,912
7,605
25,017
2
32,624
55,288
1,091
56,379
14,420
41,959
6,788
48,747
The Company did not record income or loss related to our semiconductor cryogenics business for the fiscal year ended
September 30, 2020. The table above reflects revenue for the year ended September 30, 2019 in accordance with ASC
606, while results for the years ended September 30, 2018 have not been restated and are reported in accordance with the
governing revenue recognition standards applicable to those periods prior to adoption of ASC 606. Results for the year
ended September 30, 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 concluded that there was no
impairment indicator related to the goodwill of the Disposition group at either date the impairment analysis was performed.
The Company did not include goodwill related to the semiconductor cryogenics business in its annual impairment analysis
in April 2019, as the Disposition was classified as assets held for sale.
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the summarized financial information for Ulvac Cryogenics, Inc., the unconsolidated
subsidiaries accounted for based on the equity method (in thousands):
Statements of Operations:
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88,357 $
35,127
17,791
12,483
94,652
34,982
18,405
13,345
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):
Year Ended September 30,
2019
2018
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings of equity method investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 $
666
635
(6,188)
743
302
966
(6,788)
Year Ended September 30,
2019
2018
4. Acquisitions
Acquisitions Completed in Fiscal Year 2020
Acquisition of RURO Inc.
On February 11, 2020, the Company acquired RURO, Inc. (“RURO”), an informatics software company based in
Frederick, Maryland. RURO provides cloud-based software solutions to manage laboratory workflow and bio-sample
data for a broad range of customers in the biotech, healthcare, and pharmaceutical sectors. The addition of RURO's
capabilities and offerings will enable the Company to offer enhanced on-site and off-site management of biological sample
inventories as well as integration solutions to its customers for their increasingly distributed workflow. The total cash
purchase price of the acquisition was $15.6 million, net of cash acquired, subject to net working capital adjustments.
The Company recorded the assets acquired and liabilities assumed related to RURO at their fair values as of the
acquisition date, from a market participant’s perspective. While the Company uses its best estimates and assumptions as
part of the purchase price allocation process to value the assets acquired and liabilities assumed on the acquisition date, its
estimates and assumptions are subject to refinement. 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 finalization of the assignment of fair values will be completed within
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
one year. The following table presents the preliminary net purchase price and the fair values of the assets and liabilities of
RURO (in thousands):
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total purchase price, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fair Value of
Assets and
Liabilities
1,220
29
11,116
6,042
230
(15)
(1,320)
(344)
(91)
(1,091)
(147)
15,629
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 $2.9 million with a useful
life of 12 years, technology (relief from royalty method) of $2.9 million with a useful live of 9 years and trademarks (relief
from royalty method) of $0.2 million with a useful life of 5 years. The intangible assets acquired are amortized over the
total weighted average period of 10.3 years using methods that approximate the pattern in which the economic benefits
are expected to be realized.
Goodwill of $11.1 million largely reflects the potential synergies and expansion of the Company’s core technologies
and offerings in the life sciences businesses. The goodwill from this acquisition is not tax deductible.
The Company reported the results of operations for RURO in the Brooks Life Sciences Services segment starting
from the acquisition date. The revenues and net income from RURO recognized in the Company's consolidated results of
operations were $3.8 million and $0.6 million, respectively, for the period between the acquisition date and September 30,
2020. During the period between the acquisition date and September 30, 2020, the amortization expense of acquired
intangible assets was $0.6 million. During the year ended September 30, 2020, the Company incurred $0.3 million in
transaction costs, which were recorded in "Selling, general and administrative" expenses within the accompanying
unaudited Consolidated Statements of Operations.
Acquisitions 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 the opportunity to add 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 11,
“Debt” to pay a portion of the purchase price.
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
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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):
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term tax reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total purchase price, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fair Value of
Assets and
Liabilities
28,566
4,370
11,635
36,379
235,160
189,129
15,998
(3,170)
(6,522)
(67)
(5,145)
(10,073)
(2,482)
(13,400)
(34,993)
(2,681)
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 businesses. The goodwill from this acquisition is reported within the Brooks Life Sciences
Services segment and is not tax deductible.
The revenues and net income from GENEWIZ recognized in the Company’s consolidated results of operations were
$166.4 million and $7.2 million, respectively, during the year ended September 30, 2020. The revenues and net income
from GENEWIZ recognized in the Company’s consolidated results of operations were $126.3 million and $3.2 million,
respectively, during the year ended September 30, 2019. During the year ended September 30, 2020 and 2019, net income
included $20.3 million and $11.4 million, respectively, related to amortization expense of acquired intangible assets. The
Company incurred $0.1 million, $6.5 million and $3.8 million, respectively, in transaction costs with respect to the
GENEWIZ acquisition during the years ended September 30, 2020, 2019 and 2018. Transaction costs were recorded in
"Selling, general and administrative" expenses within the accompanying unaudited Consolidated Statements of
Operations.
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following unaudited pro forma information reflects the Company’s consolidated results of operations as if the
acquisition had taken place on October 1, 2017. The unaudited pro forma information is not necessarily indicative of the
results of operations that the Company would have reported had the transaction actually occurred at the beginning of these
periods nor is it necessarily indicative of future results. The unaudited pro forma financial information does not reflect the
impact of future events that may occur after the acquisition, including, but not limited to, anticipated costs savings from
synergies or other operational improvements (in thousands).
Year Ended September 30,
2018
2019
(pro forma)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
797,501 $
10,350
752,061
2,273
The unaudited pro forma financial information presented in the table above includes adjustments for the application
of the Company’s accounting policies, elimination of related party transactions, depreciation and amortization related to
fair value adjustments to property, plant and equipment and intangible assets, and interest expense on acquisition related
debt.
To present the Company’s consolidated results of operations as if the acquisition had taken place on October 1, 2017,
the unaudited pro forma earnings for the years ended September 30, 2019 and 2018 have been adjusted to include the
following additional expenses related to the acquisition: $1.6 million and $12.7 million, respectively, of depreciation and
amortization related to the fair value step up of property, plant, and equipment and leases, recording of intangible assets,
$0 million and $53.6 million, respectively, of one-time nonrecurring compensation expenses and transaction costs related
to the GENEWIZ acquisition, $2.0 million and $19.8 million, respectively, of interest expense related to financing
activities.
Acquisitions Completed in Fiscal Year 2018
Acquisition of Tec-Sem
On April 6, 2018, the Company acquired approximately 93% of the outstanding capital stock of Tec-Sem Group AG
(“Tec-Sem”), a Switzerland-based manufacturer of semiconductor fabrication automation equipment with a focus on
reticle management. In the fourth quarter of fiscal year 2018, the Company acquired the remaining 7% noncontrolling
interest upon the completion of certain procedural steps. The total cash payment to acquire the business was $15.6 million,
net of cash acquired and subject to working capital adjustments. The acquisition of Tec-Sem has expanded the Company’s
contamination control solutions business within the Brooks Semiconductor Solutions Group segment.
The Company used a market participant approach to record the assets acquired and liabilities assumed with the Tec-
Sem acquisition as follows (in thousands):
Fair Value of Assets
and Liabilities
Accounts receivable (approximates contractual value) . . . . . . . . . . . . . . . . . . . $
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total purchase price, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
988
4,297
4,038
85
10,694
7,665
(1,049)
(6,962)
(1,391)
(2,800)
15,565
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company applied variations of the income approach to estimate the fair values of the intangible assets acquired.
The identifiable intangible assets include completed technology (excess earnings method) of $8.4 million with a useful
life of 10 years, backlog (excess earnings method) of $1.6 million with a useful life of 1 year, and customer relationships
(distributor method) of $0.7 million with a useful life of 9 years. The intangible assets acquired are amortized over the
total weighted average period of 8.6 years using methods that approximate the pattern in which the economic benefits are
expected to be realized.
Goodwill of $7.7 million largely reflects the potential synergies and expansion of technical capabilities to the
Company's existing contamination control solutions business. The goodwill from this acquisition is reported within the
Brooks Semiconductor Solutions Group segment and is not tax deductible.
As part of the acquisition, the Company assumed all the assets and liabilities of Tec-Sem’s Swiss defined benefit plan,
which covered substantially all its full-time employees. At acquisition date, the plan was fully funded for each employee’s
pension contribution plus an expected rate of return equal to the statutory discount rate. Total plan assets and plan liability
were $5.1 million and $7.9 million, respectively, at acquisition date. The Company recorded a liability of $2.8 million for
the unfunded projected benefit obligation related to each plan participant’s future services.
The Company reports the results of operations for Tec-Sem in the Brooks Semiconductor Solutions Group segment.
The revenues and net income from Tec-Sem included in the Company's consolidated results for fiscal year 2020 were
$25.3 million and $7.3 million, respectively. The revenues and net income from Tec-Sem included in the Company's
consolidated results for fiscal year 2019 were $30.9 million and $8.1 million, respectively. The revenues and net loss from
Tec-Sem included in the Company's consolidated results for fiscal year 2018 were $11.6 million and $1.2 million,
respectively. During fiscal years 2020, 2019 and 2018, the net income (loss) included $1.7 million, $2.7 million, and $2.1
million, respectively, related to amortization expense of acquired intangible assets. During fiscal years 2019 and 2018, the
net income included $0.2 million and $0.7 million, respectively, related to the step-up in value of the acquired inventories
and related to amortization expense of acquired intangible assets. During fiscal year 2018, the Company also incurred $0.9
million in transaction costs related to the Tec-Sem acquisition.
The escrow at closing had a balance of $2.6 million which consisted of $1.8 million related to satisfaction of the
sellers' indemnification obligations with respect to their representations and warranties and other indemnities. The
remaining $0.8 million of the escrow balance is related to a performance obligation that the Company assumed at the
acquisition date for the transfer of non-core wafer stocker technology to an unrelated third party. The escrow balances had
been fully released during fiscal year 2020.
The Company did not present a pro forma information summary for its consolidated results of operations for the fiscal
years ended September 30, 2018 and 2017 as if the acquisition of Tec-Sem occurred on October 1, 2016 because such
results were immaterial.
Acquisition of 4titude Limited
On October 5, 2017, the Company acquired all the outstanding capital stock of 4titude Limited (“4titude”), a U.K.-
based manufacturer of scientific consumables for biological sample materials used in a variety of genomic and DNA
analytical applications. The acquisition of 4titude has expanded the Company’s existing offerings of consumables and
instruments within the Brooks Life Sciences segments. The aggregate purchase price of $65.1 million, net of cash acquired,
consisted primarily of a cash payment of $64.8 million subject to working capital adjustments and the assumption of the
seller’s liabilities of $0.4 million.
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company used a market participant approach to record the assets acquired and liabilities assumed in the 4titude
acquisition as follows (in thousands):
Fair Value of
Assets and
Liabilities
Accounts receivable (approximates contractual value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total purchase price, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,581
2,667
140
1,555
27,212
38,185
(286)
(845)
(5,090)
65,119
The Company applied variations of the income approach to estimate the fair values of the intangible assets acquired.
The identified intangible assets include customer relationships (excess earnings method) of $21.4 million with a useful life
of 10 years, completed technology (relief from royalty method) of $5.2 million with a useful life of 13 years, backlog
(excess earnings method) of $0.4 million with a useful life of 1 year and trademarks (excess earnings method) of $0.2
million with a useful life of 1 year. The intangible assets acquired are amortized over the total weighted average period of
10.4 years using methods that approximate the pattern in which the economic benefits are expected to be realized.
At the acquisition date, a cash payment of $0.4 million was placed into escrow which was ascribed to the purchase
price. The escrow was related to satisfaction of the sellers' indemnification obligations with respect to their representations
and warranties and other indemnities. The escrow balance was fully released during fiscal year 2020.
Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired and has been
assigned to the Brooks Life Sciences Products segment. Goodwill is primarily the result of expected synergies from
combining the operations of 4titude with the Company’s operations and is not deductible for tax purposes.
The operating results of 4titude have been reflected in the results of operations for the Brooks Life Sciences Products
segment. During fiscal year 2020, revenue and net loss from 4titude recognized in the Company’s results of operations
were $21.7 million and $3.9 million, respectively. During fiscal year 2019, revenue and net income from 4titude
recognized in the Company’s results of operations were $16.1 million and $0.7 million, respectively. During fiscal year
2018, revenue and net loss from 4titude recognized in the Company’s results of operations were $15.9 million and $0.8
million, respectively. The net income (loss) in fiscal years 2020, 2019, and 2018 included recurring charges of $3.7 million,
$3.7 million, $4.1 million, respectively, related to amortization expense of acquired intangible assets. The net loss in fiscal
year 2018 also included non-recurring charges of $1.2 million related to the step-up in value of the acquired inventories.
During fiscal year 2018, the Company incurred $1.1 million in non-recurring transaction costs with respect to the 4titude
acquisition.
The Company did not present a pro forma information summary for its consolidated results of operations for the fiscal
years ended September 30, 2018 and 2017 as if the acquisition of 4titude occurred on October 1, 2016 because such results
were immaterial.
Other
On April 20, 2018, the Company acquired BioSpeciMan Corporation (“BioSpeciMan”), a Canada-based provider of
storage services for biological sample materials. BioSpeciMan, founded in 2002, provides temperature controlled
biological sample storage services to an attractive mix of pharma, biotech and contract laboratory customers. This
acquisition has expanded customer relationships and geographic reach within its growing sample management storage
services business in the Brooks Life Sciences segments. The total cash payment made by the Company was $5.2 million,
net of cash acquired and subject to working capital adjustments.
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company allocated the purchase price of $5.2 million based on the fair value of the assets and liabilities acquired,
which included $0.3 million of accounts receivable, $2.6 million of customer relationships, $2.7 million of goodwill and
$0.7 million of assumed liabilities. The Company applied the excess earnings method, a variation of the income approach
to determine the fair value of the customer relationship intangible asset. The goodwill from this acquisition is reported
within the Brooks Life Sciences Services segment and is not tax deductible.
At the acquisition date, a cash payment of $0.5 million was placed into escrow which was ascribed to the purchase
price. The escrow was related to satisfaction of the sellers' indemnification obligations with respect to their representations
and warranties and other indemnities.
The operating results of the acquisition have been reflected in the results of operations for the Brooks Life Sciences
Services segment. The Company did not present a pro forma information summary for its consolidated results of operations
for the fiscal years ended September 30, 2018 and 2017 as if the acquisition of BioSpeciMan occurred on October 1, 2016
because such results were immaterial.
5. Marketable Securities
The Company invests in marketable securities that are classified as available-for-sale and recorded at fair value in the
Company’s 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.
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 Consolidated Statements of Operations. During fiscal year 2020, the Company sold marketable securities
with a fair value and amortized cost of $2.5 million and recognized a net gain of less than $0.1 million. As a result, during
this period, the Company collected cash proceeds of $2.5 million from the sale of marketable securities and reclassified
unrealized net holding gains of less than $0.1 million from accumulated other comprehensive income into "Other expenses,
net" in the accompanying Consolidated Statements of Operations as a result of these transactions. During fiscal year 2019,
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 unrealized net holding losses of $0.1
million from accumulated other comprehensive income into "Other expenses, net" in the accompanying Consolidated
Statements of Operations as a result of these transactions.
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of the amortized cost and the fair value, including accrued interest receivable, as well as
unrealized holding gains (losses) on the short-term and long-term marketable securities as of September 30, 2020 and 2019
(in thousands):
Gross
Gross
Amortized Unrealized Unrealized
Losses
Gains
Cost
Fair Value
September 30, 2020:
Bank certificates of deposits . . . . . . . . . . . . . . . $
Corporate securities . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . .
51 $
3,101
16
$ 3,168 $
— $
—
—
— $
51
— $
3,101
—
—
16
— $ 3,168
September 30, 2019:
U.S. Treasury securities and obligations of
U.S. government agencies . . . . . . . . . . . . . . . . . $ 31,863 $
Bank certificates of deposits . . . . . . . . . . . . . . .
Corporate securities . . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . .
750
4,317
35
$ 36,965 $
(2) $
—
—
—
(2) $
5 $ 31,866
750
—
4,318
1
35
—
6 $ 36,969
The fair values of the marketable securities by contractual maturities at September 30, 2020 are presented below (in
thousands).
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after five years through ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fair Value
67
—
—
3,101
3,168
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 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 September 30, 2020. The aggregate fair value of the marketable securities in 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 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.
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Property, Plant and Equipment
Property, plant and equipment were as follows as of September 30, 2020 and 2019 (in thousands):
Buildings, land, and land use right . . . . . . . . . . . . . . . . . . . . . . . . . . $
Computer equipment and software . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital projects in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: accumulated depreciation and amortization . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . $
September 30,
2019
2020
50,748 $ 50,583
61,603
70,673
89,481
97,806
7,423
7,578
30,612
40,728
11,701
21,020
—
2,540
251,403
291,093
(173,428)
(150,734)
117,665 $ 100,669
Depreciation expense was $23.7 million, $19.3 million and $12.5 million, respectively, for the fiscal years ended
September 30, 2020, 2019 and 2018. The Company recorded $3.0 million of additions to property, plant and equipment
for which cash payments had not yet been made as of September 30, 2020.
7. Leases
The Company has operating leases for real estate and non-real estate and finance leases for non-real estate in North
America, Europe, and Asia. Non-real estate leases are primarily related to vehicles and office equipment. Lease expiration
dates range between 2020 and 2039.
The components of operating lease expense were as follows (in thousands):
Year Ended September 30, 2020
Operating lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Finance lease costs:
Amortization of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total finance lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9,288
1,246
95
1,341
1,951
526
13,106
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Supplemental balance sheet information related to leases is as follows (in thousands, except lease term and discount
rate):
Operating Leases:
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Finance Leases:
Property, plant and equipment, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average remaining lease term (in years):
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average discount rate:
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of September 30, 2020
39,071
7,015
31,855
38,870
2,540
(1,246)
1,294
1,135
348
1,483
8.72
1.32
3.92 %
4.73 %
Supplemental cash flow information related to leases was as follows (in thousands, unaudited):
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating cash flows from finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing cash flows from finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,638
95
1181
Year Ended September 30, 2020
Future lease payments for operating and finance leases as of September 30, 2020 were as follows for the subsequent
five fiscal years and thereafter (in thousands):
Operating Leases
Finance Leases
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total future lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease liability balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
8,363 $
6,148
4,899
4,680
4,068
18,519
46,677
(7,807)
38,870 $
1,175
363
-
-
-
-
1,538
(55)
1,483
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Future lease payments for operating and capital leases as of September 30, 2019 were as follows for the subsequent
five fiscal years and thereafter (in thousands):
Operating Leases
Capital Leases
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total future lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease liability balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6,794 $
5,520
3,904
3,110
2,934
10,499
32,761
(5,685)
27,076 $
1,276
1,171
363
-
-
-
2,810
(150)
2,660
As of September 30, 2020, the Company has not entered into any significant leases that have not commenced yet.
8. Goodwill and Intangible Assets
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 1st as its annual goodwill impairment assessment date. If
the existence of events or circumstances indicates that it is more likely than not that fair values of the reporting units are
below their carrying values, the Company performs additional impairment tests during interim periods to evaluate goodwill
for impairment.
In accordance with ASC 350, the Company initially assesses qualitative factors to determine whether the existence of
events or circumstances indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying
value. If the Company determines, based on this assessment, that it is more likely than not that the fair value of the reporting
unit is less than its carrying value, it performs a quantitative goodwill impairment test by comparing the reporting unit’s
fair value with its carrying value. An impairment loss is recognized for the amount by which the reporting unit’s carrying
value exceeds its fair value, up to the total amount of goodwill allocated to the reporting unit. No impairment loss is
recognized if the fair value of the reporting exceeds its carrying value.
The Company completed its annual goodwill impairment test as of April 1, 2020 for its six reporting units, including
Automation Solutions, Contamination Control Solutions and Global Semiconductor Services within the Brooks
Semiconductor Solutions Group segment, Sample Repository Solutions and GENEWIZ within the Brooks Life Sciences
Services segment, and Brooks Life Sciences Products as the only reporting unit within the Brooks Life Sciences Products
segment. Based on the test results, the Company determined that no adjustment to goodwill was necessary. The Company
conducted a qualitative assessment for the three reporting units within the Brooks Semiconductor Solutions Group segment
and determined that it was more likely than not that their fair values were greater than their carrying values. As a result of
the analysis, the Company did not perform the quantitative assessment for these reporting units, and therefore, did not
recognize any impairment losses. The Company performed the quantitative goodwill impairment test for the three
reporting units within the life sciences businesses. The Company determined that no adjustment to goodwill was necessary
for these three reporting units. The Life Sciences Products and the Sample Repository Solutions unit’s fair values
significantly exceeded book value. The GENEWIZ reporting unit, which was acquired in the first quarter of fiscal year
2019, also had a fair value in excess of its book value.
79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the changes in the carrying amount of goodwill by reportable segment since
September 30, 2018 (in thousands):
Gross goodwill, at September 30, 2018 . . . . . . . . . . $
Accumulated goodwill impairments . . . . . . . . . . . . .
Goodwill, net of accumulated impairments, at
September 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions and adjustments . . . . . . . . . . . . . . . . . .
Gross goodwill, at September 30, 2019 . . . . . . . . . . .
Accumulated goodwill impairments . . . . . . . . . . . . .
Goodwill, net of accumulated impairments, at
September 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions and adjustments . . . . . . . . . . . . . . . . . .
Gross goodwill, at September 30, 2020 . . . . . . . . . . .
Accumulated goodwill impairments . . . . . . . . . . . . .
Goodwill, net of accumulated impairments, at
September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Brooks
Brooks
Semiconductor
Solutions
Group
Services
636,907 $ 104,212 $ 103,701 $ 26,014 $ 870,834
(614,958)
Life Sciences Life Sciences
Products
(588,944)
(26,014)
Brooks
—
Other
Total
—
47,963
(116)
636,791
(588,944)
47,847
512
637,303
(588,944)
104,212
(2,255)
101,957
—
101,957
1,321
103,278
—
103,701
235,097
338,798
—
—
26,014
(26,014)
255,876
232,726
1,103,560
(614,958)
338,798
11,101
349,899
—
—
26,014
(26,014)
488,602
12,934
1,116,494
(614,958)
48,359 $ 103,278 $ 349,899 $
— $ 501,536
During fiscal year 2020, the Company recorded a goodwill increase of $12.9 million primarily related to the
acquisition of RURO and the impact of foreign currency translation adjustments.
The components of the Company’s identifiable intangible assets as of September 30, 2020 and 2019 are as follows
(in thousands):
Patents . . . . . . . . . . . . . . . . . . . . $
Completed technology . . . . . . .
Trademarks and trade names . .
Customer relationships . . . . . . .
Other intangibles . . . . . . . . . . . .
September 30, 2020
Accumulated
Amortization
Net Book
Value
September 30, 2019
Accumulated
Amortization
Net Book
Value
Cost
5,302 $
92,477
25,769
271,113
245
437 $
674
42,602
49,510
16,447
19,533
158,836
181,403
48
3
$ 394,906 $ 176,581 $ 218,325 $ 384,612 $ 133,444 $ 251,168
4,865 $
49,875
9,322
112,277
242
4,628 $
38,778
5,807
84,048
183
Cost
5,302 $
88,288
25,340
265,451
231
Amortization expense for intangible assets was $41.8 million, $35.2 million and $24.2 million, respectively, for the
fiscal years ended September 30, 2020, 2019 and 2018.
Estimated future amortization expense for the intangible assets as of September 30, 2020 is as follows (in thousands):
Fiscal year ended September 30,
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,723
35,459
32,158
27,260
21,872
62,853
$ 218,325
80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Supplementary Balance Sheet Information
The following is a summary of accounts receivable at September 30, 2020 and 2019 (in thousands):
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 195,587 $ 169,317
(3,644)
Less allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less allowance for sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(71)
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 188,291 $ 165,602
(7,216)
(80)
September 30,
2020
2019
The allowance for doubtful accounts activity for the fiscal years ended September 30, 2020, 2019 and 2018 is as
follows (in thousands):
Description
2020 Allowance for doubtful accounts . . . . . . . . . . . . . . . . . $
2019 Allowance for doubtful accounts . . . . . . . . . . . . . . . . .
2018 Allowance for doubtful accounts . . . . . . . . . . . . . . . . .
Balance at
Beginning of
Period
Reversals of Write-
Bad Debt
offs and
Provisions Expense
3,644 $ 4,587 $ (1,018) $
1,113
1,381
Balance at
End of
Adjustments Period
3 $ 7,216
3,644
1,113
3,405
708
(181)
(252)
(693)
(724)
The allowance for sales returns activity for the fiscal years ended September 30, 2020, 2019 and 2018 is as follows
(in thousands):
Description
2020 Allowance for sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 Allowance for sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 Allowance for sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at
Beginning of
Period
Balance at
End of
Provisions Adjustments Period
Write-
offs and
71 $
45
81
9 $
26
(36)
— $
—
—
80
71
45
The following is a summary of inventories at September 30, 2020 and 2019 (in thousands):
Inventories
Raw materials and purchased parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,609 $ 67,176
13,684
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,585
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 114,834 $ 99,445
16,461
24,764
September 30,
2020
2019
The activity for excess and obsolete inventory reserves is as follows for the fiscal years ended September 30, 2020,
2019 and 2018 (in thousands):
Description
2020 Reserves for excess and obsolete inventory . . . . . . . . . . . . . . $
2019 Reserves for excess and obsolete inventory . . . . . . . . . . . . . .
2018 Reserves for excess and obsolete inventory . . . . . . . . . . . . . .
Balance at
Beginning of
Period
16,298 $
14,953
17,734
Inventory
Disposals and
Balance at
Provisions Adjustments
5,152 $
5,865
4,455
(4,334) $
(4,520)
(7,236)
End of
Period
17,116
16,298
14,953
81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The activity for valuation allowance for deferred tax assets is as follows for the fiscal years ended September 30,
2020, 2019 and 2018 (in thousands):
Description
2020 Valuation allowance for deferred tax assets . . . . . . . . . . . . . . . . $ 16,093 $ (1,526) $
2019 Valuation allowance for deferred tax assets . . . . . . . . . . . . . . . .
2018 Valuation allowance for deferred tax assets . . . . . . . . . . . . . . . .
(3,475)
(72,842)
18,581
92,297
(968) $ 13,599
16,093
987
18,581
(874)
Balance at
Beginning of
Period
Balance at
Charged to Charged to
End of
Provisions Other Accounts Period
The Company establishes reserves for estimated cost of product warranties based on historical information. Product
warranty reserves are recorded at the time product revenue is recognized, and retrofit accruals are recorded at the time
retrofit programs are established. The Company’s warranty obligation is affected by product failure rates, utilization levels,
material usage, service delivery costs incurred in correcting a product failure and supplier warranties on parts delivered to
the Company. The following is a summary of product warranty and retrofit activity on a gross basis, excluding amounts
related to discontinued operations, for the fiscal years ended September 30, 2020, 2019 and 2018 (in thousands):
Amount
Balance at September 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accruals for warranties during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs incurred during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals for warranties during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs incurred during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals for warranties during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs incurred during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5,479
5,209
(4,348)
6,340
8,688
(7,853)
7,175
8,430
(7,404)
8,201
10. Line of Credit
The Company maintains a revolving line of credit under a credit agreement with Wells Fargo Bank, N.A. and
JPMorgan Chase Bank, N.A. that provides for a revolving credit facility of up to $75.0 million, subject to borrowing base
availability, as defined in the credit agreement. The line of credit matures on October 4, 2022 and expires no less than
90 days prior to the term loan expiration discussed below. The proceeds from the line of credit are available for permitted
acquisitions and general corporate purposes.
On October 4, 2017, the Company entered into a $200.0 million Senior Secured Term Loan Facility (the “term loan”)
with Morgan Stanley Senior Funding, Inc., JPMorgan Chase Bank, N.A. and Wells Fargo Securities, LLC (collectively,
the “lenders”). Coincident with the entry into the credit agreement for the term loan discussed in Note 11, “Debt” below,
the Company amended certain terms and conditions of the credit agreement. Based on the amended terms of the credit
agreement, the line of credit continues to provide for a revolving credit facility of up to $75.0 million, subject to borrowing
base availability. Borrowing base availability under the amended credit agreement excludes collateral related to fixed
assets and is redetermined periodically based on certain percentage of certain eligible U.S. assets, including accounts
receivable and inventory.
The sub-limits for letters of credit were reduced to $7.5 million under the amended terms of the credit agreement. All
outstanding borrowings under the credit agreement are guaranteed by the Company and Brooks Life Sciences, Inc.
(fka BioStorage Technologies, Inc.), the Company’s wholly-owned subsidiary (“guarantor”), and subordinated to the
obligations under the term loan which are secured by a first priority lien on substantially all of the assets of the Company
and the guarantor, other than accounts receivable and inventory. Please refer to Note 11, “Debt”, for further information
on the term loan transaction.
There were no amounts outstanding under the line of credit as of September 30, 2020 and September 30, 2019. The
Company records commitment fees and other costs directly associated with obtaining the line of credit facility as deferred
82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
financing costs, which are amortized over the term of the related financing arrangement. Deferred financing costs were
$0.2 million and $0.4 million, respectively, at September 30, 2020 and September 30, 2019. The line of credit contains
certain customary representations and warranties, a financial covenant and affirmative and negative covenants as well as
events of default. The Company was in compliance with the line of credit covenants as of September 30, 2020 and
September 30, 2019.
11. Debt
Term Loans
On October 4, 2017, the Company entered into a $200.0 million term loan with the lenders pursuant to the terms of a
credit agreement. The term loan was issued at $197.6 million, or 98.8% of its par value, resulting in a discount of $2.4
million, or 1.2%, which represented loan origination fees paid at the closing.
On November 15, 2018, the Company entered into an incremental amendment (the “First Amendment”) to the existing
credit agreement. Under the First Amendment, the Company obtained an incremental term loan in an aggregate principal
amount of $350.0 million. The proceeds of the incremental term loan were used to finance a portion of the purchase price
for the Company’s acquisition of GENEWIZ. The incremental term loan was issued at $340.5 million, or 97.3% of its par
value, resulting in a discount of $9.5 million, or 2.7%, which represented financing cost of the incremental term loan.
Except as provided in the First Amendment, the incremental term loan was subject to the same terms and conditions as set
forth in the existing credit agreement.
On February 15, 2019, the Company entered into the second amendment to the credit agreement (the “Second
Amendment”) and syndicated the incremental term loan to a group of new lenders which met the criteria of a debt
extinguishment. The Company wrote off the carrying value of the incremental term loan of $340.1 million as of
February 15, 2019 and recorded the syndicated incremental term loan at its present value for $349.1 million and a loss on
debt extinguishment for $9.1 million. The syndicated incremental term loan was issued at $345.2 million, or 98.9% of its
par value resulting in a discount of $4.0 million which represented financing costs which are presented as a reduction of
the incremental term loan principal balance in the accompanying unaudited Consolidated Balance Sheets and was accreted
over the life of the incremental term loan. Except as provided in the Second Amendment with respect to an increase of the
applicable interest rates, the syndicated incremental term loan was subject to the same terms and conditions as the initial
incremental term loan.
On July 1, 2019, the Company completed the sale of its semiconductor cryogenics business and used $348.3 million
of the proceeds from the Disposition to extinguish the outstanding balance of the incremental term loan. In addition, the
Company used $147.0 million of the proceeds from the Disposition to extinguish a portion of the outstanding balance of
the term loan. The Company recorded a loss on debt extinguishment of $5.2 million for the two term loans.
The Company’s obligations under the term loan are also guaranteed by Brooks Life Sciences, Inc. (fka BioStorage
Technologies, Inc.) as the guarantor, subject to the terms and conditions of the credit agreement. The Company and the
guarantor granted the lenders a perfected first priority security interest in substantially all of the assets of the Company
and the guarantor to secure the repayment of the term loan.
The loan principal amount under the credit agreement may be increased by an aggregate amount equal to $75.0 million
plus any voluntary repayments of the term loans plus any additional amount such that the secured leverage ratio of the
Company is less than 3.00 to 1.00.
Subject to certain conditions stated in the credit agreement, the Company may redeem the term loan at any time at its
option without a significant premium or penalty, except for a repricing transaction, as defined in the credit agreement. The
Company is required to redeem the term loan at the principal amount then outstanding upon occurrence of certain events,
including (i) net proceeds received from the sale or other disposition of the Company’s or the guarantor’ assets, subject to
certain limitations, (ii) casualty and condemnation proceeds received by the Company or the guarantor, subject to certain
exceptions, (iii) net proceeds received by the Company or the guarantor from the issuance of debt or disqualified capital
stock after October 4, 2017. Commencing on December 31, 2018, the Company was required to make principal payments
83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
equal to the excess cash flow amount, as defined in the credit agreement. Such prepayments are equal to 50% of the
preceding year excess cash flow amount reduced by voluntary prepayments of the term loan, subject to certain limitations.
The deferred financing costs are accreted over the term of the loan using the effective interest rate method and are
included in “Interest expense” in the accompanying unaudited Consolidated Statements of Operations. At
September 30, 2020, deferred financing costs were $0.4 million.
The credit agreement contains certain customary representations and warranties, covenants and events of default. If
any of the events of default occur and are not waived or cured within applicable grace periods, any unpaid amounts under
the credit agreement will bear an annual interest rate at 2.00% above the rate otherwise applicable under the terms and
conditions of such agreement. The credit agreement does not contain financial maintenance covenants. As of
September 30, 2020, the Company was in compliance with all covenants and conditions under the credit agreement.
In connection with the GENEWIZ acquisition, the Company assumed three five-year term loans for a total of $3.3
million and two one-year short term loans for a total of $3.2 million. The three five-year term loans were initiated during
2016 and mature in 2021. The principal payments are payable in eight installments equal to 12.5% of the initial principal
amount of the term loans on December 14th and June 14th of each year. The three five-year term loans were secured by
GENEWIZ to fund equipment procurement and new building related payments and the interest rates are equal to the
LIBOR plus 3.1%. The two one-year term loans were secured by GENEWIZ to fund operations. Both of the one-year term
loans were initiated in 2018 and matured in 2019. The interest rates of these two loans were 4.56% and 4.35%. There are
no deferred financing costs related to either the five-year term loans or the one-year term loans. At September 30, 2020,
the Company had an aggregate outstanding principal balance of $0.8 million for the three five-year term loans. Both of
the two one-year short term loans matured and were repaid in full during fiscal year 2019.
During the year ended September 30, 2020, the weighted average stated interest rate paid on all outstanding debt was
4.1%. During the year ended September 30, 2020, the Company incurred aggregate interest expense of $2.4 million in
connection with the borrowings, including $0.2 million of deferred financing costs amortization.
The following are the future minimum principal payment obligations under all of the Company’s outstanding debt as
of September 30, 2020 (in thousands):
Amount
Fiscal year ended September 30,
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total outstanding principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
827
—
—
—
50,000
50,827
(412)
50,415
827
49,588
84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Income Taxes
The components of the income tax provision (benefit) from continuing operations for the fiscal years are as follows
(in thousands):
Year Ended September 30,
2019
2018
2020
Current income tax provision (benefit):
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,122 $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current income tax provision . . . . . . . . . . . . . . . . . .
1,137
13,136
15,395
963 $
510
15,860
17,333
—
917
7,608
8,525
Deferred income tax provision (benefit):
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred income tax provision (benefit) . . . . . . . . .
Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . $ 9,937 $
(2,045)
(695)
(2,718)
(5,458)
(8,633)
(2,138)
(6,673)
(17,444)
(48,815)
(5,518)
(1,443)
(55,776)
(111) $ (47,251)
The components of income (loss) from continuing operations before income taxes and equity in earnings of equity
method investments for the fiscal years are as follows (in thousands):
Year Ended September 30,
2019
2020
2018
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,697 $ (37,160) $ 3,122
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,344
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74,972 $ 9,443 $ 20,466
46,603
54,275
85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The differences between the income tax provision (benefit) on income (loss) from continuing operations including
income from equity in earnings (losses) of equity method investments and income taxes computed using the applicable
U.S. statutory federal tax rates for the fiscal years ended September 30, 2020, 2019 and 2018 are as follows (in thousands):
Year Ended September 30,
2019
2018
2020
Income tax provision computed at federal statutory rate . . . . $ 15,744 $ 1,983 $ 5,014
692
State income taxes, net of federal benefit . . . . . . . . . . . . . . . .
920
Foreign income taxed at different rates . . . . . . . . . . . . . . . . . .
(729)
Impact of investments in subsidiaries . . . . . . . . . . . . . . . . . . .
(75,918)
Change in deferred tax asset valuation allowance . . . . . . . . .
220
Net increase in uncertain tax positions . . . . . . . . . . . . . . . . . .
—
Global intangible low taxed income, net of foreign tax credits
15,287
Impact of tax rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(701)
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,633)
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,405
Merger costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
Other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
176
Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,027
Transition tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred state rate change due to acquisition . . . . . . . . . . . . .
—
Prior year true ups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Research and development expense deduction . . . . . . . . . . . .
—
Foreign derived intangible income . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(81)
Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,937 $ (111) $ (47,251)
493
132
296
(1,526)
1,417
611
262
(3,022)
(2,845)
37
580
116
—
—
(1,645)
(530)
(153)
(30)
(630)
550
(536)
(2,264)
720
1,389
—
(1,103)
(2,741)
572
764
174
2,988
(1,360)
(152)
(447)
—
(18)
The Company has not provided deferred income taxes on the outside basis differences of its foreign subsidiaries. The
Company maintains its general assertion of indefinite reinvestment as of September 30, 2020. The foreign earnings are
expected to be reinvested in foreign operations and acquisitions. Unremitted foreign earnings total approximately $414
million. The Company did not calculate estimated deferred tax liabilities related to these earnings because such
calculations would not be practicable due to the complexity of its hypothetical calculation. The taxes on these earnings
would primarily consist of foreign withholding taxes and minimal U.S. state income taxes.
The significant components of the net deferred tax assets and liabilities as of September 30, 2020 and 2019 are as
follows (in thousands):
September 30,
2020
2019
Accruals and reserves not currently deductible . . . . . . . . . . . . . . . . . . . . $ 17,245 $ 14,286
5,952
Federal, state and foreign tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,487
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,360
18,987
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,038
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserves and valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,626
56,736
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(57,634)
Depreciation and intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(57,634)
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(16,093)
Net deferred tax asset (liability) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (14,408) $ (16,991)
5,625
958
4,141
15,556
9,534
3,494
6,522
63,075
(54,360)
(9,524)
(63,884)
(13,599)
86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The deferred tax assets on the balance sheet for September 30, 2020 also includes a $1.6 million deferred tax charge
related to the company’s intercompany profit elimination.
ASC Topic 740, Income Taxes, requires that all available evidence, both positive and negative, be considered in
determining, based on the weight of that evidence, whether a valuation allowance is needed. The weight given to the
potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively
verified. The more negative evidence that exists, (a) the more positive evidence is necessary and (b) the more difficult it
is to support a conclusion that a valuation allowance is not needed for some portion or the entire deferred tax asset. A
cumulative loss in recent years is considered a significant piece of negative evidence that is difficult to overcome in
assessing the need for a valuation allowance.
The Company evaluates the realizability of its deferred tax assets by tax-paying component and assesses the need for
a valuation allowance on an annual and quarterly basis. The Company evaluates the profitability of each tax-paying
component on a historic cumulative basis and a forward-looking basis in the course of performing this analysis.
After evaluating all the relevant positive and negative evidence as of March 31, 2018, the Company concluded that it
was more likely than not that a substantial portion of the U.S. deferred tax assets would be realized. In the second quarter
of fiscal year 2018 the Company reached a significant level of cumulative profitability in the U.S., coupled with an
improved outlook of U.S. earnings. During the full fiscal year 2018, the Company reduced its U.S. valuation allowance
against its U.S. net deferred tax assets resulting in a tax benefit of $77.2 million. In the fourth quarter of fiscal year 2020
the Company reduced its U.S. valuation allowance by an additional $1.0 million based on its conclusion that it is more
likely than not that there will be sufficient future foreign source income to realize the foreign tax credit carryover balance
held in the United States. The remaining portion of the Company’s U.S. valuation allowance is related to the realizability
of certain state tax credits and net operating loss carry-forwards. The Company continues to maintain valuation allowances
against net deferred tax assets in certain foreign tax-paying components as of the end of fiscal year 2020.
As of September 30, 2020, the Company has federal, state and foreign net operating loss carry-forwards of
approximately $11.4 million, $42.7 million and $43.6 million, respectively. Included in the federal net operating loss carry-
forwards are $8.8 million of losses that can be carried forward indefinitely, while the remaining losses expire at various
dates through 2030.
As of September 30, 2020, the Company had federal research and development tax credit carry-forwards of $1.1
million. These credit carry-forwards will expire at various dates beginning in 2037 through 2040. The Company has federal
foreign tax credit carry-forwards of $1.0 million. These credit carry-forwards will expire at various dates beginning in
2027 through 2030. The Company also has $5.7 million of state credits which begin to expire in 2034, while some of these
credits have an unlimited carryover period.
During the fiscal year 2018, the Tax Cuts and Jobs Act (“Tax Reform”) was enacted in the U.S., making significant
tax law changes affecting the Company.
In accordance with international tax reform regulations, the Company recorded a toll charge in the U.S. on its
previously untaxed accumulated foreign earnings. The Company recorded a tax impact of $8.0 million, net of foreign tax
credits, related to the toll charge during the fiscal year ended September 30, 2018. The Company completed final
calculations in accordance with Staff Accounting Bulletin No.118 during the first quarter of fiscal year 2019 and recorded
a reduction in the toll charge of $1.1 million. During the third quarter of fiscal year 2019, the U.S. government issued
final regulations that clarified certain rules related to the toll charge that impacted fiscal year taxpayers. As a result of this
clarification, the Company recorded an increase to the toll charge of $4.1 million. After all adjustments had been recorded,
the Company realized a toll charge of $11.0 million, net of foreign tax credits.
In March 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act which
contains numerous income tax provisions among other tax and non-tax provisions. Some of these income tax provisions
have retroactive effects on years before the date of enactment. The Company evaluated the CARES Act legislation in
relation to income taxes and determined that the CARES Act income tax provisions do not have a material impact on its
income tax provision.
87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company has performed studies to determine if there are any annual limitations on the federal net operating losses
under the Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. As a result of
these studies, the Company has determined that ownership changes have occurred primarily in connection with
acquisitions when the Company has issued stock to the sellers, as well as ownership changes in the subsidiaries acquired
by the Company. Certain limitations have been calculated, and the benefits of the net operating losses that will expire
before utilization have not been recorded as deferred tax assets in the accompanying Consolidated Balance Sheets.
Limitations on current year use of net operating loss carryovers have also been recorded in the tax provision.
The Company maintains liabilities for unrecognized tax benefits. These liabilities involve judgment and estimation,
and they are monitored based on the best information available. A reconciliation of the beginning and ending amount of
the consolidated liability for unrecognized income tax benefits during the fiscal years ended September 30, 2020, 2019
and 2018 is as follows (in thousands):
Balance at September 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions for tax positions in current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reduction for tax positions in prior year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net reductions from lapses in statutes of limitations . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in prior year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions from lapses in statutes of limitations . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions from settlements with taxing authorities . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions in current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions from lapses in statutes of limitations . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions from settlements with taxing authorities . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total
3,378
874
(656)
(353)
3,243
901
13,400
(68)
(166)
17,310
448
(64)
(522)
17,172
All of the unrecognized tax benefits for the fiscal year ended September 30, 2020 would impact the effective tax rate
if recognized. The Company recognizes interest related to unrecognized benefits as a component of the income tax
provision (benefit), of which $1.1 million, $1.1 million and $0.1 million, respectively, was recognized for the fiscal years
ended September 30, 2020, 2019 and 2018. In fiscal year 2019, the Company recorded $13.4 million of unrecognized tax
benefits with the acquisition of GENEWIZ. All unrecognized tax benefits recorded with the acquisition of GENEWIZ are
part of an indemnification agreement with the sellers.
The Company is subject to U.S. federal, state, local and foreign income taxes in various jurisdictions. The amount of
income taxes paid is subject to the Company’s interpretation of applicable tax laws in the jurisdictions in which it files.
In the normal course of business, the Company is subject to income tax audits in various global jurisdictions in which
it operates. The years subject to examination vary for the U.S. and international jurisdictions, with the earliest tax year
being 2013. Based on the outcome of these examinations or the expiration of statutes of limitations for specific
jurisdictions, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in the
Company’s Consolidated Balance Sheets. The Company currently anticipates that it is reasonably possible that the
unrecognized tax benefits and accrued interest on those benefits will be reduced by an amount in the range of $2.5 million
to $17.7 million in the next 12 months due to statute of limitations expirations.
13. 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. These transactions
and balances, including short-term advances between the Company and its subsidiaries, subject the Company’s operations
to exposure from exchange rate fluctuations. The impact of currency exchange rate movement can be positive or negative
88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
in any period. The Company mitigates the impact of potential currency transaction gains and losses on short-term
intercompany advances through timely settlement of each transaction, generally within 30 days.
The Company also enters into foreign exchange contracts to reduce its exposure to currency fluctuations. Under
forward contract arrangements, the Company typically agrees to purchase a fixed amount of one currency in exchange for
a fixed amount of another currency on specified dates with maturities of 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 Consolidated Statements of Operations and are as follows for the fiscal years ended
September 30, 2020, 2019 and 2018 (in thousands):
Realized (losses) gains on derivatives not designated as hedging instruments . . . . $ (2,671)
Fiscal Year Ended September 30,
2018
2019
2020
(330)
$ 3,656
$
The fair value of derivative instruments are as follows at September 30, 2020 and 2019 (in thousands):
As of September 30,
Derivatives not designated as hedging instruments
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020
2019
2020
2019
370 $
370 $
17 $
17 $
(238) $
(238) $
(340)
(340)
Fair Value of Assets
Fair Value of Liabilities
The fair values of the forward contracts described above are recorded in the Company’s accompanying Consolidated
Balance Sheets as "Prepaid expenses and other current assets" and "Accrued expenses and other current liabilities".
14. Postretirement Benefits
Defined Benefit Pension Plans
The Company has three active defined benefit pension plans (collectively, the “Plans”), including legacy Taiwan Plan,
the legacy Switzerland Plan, and the newly acquired Tec-Sem Plan. The Plans cover substantially all of the Company’s
employees in Switzerland and Taiwan. Retirement benefits are generally earned based on years of service and the level of
compensation during active employment, but the level of benefits varies within the Plans. Eligibility is determined in
accordance with local statutory requirements.
89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company uses September 30th as a measurement date to determine net periodic benefit costs, benefit obligations
and the value of plan assets for all plans. The following tables set forth the funded status and amounts recognized in the
Company’s Consolidated Balance Sheets as of September 30, 2020 and 2019 (in thousands):
September 30,
2020
2019
—
576
71
557
(401)
300
—
—
833
Benefit obligation through acquisition . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligation at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . $ 11,915 $ 11,144
—
599
118
831
(811)
273
—
—
(239)
Benefit obligation at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,851 $ 11,915
Fair value of assets at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . $ 6,574 $ 7,078
—
(179)
(811)
370
273
—
(157)
Fair value of assets at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,500 $ 6,574
Accrued benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,351 $ 5,341
Fair value of assets through acquisition . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
168
(401)
404
300
—
455
The accumulated benefit obligation of the Plans is $13.2 million and $11.4 million, respectively, at September 30,
2020 and 2019. All Plans have an accumulated benefit obligation and projected benefit obligation in excess of plans’ assets
at September 30, 2020.
The following table provides pension-related amounts and their classification within the accompanying Consolidated
Balance Sheets as of September 30, 2020 and 2019 (in thousands):
September 30,
2020
2019
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
419 $
366
4,975
$ 6,351 $ 5,341
5,932
The Company bases its determination of pension expense on a market-related valuation of assets, which reduces year-
to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year
in which they occur. Investment gains or losses represent the difference between the expected return calculated using the
market-related value of assets and the actual return on assets. Since the market-related value of assets recognizes gains or
losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are
recognized. At September 30, 2020 and 2019, the Company had cumulative unrecognized net actuarial gains of $1.5
million and $0.9 million, respectively, which are amortized into net periodic benefit cost over the average remaining
service period of active Plans’ participants. The Company had cumulative unrecognized investment gains of $0.6 million
and $0.5 million at September 30, 2020 and 2019, under the Plans which remain to be recognized in the calculation of the
market-related values of assets.
90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of the Company’s net pension cost for the fiscal years ended September 30, 2020, 2019 and 2018 are
as follows (in thousands):
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Settlement gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total pension cost (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020
2019
Year Ended September 30,
2018
599 $ 382
75
118
5
(18)
(74)
(66)
625 $ 396
—
625 $ 396
576 $
71
12
(71)
588 $
—
588 $
—
The following changes in Plans’ assets and benefit obligations were recognized in other comprehensive income (loss)
as of September 30, 2020 and 2019 (in thousands):
September 30,
2020
2019
Net gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (487) $ (854)
30
Amortization of net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in other comprehensive income (loss) . . . . . . . . . . . . . . .
(824)
Total recognized in net periodic pension cost and other comprehensive
income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
128 $ (198)
27
(460)
Weighted-average assumptions used to determine the projected benefit obligation for the fiscal years ended
September 30, 2020, 2019 and 2018 are as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.37 % 0.55 % 1.04 %
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02 % 1.01 % 1.06 %
Expected rate of compensation increases . . . . . . . . . . . . . . . . . . . . 1.12 % 1.12 % 1.19 %
Year Ended September 30,
2018
2020
2019
In selecting the appropriate discount rates for the Plans, the Company uses country-specific information, adjusted to
reflect the duration of the particular plan. The expected return on plan assets is based on an evaluation of fixed income
yield curves and equity return assumption studies applied to the Plans’ asset allocations.
Plan Assets
The fair value of plan assets for the two Swiss Plans and the Taiwan Plan were $7.4 million and $0.1 million,
respectively, at September 30, 2020. The assets of the Swiss Plans are invested in a collective fund with multiple employers
through a Swiss insurance company, which is a customary practice for Swiss pension plans. The Company does not have
any rights or an investment authority over the Plan’s assets which are invested primarily in highly rated debt securities.
The assets of the Taiwan Plan are invested with a trustee selected by the Taiwan government, and the Company has
no investment authority over the Plan’s assets.
91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The allocation of the Plans’ assets at September 30, 2020 is as follows:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2 %
59
19
20
100 %
September 30,
2020
The fair values of pension assets by asset category and by level at September 30, 2020 are as follows (in thousands):
As of September 30, 2020
Level 1 Level 2 Level 3 Total
Swiss Life collective foundation . . . . . . . . . . . . . . . . . . . . . $ — $ 7,371 $ — $ 7,371
Taiwan collective trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
129
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 7,500 $ — $ 7,500
129
—
—
The fair values of pension assets by asset category and by level at September 30, 2019 are as follows (in thousands):
As of September 30, 2019
Level 1 Level 2 Level 3 Total
Swiss Life collective foundation . . . . . . . . . . . . . . . . . . . . . $ — $ 6,486 $ — $ 6,486
Taiwan collective trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 6,574 $ — $ 6,574
88
—
—
Please refer to Note 21, "Fair Value Measurements" for a description of the levels of inputs used to determine fair
value measurements.
Benefit payments expected to be paid over the next five fiscal years and thereafter are as follows (in thousands):
Fiscal year ended September 30,
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
282
303
300
374
384
99
The Company expects to contribute $0.4 million to the Plans in fiscal year 2021 to meet the minimum funding
requirements of the Plans.
Defined Contribution Plans
The Company sponsors a defined contribution plan that meets the requirements of Section 401(k) of the Internal
Revenue Code. All United States employees who meet minimum age and service requirements are eligible to participate
in the plans. The plans allow employees to invest, on a pre-tax basis, a percentage of their annual salary and bonus subject
to statutory limitations. The Company matches a portion of their contributions on a pre-tax basis up to a maximum amount
of 4.5% of deferred pay. The expense recognized for the defined contribution plans was $5.2 million, $4.6 million and
$3.4 million, respectively, for the fiscal years ended September 30, 2020, 2019 and 2018.
92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. Stockholders’ Equity
Preferred Stock
Total number of shares of preferred stock authorized for issuance was 1,000,000 shares at September 30, 2020 and
2019, respectively. Preferred stock has a par value of $0.01 per share and may be issued at the discretion of the Board of
Directors without stockholder approval with such designations, rights and preferences as the Board of Directors may
determine. There were no shares of preferred stock issued or outstanding at September 30, 2020 or 2019, respectively.
Accumulated Other Comprehensive Income
The following is a summary of the components of accumulated other comprehensive income, net of tax, at
September 30, 2020, 2019 and 2018 (in thousands):
Unrealized
Gains (Losses)
on Available-
for-Sale
Securities
Currency
Translation
Adjustments
Pension
Liability
Adjustments
Total
Balance at September 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,168 $
(1) $
(1,651)
(110)
Other comprehensive income (loss) before reclassifications . . . .
Amounts reclassified from accumulated other comprehensive
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) before reclassifications . . . .
Amounts reclassified from accumulated other comprehensive
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) before reclassifications . . . .
Amounts reclassified from accumulated other comprehensive
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
13,517
(9,333)
—
4,184
18,877
—
Balance at September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,061 $
46 $ 15,213
(1,637)
124
12
182
(882)
11
13,587
(9,971)
35
(665)
(503)
(105)
3,511
18,379
(1)
(112)
244
(140)
(8)
5
2
29
27
(1) $ (1,141) $ 21,919
Unrealized net holding gains (losses) on available-for-sale marketable securities are reclassified from accumulated
other comprehensive income into results of operations at the time of the securities’ sale, as described in Note 5,
“Marketable Securities.” Gains (losses) related to defined benefit pension plan settlements are reclassified from
accumulated other comprehensive income into results of operations at the time of the settlement, as described in Note 14,
“Postretirement Benefits.” Defined benefit pension plan curtailments are recognized as reclassifications from accumulated
other comprehensive income and corresponding reductions in pension liabilities and net pension cost, as described in
Note 14, “Postretirement Benefits.”
16. Equity Incentive Plans
The Company’s equity incentive plans are intended to attract and retain employees and provide an incentive for them
to contribute to the Company’s long-term growth and achievement of its long-range performance goals. The equity
incentive plans consist of plans under which employees may be granted options to purchase shares of the Company’s
stock, restricted stock and other equity incentives. Restricted stock awards generally have a three-year vesting period. At
September 30, 2020, a total of 1,153,325 shares were reserved and available for future grant under the equity incentive
plans.
2015 Equity Incentive Plan
In accordance with the 2015 Equity Incentive Plan (the “2015 Plan”), the Company may grant (i) restricted stock and
other stock-based awards, (ii) nonqualified stock options, and (iii) options intended to qualify as incentive stock options
under Section 422 of the Internal Revenue Code. All employees of the Company or any affiliate of the Company,
independent directors, consultants and advisors are eligible to participate in the 2015 Plan. The 2015 Plan provides for the
93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
issuance of a maximum of 5,000,000 shares of common stock in addition to the stock option and restricted stock awards
granted out of the 2000 Plan that were canceled or forfeited after February 5, 2015 upon expiration of the 2000 Plan on
March 31, 2015.
Restricted Stock Activity
The following table summarizes restricted stock unit activity for the fiscal year ended September 30, 2020:
Outstanding at September 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,782,726 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
412,036
(900,154)
(111,599)
Outstanding at September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,183,009
Shares
Weighted
Average
Grant-Date
Fair Value
24.63
46.52
26.04
34.96
36.10
The weighted average grant date fair value of restricted stock units granted during fiscal years 2020, 2019 and 2018
was $46.52, $30.47 and $33.28 per share, respectively. The fair value of restricted stock units vested during fiscal years
2020, 2019 and 2018 was $41.7 million, $34.8 million and $22.0 million, respectively. During fiscal years 2020, 2019 and
2018, the Company remitted $24.1 million, $15.3 million and $7.3 million, respectively, collected from employees to
satisfy their tax obligations as a result of share issuances.
As of September 30, 2020, the future unrecognized stock-based compensation expense related to restricted stock units
expected to vest is $18.4 million and is expected to be recognized over an estimated weighted average amortization period
of 1.6 years.
The Company grants restricted stock units that vest over a required service period and /or achievement of certain
operating performance goals. Restricted stock units granted with performance goals may also have a required service
period following the achievement of all or a portion of the performance goals. The following table reflects restricted stock
units and stock awards granted during fiscal years ended September 30, 2020, 2019 and 2018:
Year ended September 30, 2020 . . . . . . . . . . . . . 412,036 163,390 27,076
Year ended September 30, 2019 . . . . . . . . . . . . . 792,315 330,006 38,920
Year ended September 30, 2018 . . . . . . . . . . . . . 535,289 213,893 36,774
Time-Based Stock
Total Units
Units
Performance-
Grants Based Units
221,570
423,389
284,622
Among the total restricted stock units granted, 134,993 shares were granted to the employees who belong to the
discontinued operations in the year ended September 30, 2018.
Time-Based Grants
Restricted stock units granted with a required service period typically have three-year vesting schedules in which one-
third of awards vest at the first anniversary of the grant date, one-third vest at the second anniversary of the grant date and
one-third vest at the third anniversary of the grant date, subject to the award holders meeting service requirements.
Stock Grants
The stock awards granted to the members of the Company’s Board of Directors include stock awards, restricted stock
awards and deferred stock and restricted stock units.
Stock awards granted during fiscal years 2020 and 2019 were vested upon issuance. Restricted stock awards granted
during fiscal year 2018 were subject to a one-year vesting period.
94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Certain members of the Board of Directors have elected to defer receiving their annual stock awards and related
quarterly dividends until they attain a certain age or cease to provide services as the Company’s Board members. Annual
deferred restricted stock units granted during fiscal years 2020 and 2019 vested upon issuance. Annual deferred restricted
stock units granted during fiscal year 2018 were subject to a one-year vesting period.
Performance-Based Grants
Performance-based restricted stock units are earned based on the achievement of performance criteria established by
the Human Resources and Compensation Committee and approved by the Board of Directors. The criteria for performance-
based awards are weighted and have threshold, target and maximum performance goals.
Performance-based awards granted in fiscal year 2020, 2019 and 2018 allow participants to earn 100% of restricted
stock units if the Company’s performance meets or exceeds its target goal for each applicable financial metric, and up to
a maximum of 200% if the Company’s performance for such metrics meets the maximum or stretch goal. Performance
below the minimum threshold for each financial metric results in award forfeiture. Performance goals will be measured
over a three-year period for each year’s awards and at the end of the period to determine the number of units earned by
recipients who continue to meet the service requirement. Around the third anniversary of each year’s awards’ grant date,
the Company’s Board of Directors determines the number of units earned for participants who continue to meet the service
requirements on the vest date.
Employee Stock Purchase Plan
The Company maintains an employee stock purchase plan that allows its employees to purchase shares of common
stock at a price equal to 85% of the fair market value of the Company’s stock at the beginning or the end of the semi-
annual period, whichever is lower. On February 8, 2017, the stockholders approved the 2017 Employee Stock Purchase
Plan (the “2017 Plan”) to replace the 1995 Employee Stock Purchase Plan (the “1995 Plan”) which was terminated upon
the expiration of the offering period ending on July 31, 2017. The 2017 Plan allows for purchases by employees of up to
1,250,000 shares of the Company’s common stock. As of September 30, 2020, 858,687 shares of common stock remain
available for purchase under the 2017 Plan. During fiscal year ended September 30, 2020 and 2019, the Company issued
133,597 shares and 131,042 shares, respectively, under the 2017 Plan.
95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. Earnings per Share
The calculations of basic and diluted net income (loss) per share and basic and diluted weighted average shares
outstanding are as follows for the fiscal years ended September 30, 2020, 2019 and 2018 (in thousands, except per share
data):
Year Ended September 30,
2019
9,554 $ 67,717
48,747
116,464
111
Net income attributable to Brooks Automation, Inc. . . . . . . . . . . . . . . . . . . . . . . . . $ 64,853 $ 437,416 $ 116,575
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,035 $
Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss attributable to noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . .
427,862
437,416
—
(182)
64,853
—
2020
2018
Weighted average common shares outstanding used in computing basic
earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average common shares outstanding used in computing diluted
earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,557
293
71,992
394
70,489
448
73,850
72,386
70,937
Basic net income per share attributable to Brooks Automation, Inc. common
stockholders:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . .
Basic net income per share attributable to Brooks Automation, Inc. . . . . . . . . . . . $
0.88 $
(0.00)
0.88 $
0.13 $
5.95
6.08 $
0.96
0.69
1.65
Diluted net income per share attributable to Brooks Automation, Inc. common
stockholders:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . .
0.88 $
(0.00)
0.13 $
5.91
0.95
0.69
Diluted net income per share attributable to Brooks Automation, Inc.
common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dividend declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.88 $
0.40 $
6.04 $
0.40 $
1.64
0.40
Restricted stock units of 16,695, 9,439 and 9,927, respectively, during fiscal year 2020, 2019 and 2018 were excluded
from the computation of diluted earnings per share as their effect would be anti-dilutive based on the treasury stock method.
18. Revenue from Contracts with Customers
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers in a manner that depicts how the nature, amount,
timing, and uncertainty of revenue and cash flows are affected by economic factors. The Company disaggregates revenue
based on the geographic location in which customer orders are placed and by reporting unit.
Revenue from contracts with customers is attributed to geographic areas based on locations in which the customer
orders are placed. The Company has three operating and three reportable segments consisting of Brooks Semiconductor
Solutions Group, Brooks Life Sciences Products and Brooks Life Sciences Services. The Company has six reporting units,
including three reporting units within the Brooks Semiconductor Solutions Group operating segment, one reporting unit
within Brooks Life Sciences Products operating segment and two reporting units within the Brooks Life Sciences Services
96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
operating segment. The following is revenue by geographic location and reporting unit for the fiscal years ended
September 30, 2020 and 2019 (in thousands):
Geographic Location
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Asia/Pacific/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Reporting Unit
Automation Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Contamination Control Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Semiconductor Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brooks Semiconductor Solutions Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended September 30,
2020
2019
340,403 $
417,099
139,771
897,273 $
308,593 $
157,557
42,586
508,736
327,250
312,237
141,361
780,848
286,188
118,318
42,163
446,669
Brooks Life Sciences Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
129,759
119,020
Sample Repository Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GENEWIZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brooks Life Sciences Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
92,332
166,446
258,778
897,273 $
88,896
126,263
215,159
780,848
Contract Balances
Accounts Receivable, Net. Accounts receivable represent rights to consideration in exchange for products or services
that have been transferred by the Company, when payment is unconditional and only the passage of time is required before
payment is due. Accounts receivable do not bear interest and are recorded at the invoiced amount. The Company maintains
an allowance for doubtful accounts representing its best estimate of probable credit losses related to its existing accounts
receivable and their net realizable value. The Company determines the allowance for doubtful accounts based on a number
of factors, including an evaluation of customer credit worthiness, the age of the outstanding receivables, economic trends
and historical experience. Accounts receivable, net were $188.3 million and $165.6 million at September 30, 2020 and
September 30, 2019, respectively.
Contract Assets. Contract assets represent rights to consideration in exchange for products or services that have been
transferred by the Company, when payment is conditional on something other than the passage of time. These amounts
typically relate to contracts within the Brooks Life Sciences segments where the right to payment is not present until
completion of the contract or the achievement of specified milestones and the value of the products or services transferred
exceed this constraint. Contract assets are classified as current. Contract asset balances which are included within “Prepaid
expenses and other current assets” on the Company’s Consolidated Balance Sheet, were $16.8 million and $14.0 million
at September 30, 2020 and September 30, 2019, respectively.
Deferred Commissions. Deferred commissions represent a direct and incremental cost of obtaining a contract. These
amounts primarily relate to sales commissions within the Brooks Life Sciences segments and are deferred and amortized
over a 60-month period, which represents the average period of contract performance. The Company classifies deferred
commissions as noncurrent as the original amortization period of this asset is greater than one year. Deferred commissions
balances are included within “Other assets” on the Company’s Consolidated Balance Sheet. Deferred commissions were
$0.4 million and $0.8 million at September 30, 2020 and September 30, 2019, respectively. The Company recorded $0.4
million of amortization expense related to deferred commissions for the year ended September 30, 2020.
Contract Liabilities. Contract liabilities represent the Company’s obligation to transfer products or services to a
customer for which consideration has been received, or for which an amount of consideration is due from the customer.
97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Contract assets and liabilities are reported on a net basis at the contract level, depending on the contracts position at the
end of each reporting period. Contract liabilities are included within “Deferred revenue” on the Company’s Consolidated
Balance Sheet. Contract liabilities were $31.4 million and $29.4 million at September 30, 2020 and September 30, 2019,
respectively. Revenue recognized from the contract liability balance at September 30, 2019 was $18.0 million for the year
ended September 30, 2020.
Remaining Performance Obligations. Remaining performance obligations represent the transaction price of
unsatisfied or partially satisfied performance obligations within contracts with an original expected contract term that is
greater than one year and for which fulfillment of the contract has started as of the end of the reporting period. The
aggregate amount of transaction consideration allocated to remaining performance obligations as of September 30, 2020
was $62.1 million. The following table summarizes when the Company expects to recognize the remaining performance
obligations as revenue, the Company will recognize revenue associated with these performance obligations as transfer of
control occurs (in thousands):
Remaining Performance Obligations . . . . . . . . . . $
As of September 30, 2020
Less than 1 Year Greater than 1 Year
19,380 $
42,739 $
Total
62,119
Cost to Obtain and Fulfill a Contract
The Company capitalizes sales commissions when incurred if they are (i) incremental costs of obtaining a contract,
(ii) expected to be recovered and (iii) have an expected amortization period that is greater than one year. As part of the
Company’s cumulative effect adjustment, incremental costs associated with obtaining a contract were capitalized and have
been classified as deferred commissions within the Company’s Consolidated Balance Sheet. These amounts primarily
relate to sales commissions within the Brooks Life Sciences segments and are being amortized over a 60-month period,
which represents the average period of contract performance. The Company did not capitalize any sales commissions
during the fiscal year ended September 30, 2020 as the amount of sales commissions that qualified for capitalization during
the reporting period was insignificant. Sales commissions incurred during the reporting period have been expensed as
incurred. These costs are recorded within “Selling, general, and administration expenses”. The Company has concluded
that none of its costs incurred in fulfillment of customer contracts meet the capitalization criteria. The Company will
account for shipping and handling activities as fulfillment activities and recognize the associated expense when transfer
of control of the product has transferred to the customer.
19. Significant Customers
No customers accounted for more than 10% of the Company’s consolidated revenue during the fiscal years ended
September 30, 2020, 2019 and 2018. No customers accounted for more than 10% of the Company’s total receivables
during the fiscal year ended September 30, 2020 and 2019.
20. Segment and Geographic Information
Operating segments are defined as components of an enterprise that engage in business activities for which discrete
financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate
resources and to assess performance. The Company’s Chief Executive Officer is the Company’s chief operating decision
maker.
The Company operates in three reportable segments: the Brooks Semiconductor Solutions Group segment, the Brooks
Life Sciences Services segment and the Brooks Life Sciences Products segment. These reportable segments also represent
the Company’s operating segments. The Company previously operated in two reportable segments: the Brooks
Semiconductor Solutions Group segment and the Brooks Life Sciences segment. The Brooks Life Sciences segment
consisted of the Sample Management operating segment and the GENEWIZ operating segment that aggregated into one
reportable segment. During fiscal year 2020, the Company reorganized its operating segments to better align with its
business activities in connection with its recent acquisitions and the Company’s strategic vision. Historical information
has been adjusted to reflect the new reportable segments.
98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Brooks Semiconductor Solutions Group segment provides a variety of products, services and solutions that enable
improved throughput and yield in controlled operating environments, as well as an extensive range of support services.
The solutions include atmospheric and vacuum robots, robotic modules, tool automation systems, contamination control
of wafer carrier front opening unified pods and reticle storage. The support services include repair services, diagnostic
support services, and installation services in support of the products, which enable customers to maximize process tool
uptime and productivity. This segment also provides end-user customers with spare parts and productivity enhancement
upgrades to maximize tool productivity.
The Brooks Life Sciences Services segment provides comprehensive sample management programs, integrated cold
chain solutions, informatics, as well as sample-based laboratory services to advance scientific research and support drug
development. The segment’s service offerings include sample storage, genomic sequencing, gene synthesis, laboratory
processing services, laboratory analysis, and other support services which are provided to a wide range of life science
customers, including pharmaceutical companies, biotechnology companies, biorepositories and research institutes.
The Brooks Life Sciences Products segment provides automated cold sample management systems for compound and
biological sample storage, equipment for sample preparation and handling, consumables and instruments, that help
customers manage samples throughout their research discovery and development workflows. The segment’s product
offerings include the automated cold storage systems, cryogenic storage systems, consumables and instruments and the
associated services business for these products
The Company considers adjusted operating income, which excludes charges related to amortization of completed
technology, the acquisition accounting impact on inventory contracts acquired and restructuring related charges as the
primary performance metric when evaluating the business.
The following is the summary of the financial information for the Company’s reportable segments for the fiscal years
ended September 30, 2020, 2019 and 2018 (in thousands):
Revenue:
Brooks Semiconductor Solutions Group . . . . . . . . . . . . . . . . . . . . . . . . $
Brooks Life Sciences Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brooks Life Sciences Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
508,736 $
129,759
258,778
897,273 $
446,669 $
119,020
215,159
780,848 $
435,018
106,146
90,396
631,560
Year Ended September 30, 2020
2019
2018
2020
Operating income:
Brooks Semiconductor Solutions Group . . . . . . . . . . . . . . . . . . . . . . . . $
Brooks Life Sciences Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brooks Life Sciences Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reportable segment adjusted operating income . . . . . . . . . . . . . . . . . . . . .
Amortization of completed technology . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition accounting impact on inventory contracts
acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquired intangible assets . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other unallocated corporate expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
82,950 $
9,353
28,832
121,135
11,007
69,961 $
(1,835)
22,466
90,592
10,424
—
301
30,766
1,366
(763)
78,458
849
(2,944)
—
(1,391)
74,972 $
184
285
24,737
1,894
7,030
46,038
1,449
(22,250)
(14,339)
(1,455)
9,443 $
62,511
(9,044)
12,839
66,306
4,877
1,896
—
19,339
714
8,071
31,409
1,881
(9,520)
—
(3,304)
20,466
99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Assets:
Brooks
Semiconductor
Brooks Life
Solutions Group Sciences Products Sciences Services
Brooks Life
Total
September 30, 2020 . . . . . . . . . . . . . . . . . $
September 30, 2019 . . . . . . . . . . . . . . . . .
296,289 $
259,641
214,196 $
206,456
737,967 $ 1,248,452
1,168,795
702,698
The following is a reconciliation of the Company’s reportable segments’ segment assets to the amounts presented in
the accompanying Consolidated Balance Sheets as of September 30, 2020 and 2019 (in thousands):
Segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,248,452 $ 1,168,795
342,140
Cash and cash equivalents, restricted cash, and marketable securities . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,064
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,559,125 $ 1,515,999
305,694
4,979
September 30, September 30,
2020
2019
Revenue from external customers is attributed to geographic areas based on locations in which customer orders are
placed. Net revenue by geographic area for the fiscal years ended September 30, 2020, 2019 and 2018 are as follows (in
thousands):
Year Ended September 30,
2019
2020
2018
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,403 $ 327,250 $ 233,243
262,706
Asia / Pacific/ Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
135,611
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 897,273 $ 780,848 $ 631,560
417,099
139,771
312,237
141,361
The majority of the Company’s net revenue in North America is generated in the United States which amounted to
$337.3 million, $325.3 million and $232.7 million, respectively, during fiscal years ended September 30, 2020, 2019 and
2018.
The geographic location of an OEM is not indicative of where the products will eventually be used. The geographic
area for the orders is determined by the onward sale of an OEM system which incorporates the sub-systems and/or
components.
Property, plant and equipment by geographic area as of September 30, 2020 and 2019 are as follows (in thousands):
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79,366 $ 72,401
15,628
Asia / Pacific/ Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,640
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 117,665 $ 100,669
25,117
13,182
September 30,
2020
2019
Property, plant and equipment located in the United States amounted to $79.4 million and $72.3 million, respectively,
at September 30, 2020 and 2019.
100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
21. Fair Value Measurements
The fair value measurement guidance establishes a fair value hierarchy which 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.
The Company measures certain assets, including the cost and equity method investments, at fair value on a
nonrecurring basis when they are deemed to be other-than-temporarily impaired. The fair values of these investments are
determined based on valuation techniques using the best information available, and may include quoted market prices,
market comparables, and discounted cash flow projections. An impairment charge is recorded when the cost of the
investment exceeds its fair value and this condition is determined to be other-than-temporary.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables summarize assets and liabilities measured and recorded at fair value on a recurring basis in the
accompanying Consolidated Balance Sheets as of September 30, 2020 and 2019 (in thousands):
Description
Assets:
Fair Value Measurements at Reporting Date Using
Quoted Prices in
Active Markets for
Significant Other Unobservable
Significant
September 30,
2020
Identical Assets Observable Inputs
(Level 1)
(Level 2)
Inputs
(Level 3)
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Available-for-sale securities . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
50 $
3,168
370
3,588 $
Liabilities:
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . $
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . $
238 $
238 $
— $
—
—
— $
— $
— $
50 $
3,168
370
3,588 $
238 $
238 $
—
—
—
—
—
—
Description
Assets:
Fair Value Measurements at Reporting Date Using
Quoted Prices in
Active Markets for
Significant Other Unobservable
Significant
September 30,
2019
Identical Assets Observable Inputs
(Level 1)
(Level 2)
Inputs
(Level 3)
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Available-for-sale securities . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
16,164 $
36,969
17
53,150 $
6,188 $
—
—
6,188 $
9,976 $
36,969
17
46,962 $
Liabilities:
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . $
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
340 $
340 $
— $
— $
340 $
340 $
—
—
—
—
—
—
101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash Equivalents
Cash equivalents $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
$0.1 million and $10.0 million, respectively, as of September 30, 2020 and 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.
Available-For-Sale Securities
Available-for-sale securities of $3.2 million and $37.0 million, respectively, at September 30, 2020 and 2019 consist
of U.S. Treasury Securities, Municipal Securities, Bank Certificate of Deposits, Corporate Securities and Other Debt
Securities. 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.
Foreign Exchange Contracts
Foreign exchange contract assets and liabilities amounted to $0.4 million and $0.2 million, respectively, at
September 30, 2020. Foreign exchange contract assets and liabilities amounted less than $0.1 million and $0.3 million,
respectively, at September 30, 2019. 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 due to a lack of an active
market for these contracts.
Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
During fiscal year 2020 and 2019, the Company did not record any material other-than-temporary impairments on
financial assets required to be measured at fair value on a nonrecurring basis.
22. Commitments and Contingencies
Letters of Credit
At September 30, 2020, the Company had $1.3 million of letters of credit outstanding related primarily to customer
advances and other performance obligations. These arrangements guarantee the refund of advance payments received from
the Company’s customers in the event that the product is not delivered or warranty obligations are not fulfilled in
accordance with the contract terms. These obligations could be called by the beneficiaries at any time before the expiration
date of the particular letter of credit if the Company fails to meet certain contractual requirements. None of these
obligations were called during fiscal years ended September 30, 2020, and the Company currently does not anticipate any
of these obligations to be called in the near future.
Purchase Commitments
At September 30, 2020, the Company has non-cancelable commitments of $163.9 million, including purchase orders
for inventory of $127.9 million, information technology related commitments of $22.6 million, China facility
commitments of $13.2 million and other commitments of $0.2 million.
Contingencies
The Company is subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course
of business. The Company cannot predict the ultimate outcome of such legal proceedings or in certain instances provide
reasonable ranges of potential losses. The Company may also have certain indemnification obligations pursuant to claims
made under the definitive agreement it entered into with Edwards in connection with the Company’s sale of its
semiconductor cryogenics business. See Note 3, “Discontinued Operations” for further information. However, as of the
date of this report, the Company believes that none of these claims will have a material adverse effect on its consolidated
financial position or results of operations. In the event of unexpected subsequent developments and given the inherent
unpredictability of these matters, there can be no assurance that the Company’s assessment of any claim will reflect the
102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ultimate outcome, and an adverse outcome in certain matters could, from time to time, have a material adverse effect on
the Company’s consolidated financial position or results of operations in particular quarterly or annual periods.
23. Subsequent Events
Dividend
On November 5, 2020, the Company’s Board of Directors declared a cash dividend of $0.10 per share payable on
December 17, 2020 to common stockholders of record as of December 4, 2020. Dividends are declared at the discretion
of the Company’s Board of Directors and depend on the Company’s actual cash flow from operations, its financial
condition and capital requirements, as well as any other factors the Company’s Board of Directors may consider relevant.
Future dividend declarations, as well as the record and payment dates for such dividends, will be determined by the
Company’s Board of Directors on a quarterly basis.
103
Item 9. Changes in and Disagreements with Accountants on Financial Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and chief
financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under
Rule 13a-15(e) promulgated under the Exchange Act. Disclosure controls and procedures are designed to ensure that
information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is
accumulated and communicated to management, including the chief executive officer and chief financial officer, as
appropriate, to allow timely decisions regarding required disclosure. Based upon this evaluation, our chief executive officer
and our chief financial officer concluded that our disclosure controls and procedures were effective as of September 30,
2020, the end of the period covered by this annual report.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as a process
designed by, or under the supervision of our chief executive and chief financial officers and effected by our board of
directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies
and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
disposition of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance
with authorization of our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our chief executive officer and chief
financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of
September 30, 2020. In making this assessment, we used the criteria set forth in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on this
evaluation, management concluded that the Company's internal control over financial reporting was effective as of
September 30, 2020.
The effectiveness of our internal control over financial reporting as of September 30, 2020 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in
Item 8. Financial Statements and Supplementary Data.
104
Previously Identified Material Weakness in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be
prevented or detected on a timely basis.
We previously disclosed in our 2019 Annual Report on Form 10-K, the following control deficiency, that constitutes
a material weakness in our internal control over financial reporting:
● We did not maintain effective controls related to the accuracy of revenue recorded at a business unit within our
Brooks Life Sciences Services segment. Specifically, we did not maintain effective controls to verify the accuracy
of the price and quantity data for customer transactions entered into the business unit’s billing system, and to
verify that the invoices generated from the billing system were based on the appropriate amounts. These control
deficiencies resulted in immaterial misstatements and subsequent immaterial adjustments to revenue and related
accounts and disclosures in the interim and annual consolidated financial statements for the years ended
September 30, 2019, 2018 and 2017.
Remediation of Prior Material Weakness
During the quarter ended December 31, 2019, we implemented a new billing system and enterprise resource planning
system (ERP) for the business unit within our Brooks Life Sciences with the reported material weakness. In connection
with the implementation, during the quarter ended March 31, 2020, we designed and implemented new and enhanced
controls to verify the accuracy of price and quantity data for the business unit's customer transactions and verify that
invoices generated from the business unit's billing system are based on appropriate amounts. We also enhanced our
documentation related to the business unit's billing systems, procedures, and controls, which will support its ability to train
employees and execute the controls effectively. Based on the actions taken, as well as the testing and evaluation of the
design and operating effectiveness of the controls, we concluded that the material weakness related to the accuracy of price
and quantity data for the business unit's customer transactions, and the verification that invoices generated from the
business unit's billing system are based on appropriate amounts, was remediated as of September 30, 2020.
Changes in Internal Control Over Financial Reporting
There were no changes in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) during the fiscal fourth quarter ended September 30, 2020, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
105
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this Item 10 is contained in our definitive proxy statement for our 2021 annual meeting
of shareholders to be filed by us within 120 days after the close of our fiscal year, or the 2021 Proxy Statement, under the
captions “Proposal No. 1-Election of Directors,” “Other Matters-Standards of Conduct,” “Other Matters-Stockholder
Proposals and Recommendations for Director” and “Corporate Governance” and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item 11 is contained under the captions “Corporate Governance,” “Director
Compensation” and “Executive Officers” in the 2021 Proxy Statement to be filed by us within 120 days after the close of
our fiscal year and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 is contained under the captions “Security Ownership of Certain Beneficial
Owners” and “Equity Compensation Plan Information” in the 2021 Proxy Statement to be filed by us within 120 days after
the close of our fiscal year and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is contained under the captions “Related Party Transactions,” “Corporate
Governance” and “Compensation of Directors” in the 2021 Proxy Statement to be filed by us within 120 days after the
close of our fiscal year and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item 14 is contained under the caption “Independent Auditor Fees and Other Matters”
in the 2021 Proxy Statement to be filed by us within 120 days after the close of our fiscal year and is incorporated herein
by reference.
106
Item 15. Exhibits and Financial Statement Schedules
(a) Financial Statements and Financial Statement Schedules
PART IV
• Consolidated Financial Statements of the Company and the related notes are included under Part II, Item 8,
“Financial Statements and Supplementary Data” of this Form 10-K.
• Other financial statement schedules are omitted because of the absence of conditions under which they are
required or because the required information is given in the supplementary Consolidated Financial
Statements or notes thereto.
(b) Exhibits
Exhibit
No.
Description
2.01*
2.02*
2.03*
2.04
2.05*
3.01
Sales and Purchase Agreement, dated October 5, 2017, by and among Brooks Automation Limited and
the shareholders of 4titude Ltd. (incorporated herein by reference to Exhibit 10.27 of the Company’s
Annual Report on Form 10-K, filed on November 17, 2017).
Agreement of Merger, dated as of September 26, 2018, by and among the Company, GENEWIZ Group,
Darwin Acquisition Company, and Shareholder Representative Services L.L.C. (incorporated herein by
reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on November 15, 2018).
Asset Purchase Agreement, dated August 27, 2018, among the Company, Edwards Vacuum LLC, and
for certain sections thereof, Atlas Copco AB (incorporated herein by reference to Exhibit 10.29 to the
Company’s Annual Report on Form 10-K, filed on November 29, 2018).
Amendment No. 1, dated as of February 12, 2019, to Asset Purchase Agreement dated as of August 27,
2018, among the Company, Edwards Vacuum LLC, and for certain sections, Atlas Copco AB
(incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed
on February 13, 2019).
Amendment No. 2, dated June 28, 2019, to Asset Purchase Agreement dated as of August 27, 2018,
among the Company, Edwards Vacuum LLC, and for certain sections, Atlas Copco AB (incorporated
herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on July 5, 2019).
Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.01
to the Company’s Registration Statement on Form S-3 (Reg. No. 333-189582), filed on June 25, 2013).
3.02
Amended and Restated Bylaws, (incorporated herein by reference to Exhibit 3.01 of the Company’s
Current Report on Form 8-K, filed on February 11, 2008).
3.03
4.01
Amendment to Amended and Restated Bylaws of the Company, dated August 1, 2017 (incorporated
herein by reference to Exhibit 3.02 of the Company’s Quarterly Report on Form 10-Q, filed on August 4,
2017).
Specimen Certificate for shares of the Company’s common stock (incorporated herein by reference to
the Company’s Registration Statement on Form S-3 (Reg. No. 333-88320), filed on May 15, 2002).
4.02
Description of Securities (incorporated herein by reference to Exhibit 4.02 of the Company’s Annual
Report on Form 10-K, filed on December 17, 2019).
107
10.01**
10.02**
10.03**
10.04**
10.05**
10.06**
10.07**
10.08**
10.09**
10.10**
Form of Indemnification Agreement for directors and officers of the Company (incorporated herein by
reference to Exhibit 10.02 of the Company’s Annual Report on Form 10-K, filed on November 17,
2017).
Employment Agreement, effective as of April 5, 2010, by and between the Company and
Stephen S. Schwartz (incorporated herein by reference to Exhibit 10.01 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2010, filed on May 6, 2010).
Offer letter, dated September 5, 2013, between the Company and Lindon G. Robertson (incorporated
herein by reference to Exhibit 10.03 of the Company’s Annual Report on Form 10-K, filed on
December 17, 2019).
Letter Agreement, dated June 4, 2015, between the Company and Lindon G. Robertson (incorporated
herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on June 9,
2015).
Offer Letter. dated September 27, 2014, as revised, between the Company and Maurice Tenney, III
(incorporated herein by reference to Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended December 31, 2015, filed on February 3, 2016).
Amended Offer Letter, dated June 4, 2015, between the Company and Maurice Tenney, III (incorporated
herein by reference to Exhibit 10.02 to the Company’s Quarterly Report on Form 10-Q for the quarter
ended December 31, 2015, filed on February 3, 2016).
Separation Agreement, dated September 6, 2019, as amended, between
the Company and
Maurice H. Tenney, III (incorporated herein by reference to Exhibit 10.07 of the Company’s Annual
Report on Form 10-K, filed on December 17, 2019).
Offer Letter, dated June 12, 2014 between the Company and David C. Gray (incorporated herein by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
December 31, 2014, filed on February 5, 2015).
Letter Agreement, dated November 1, 2016, between the Company and David E. Jarzynka (incorporated
herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2017, filed on August 4, 2017).
Offer Letter dated September 12, 2018, between the Company and Amy Liao (incorporated herein by
reference to Exhibit 10.10 of the Company’s Annual Report on Form 10-K, filed on December 17,
2019).
10.11**
Form of Non-Competition Agreement (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed on June 9, 2015).
10.12**
Form of Change in Control Agreement (incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K, filed on June 9, 2015).
10.13**
Second Amended and Restated 2000 Equity Incentive Plan, restated as of May 7, 2013 (incorporated
herein by reference to Exhibit 10.01 to the Company’s Current Report on Form 8-K, filed on May 9,
2013).
10.14**
2017 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed on February 13, 2017).
108
10.15**
2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed on February 5, 2015).
10.16**
10.17**
Form of Restricted Stock Unit Award Notice under the 2000 Equity Incentive Plan (incorporated herein
by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K, as filed on November 28,
2011).
Form of Restricted Stock Unit Award Notice under the 2015 Equity Incentive Plan (incorporated herein
by reference to Exhibit 10.17 of the Company’s Annual Report on Form 10-K, filed on November 17,
2017).
10.18**
Executive Performance-Based Variable Compensation Plan (incorporated herein by reference to
Exhibit 10.01 to the Company’s Current Report on Form 8-K, filed on January 29, 2016).
10.19**
10.20**
10.21**
10.22
10.23
10.24
10.25
10.26
10.27
Non-Employee Directors Stock Grant/Restricted Stock Unit Election Form under the 2000 Equity
Incentive Plan (incorporated herein by reference to Exhibit 10.42 to the Company’s Annual Report on
Form 10-K, filed on November 23, 2010).
Non-Employee Director Restricted Stock Unit Deferral Election Form under the 2015 Equity Incentive
Plan (incorporated herein by reference to Exhibit 10.20 of the Company’s Annual Report on Form 10-K,
filed on November 17, 2017).
Brooks Automation, Inc. Amended and Restated Deferred Compensation Plan, as amended
(incorporated herein by reference to Exhibit 10.21 of the Company’s Annual Report on Form 10-K,
filed on November 17, 2017).
Credit Agreement, dated as of May 26, 2016, by and among the Company, Brooks Life Sciences, Inc.
(fka BioStorage Technologies, Inc.), Wells Fargo Bank, National Association and the Lenders parties
thereto (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2016 filed on July 28, 2016).
Consent and First Amendment to Credit Agreement, dated October 4, 2017, by and among Wells Fargo
Bank, National Association, as Administrative Agent, the Company and Brooks Life Sciences, Inc.
(fka BioStorage Technologies Inc.) (incorporated herein by reference to Exhibit 10.24 of the Company’s
Annual Report on Form 10-K, filed on November 17, 2017).
Guaranty and Security Agreement, dated as of May 26, 2016, by and among Wells Fargo Bank, National
Association and the Grantors and members of the Lender Group parties thereto (incorporated herein by
reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2016 filed on July 28, 2016).
Credit Agreement, dated October 4, 2017, by and among the Company, Morgan Stanley Senior Funding,
Inc., and the lenders party thereto (incorporated herein by reference to Exhibit 10.25 of the Company’s
Annual Report on Form 10-K, filed on November 17, 2017).
Incremental Amendment, dated as of November 15, 2018, to that certain Credit Agreement dated as of
October 4, 2017, among the Company, the several lenders party thereto from time to time and Morgan
Stanley Senior Funding, Inc., as administrative agent for the Lenders (incorporated herein by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 15, 2018).
Amendment No. 2, dated as of February 15, 2019, to Credit Agreement dated as of October 4, 2017,
among the Company, the several lenders party thereto from time to time and Morgan Stanley Senior
Funding, Inc., as administrative agent for the Lenders (incorporated herein by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K, filed on February 22, 2019).
109
10.28
21.01
23.01
31.01
Guarantee and Security Agreement, dated October 4, 2017, by and among the Company, Brooks Life
Sciences, Inc. (fka BioStorage Technologies, Inc.), Morgan Stanley Senior Funding, Inc., as
Administrative Agent for the lenders (incorporated herein by reference to Exhibit 10.26 of the
Company’s Annual Report on Form 10-K, filed on November 17, 2017).
Subsidiaries of the Company.
Consent of PricewaterhouseCoopers LLP
Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
31.02
Certification of the Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
32
Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
101
The following material from the Company’s Annual Report on Form 10-K, for the year ended
September 30, 2020, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the
Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated
Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; (v) the
Consolidated Statements of Changes in Equity; and (vi) the Notes to Consolidated Financial Statements.
The instance document does not appear in the Interactive Data File because XBRL tags are embedded
in the iXBRL document.
104
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).
* Certain schedules and exhibits have been omitted from this Exhibit pursuant to Item 601(a)(5) of Regulation S-K.
Brooks Automation, Inc. will furnish a copy of any omitted schedule or exhibit to the U.S. Securities and Exchange
Commission or its staff upon request
** Management contract, compensatory plan or agreement.
Item 16. Form 10-K Summary
None.
110
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
BROOKS AUTOMATION, INC.
By:/S/ STEPHEN S. SCHWARTZ
Stephen S. Schwartz
President and Chief Executive Officer
Date: November 18, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ STEPHEN S. SCHWARTZ
Stephen S. Schwartz
Director, President and Chief Executive Officer
(Principal Executive Officer)
November 18, 2020
/S/ LINDON G. ROBERTSON
Lindon G. Robertson
/S/ DAVID PIETRANTONI
David Pietrantoni
/S/ A. CLINTON ALLEN
A. Clinton Allen
/S/ ROBYN C. DAVIS
Robyn C. Davis
/S/ JOSEPH R. MARTIN
Joseph R. Martin
/S/ ERICA J. MCLAUGHLIN
Erica J. McLaughlin
/S/ KRISHNA G. PALEPU
Krishna G. Palepu
/S/ MICHAEL ROSENBLATT
Michael Rosenblatt
/S/ ALFRED WOOLLACOTT III
Alfred Woollacott III
/S/ MARK S. WRIGHTON
Mark S. Wrighton
/S/ ELLEN M. ZANE
Ellen M. Zane
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Vice President - Finance and
Corporate Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
111
November 18, 2020
November 18, 2020
November 18, 2020
November 18, 2020
November 18, 2020
November 18, 2020
November 18, 2020
November 18, 2020
November 18, 2020
November 18, 2020
November 18, 2020
BR114340-1120-10K