What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2020-11-18 compared with 2019-12-17 · 218 added, 227 removed, 281 unchanged (61% of the section changed)

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.

Our MD&A is organized as follows:

10 unchanged sentences

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” included above in this Form 10-K and Item 1A, “Risk Factors"

for a discussion of important factors that could cause our actual results to differ materially from our expectations.

We are a leading provider of semiconductor manufacturing automation solutions and life science sample-based services and solutions worldwide.

In the semiconductor manufacturing market, we have been a provider of precision robotics, integrated automation systems and services for more than 40 years.

In the life sciences market, we apply our automation and cryogenics expertise to offer a full suite of sample-based services and products, including a full line of cold chain management solutions for handling and storing biological and chemical compound samples used in areas such as drug development, clinical research and advanced cell therapies.

We are also a global provider of gene sequencing and gene synthesis services.

We believe our leadership positions and our global support capability in each of these markets make us a valued business partner to the largest semiconductor capital equipment device makers, and pharmaceutical and life science research institutions in the world.

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.

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.

2 unchanged sentences

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.

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.

1 unchanged sentence

We invest in research and development initiatives within the Brooks Semiconductor Solutions Group segment to maintain continued leadership position in the markets we serve.

We launched our newest Vacuum Automation platform, MagnaTran LEAP™, for the rapidly emerging advanced technologies related to manufacturing 10 nanometer design rule semiconductor chips.

MagnaTran LEAP is well positioned to deliver clean, accurate and fast wafer transport available for the fast-growing Deposition and Etch markets.

In addition, we expect to continue to support and expand our technology and product offerings for the semiconductor market through acquisitions.

In 2018, we acquired Tec-Sem, a Switzerland-based provider of semiconductor fabrication automation equipment with a focus on reticle management.

The acquisition is expected to enhance our contamination controls solutions offerings.

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.

1 unchanged sentence

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.

In November of 2015, we acquired BioStorage Technologies, a full-service outsourcing sample management business, for a total purchase price of $125.2 million, net of cash acquired.

The acquisition provided us with the capability to support customers with an integrated, comprehensive set of sample management products, services and solutions.

In July 2017, we acquired substantially all of the assets and liabilities of Pacific Bio-Material Management, Inc., or PBMMI, and Novare, LLC, or Novare, for a total purchase price of $34.1 million, net of cash acquired.

PBMMI and Novare provide storage, transportation, management, and cold chain logistics of biological materials.

The acquisition expanded our capabilities with respect to sample management and integrated cold chain storage and transportation solutions.

We acquired Cool Lab, LLC, a subsidiary of BioCision, LLC, which provides a range of cryogenic product solutions that assist in managing the temperature stability of therapeutics, biological samples and related biomaterials in ultra-cold environments, in November 2016.

We held an equity interest in BioCision prior to the acquisition of Cool Lab and collaborated in the development of advanced solutions in temperature-controlled environments.

The aggregate purchase price of $15.2 million consisted of a cash payment of $4.8 million, a liability to the seller of $0.1 million and a non-cash consideration of $10.3 million measured at fair value on the acquisition date.

We have made several investments in developing new consumable and instrument offerings since the acquisitions of FluidX and Cool Lab.

In August 2017, we acquired certain assets and liabilities related to FreezerPro ® web-based software platform from RURO, Inc.

for a total purchase price of $5.5 million.

provides sample management software across multiple end markets, including academic research, government, pharmaceutical, biotech, and healthcare.

Our informatics solutions address needs within laboratories, biobanks, and enterprises that manage biological samples.

In October 2017, we acquired all of the outstanding capital stock of 4titude Limited, or 4titude, a U.K.-based manufacturer of scientific consumables for biological sample materials used in a variety of genomic and DNA analytical applications, for a total purchase price of $65.1 million, net of cash acquired.

The acquisition has expanded our existing offerings of consumables and instruments within the Brooks Life Sciences segment.

In April 2018, we acquired BioSpeciMan Corporation, or BioSpeciMan, a Canadian provider of storage services for biological sample materials.

We made a total cash payment of $5.2 million, net of cash acquired and subject to working capital adjustments.

The acquisition expanded customer relationships and geographic reach within our sample management storage services business.

In fiscal year 2019, we acquired GENEWIZ Group, or GENEWIZ, a leading global genomics service provider headquartered in South Plainfield, New Jersey.

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.

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 expect to leverage, along with our core capabilities, to add even more value to samples under our care.

Since entering the life sciences industry, we have also strengthened and broadened our product portfolio and market reach by investing in internal product development.

For the fiscal years ended 2019, 2018 and 2017, more than 23% of our cumulative research and development spending was focused on innovating and advancing solutions in the life sciences sample management 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 sample management market.

Within the Brooks Life Sciences segment, we have developed and continue to develop automated biological sample storage solutions for operating in ultra-low temperature environments.

We have developed the Twin-bank platform which provides -20°C and -80°C ultracold storage and the BioStore™ III Cryo for -190°C cryogenic storage.

With the acquisition of GENEWIZ, we acquired and continue to invest in research and development activities related to our protocols, processes and technologies to support complex gene reading and writing services.

Recent Developments

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.

2 unchanged sentences

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 estimated taxes payable and closing costs.

As part of this sale, we transferred our intellectual property, or IP, for our cryogenics pump products, but not our IP related to our semiconductor automation or life sciences businesses.

Net 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.

1 unchanged sentence

Refer to “Liquidity and Capital Resources” for further discussion of the debt extinguishment.

We have three operating segments aggregated into two reportable segments consisting of Brooks Semiconductor Solutions Group and Brooks Life Sciences.

For additional information on our operating segments and the related restructuring actions, as well as segment revenues and their operating results, please refer to Note 17, "Restructuring and Other Charges"

and Note 21, "Segment and Geographic Information"

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"

1 unchanged sentence

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 carrier front opening unified pods.

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 segment provides 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 segment’s product offerings include automated cold sample management systems for compound and biological sample storage, equipment for sample preparation and handling, consumables, and informatics that help customers

manage samples throughout their research discovery and development work flows.

The segment’s service offerings include sample storage, genomic sequencing, gene synthesis, lab processing services, lab analysis, and other support services provided to a wide range of life science customers, including pharmaceutical companies, biotechnology companies, biorepositories and research institutes.

We combine two reporting operating segments, Sample Management and GENEWIZ, into one reportable segment, Brooks Life Sciences, based on long term economic similarities of the two segments.

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

Review of Revenue Recognition Timing - We have completed our review of the timing of revenue recognition with respect to a product shipment from one of our contract manufacturers within the Brooks Semiconductor Solutions Group segment and similar transactions announced in our Notification of Late Filing on Form 12b-25 filed with the SEC on December 2, 2019 and determined that approximately $1.0 million of revenue from this product should be recognized in the fiscal quarter ended December 31, 2019 as opposed to the fiscal quarter ended September 30, 2019.

As a result, the revenue and related profits from this product previously recorded in the fiscal fourth quarter and of the fiscal year ended September 30, 2019 as reported in the press release we issued on November 6, 2019 and furnished to the SEC with our Current Report on Form 8-K on the same date was adjusted downward and the revenue and related profits from this product will subsequently be recorded in the fiscal quarter ended December 31, 2019.

Our financial results included in this Form 10-K and the consolidated financial statements included elsewhere in this Form 10-K reflect these adjustments.

Following our review of this issue, we conducted an assessment of our controls relating to the timing of revenue recognition for products shipped from our contract manufacturers and determined we had a material weakness in our internal control over financial reporting, as described further in this annual report in Item 9A, Controls and Procedures.

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%.

1 unchanged sentence

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 $46.0 million for fiscal year 2019 compared to $31.4 million for fiscal year 2018, an increase of $14.6 million, which was primarily attributable to the revenue growth and gross margin improvement, partially offset by higher operating expenses.

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 year 2019.

This decrease was primarily attributable to an increase in income taxes of $47.1 million driven by the release of the tax valuation allowance of $77.2 million in fiscal year 2018.

Additional factors contributing to the decrease in income from continuing operations compared to the prior fiscal year include a loss on extinguishment of debt of $14.3 million and higher interest expense of $12.7 million in fiscal year 2019, partially offset by an increase in operating income of $14.6 million.

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 increase in cash and cash equivalents and marketable securities of $90.9 million was primarily attributable to cash inflows of $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.

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.

1 unchanged sentence

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.

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.

9 unchanged sentences

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 segment.

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 our performance does not have alternative use to us and an enforceable right to payment for performance completed to date is present.

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.

12 unchanged sentences

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 judgement 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 expenses and the discount rate.

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.

9 unchanged sentences

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 two reportable segments consisting of Brooks Semiconductor Solutions Group and Brooks Life Sciences.

We have five reporting units, including three reporting units within the Brooks Semiconductor Solutions Group operating segment and two reporting units which is the Brooks Life Sciences operating segment.

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 1 st 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 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.

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 exceeds its carrying value.

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.

2 unchanged sentences

We consider the DCF Method to be the most appropriate valuation technique since it is based on management’s long-term financial projections.

Due to the cyclical nature of the semiconductor equipment market, management’s projections as of the valuation date are considered more subjective since market metrics of peer companies fluctuate during the cycle.

In addition, we also compare 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 test the reasonableness of the reporting unit fair values determined in accordance with the DCF Method.

The observable inputs used in the DCF Method include 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 businesses and our internally developed projections of future cash flows.

We completed our annual goodwill impairment test as of April 1, 2019 for our five reporting units:

Automation Solutions, Contamination Control Solutions and Global Semiconductor Services within the Brooks Semiconductor Solutions Group segment, as well as Sample Management and GENEWIZ within the Brooks Life Sciences segment.

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.

1 unchanged sentence

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 two reporting units within the Brooks Life Sciences segment.

We determined that no adjustment to goodwill was necessary for these two reporting units.

The Sample Management reporting unit’s fair value significantly exceeded book value.

The GENEWIZ reporting unit, which was recently acquired, had a fair value slightly above its book value.

Different assumptions of forecasted sales volumes, product costs, future cash flows, risk-adjusted weighted average cost of capital discount rate, as well as long-term growth rate projections used in the DCF model could results in different estimates of the reporting unit’s fair value as of each testing date.

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.

1 unchanged sentence

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 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.

10 unchanged sentences

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.

Throughout fiscal year 2017 we maintained a full valuation allowance against our U.S.

net deferred tax assets

along with those of certain foreign tax-paying components.

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.

4 unchanged sentences

During the full fiscal year 2018, we reduced our U.S.

valuation against 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.

14 unchanged sentences

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%.

In the first quarter of fiscal 2019, we adopted new accounting guidance for recognizing revenue on a modified retrospective basis.

The difference in reported revenue due to the adoption of the new revenue recognition standard was a net decrease in revenue of $0.9 million for fiscal year 2019.

Our Brooks Semiconductor Solutions Group segment reported revenue of $446.7 million for fiscal year 2019 compared to $435.0 million for fiscal year 2018.

The increase of $11.7 million, or 3%, reflects increases in revenue from contamination control solutions and automation systems, partially offset by a decline in revenue from our robotics products.

The increase in contamination control solutions revenue is primarily due to organic growth, and includes $15.1 million of revenue from Tec-Sem which was driven by the additional months of ownership in fiscal year 2019 compared to fiscal year 2018.

The difference in reported revenue due to the adoption of the new revenue recognition standard was a net increase of $1.9 million for fiscal year 2019.

Our Brooks Life Sciences segment reported revenue of $334.2 million for fiscal year 2019 compared to $196.5 million for fiscal year 2018.

The increase of $137.6 million, or 70%, included organic growth of $16.0 million, or 8%, which was primarily driven by consumables and instruments, BioStore III Cryo systems, sample storage services, and infrastructure services.

Acquisitions accounted for $126.8 million of the increase compared to fiscal year 2018, which consisted of $126.3 million from the acquisition of GENEWIZ, and $0.5 million from the acquisition of BioSpeciMan.

The difference in reported revenue due to the adoption of the new revenue recognition standard was a net decrease of $2.8 million for fiscal year 2019.

We anticipate continued growth in revenue from our Brooks Life Sciences 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 capital investments for our customers and these markets are cyclical, often fluctuating significantly from quarter to quarter.

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.

2 unchanged sentences

We reported operating income of $78.5 million for fiscal year 2020 compared to $46.0 million for fiscal year 2019.

The increase of 47% is 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.

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 $3.6 million and $3.4 million for fiscal years 2019 and 2018, respectively and includes inventory step-up charges of $0.2 million and $0.7 million for fiscal years 2019 and 2018, respectively.

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 21, “Segment Information”.

Operating income for our Brooks Life Sciences segment was $13.5 million for fiscal year 2019 compared to $1.2 million for fiscal year 2018.

Operating income for our Brooks Life Sciences segment includes charges for amortization related to completed technology of $6.8 million and $1.5 million for fiscal years 2019 and 2018, respectively.

Fiscal year 2018 includes $1.2 million inventory step-up charges.

There were no inventory step-up charges for fiscal year 2019.

Fiscal year 2019 includes restructuring related charges of $0.3 million.

There were no restructuring related charges for fiscal year 2018.

Adjusted operating income for our Brooks Life Sciences segment, which excludes the charges mentioned above, was $20.6 million for fiscal year 2019 compared to $3.8 million in fiscal year 2018.

Please refer to Note 21, “Segment Information”.

We reported gross margins of 40.5% for fiscal year 2019 compared to 39.0% for fiscal year 2018.

Gross margin increased 3.6 points in the Brooks Life Sciences segment and increased 0.7 points in the Brooks Semiconductor Solutions segment.

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”.

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.

The increase compared to the prior year period was due to the amortization of intangible assets acquired with GENEWIZ.

Additionally, cost of revenue for fiscal year 2019 also included $0.3 million of restructuring related charges and $0.2 million of inventory step-up charges from acquisitions, compared to the prior year period which included $1.9 million of inventory step-up charges.

The difference in reported gross margin due to the adoption of the new revenue recognition standard was a net increase in gross profit of $1.0 million for 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.

Margins improved on the impact of product mix, and lower production material variances.

Cost of revenue during fiscal year 2019 included $3.6 million of amortization related to completed technology compared to $3.4 million during fiscal year 2018.

During fiscal years 2019 and 2018, cost of revenue included $0.2 million and $0.7 million, respectively, of inventory step-up charges, which were attributable to the

acquisition of Tec-Sem.

The difference in reported gross margin due to the adoption of the new revenue recognition standard was a net increase in gross profit of $1.9 million for fiscal year 2019.

Our Brooks Life Sciences segment reported gross margins of 40.3% for fiscal year 2019 compared to 36.7% for fiscal year 2018.

Margins benefitted from the impact of GENEWIZ, acquired in November of 2018, which carries higher than average gross margins, and improved in gross margins in Sample Management driven by consumables and instruments and BioStorage services.

These benefits were offset by lower margins in our manufactured automated stores business, which experienced cost overruns in the areas of production and project management.

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.

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.

During fiscal year 2019, cost of revenue included $0.3 million of restructuring related charges and during fiscal year 2018, cost of revenue included $1.2 million of inventory step-up charges.

The difference in reported gross margin due to the adoption of the new revenue recognition standard was a net decrease in gross profit of $0.9 million for 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 $9.4 million was due to increased expense of $5.3 million within the Brooks Life Sciences segment and $4.1 million within the Brooks Semiconductor Solutions Group segment.

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 of $2.2 million and outside services of $1.1 million.

The additional months of Tec-Sem under ownership acquired in April of 2018, drove $1.3 million of the increase.

Research and development expenses in our Brooks Life Sciences Segment were $17.3 million in fiscal 2019 compared to $12.0 million in fiscal year 2018.

The acquisition of GENEWIZ in November of 2018 added $5.0 million of expense 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 $212.0 million in fiscal year 2019 compared to $167.0 million in fiscal year 2018.

The increase of $44.9 million was due to increased expense of $44.8 million within the Brooks Life Sciences Segment.

Corporate expenses, not allocated to segments, were $31.8 million in in fiscal year 2019, compared to $27.4 million in fiscal year 2018.

Corporate unallocated expenses included amortization expense related primarily to customer relationships of $24.7 million and $19.3 million, during fiscal years 2019 and 2018 respectively, and merger and acquisition related expenses of $6.7 million and $6.9 million, during fiscal years 2019 and 2018 respectively.

These increases were partially offset by a $4.2 million decrease within the Brooks Semiconductor Solutions Segment.

Selling, general, and administrative expenses in our Brooks Semiconductor Solutions Group segment were $76.4 million in fiscal year 2019 compared to $80.6 million in fiscal year 2018.

The decrease of $4.2 million is primarily related to a reduction in corporate allocated expenses, due to the addition of GENEWIZ, and lower variable compensation expense.

The additional months of Tec-Sem under ownership acquired in April of 2018, drove $0.4 million of the increase.

Selling, general, and administrative expenses in our Brooks Life Sciences segment were $103.8 million in fiscal year 2019 compared to $59.0 million in fiscal year 2018.

The increase of $44.8 million is primarily related to GENEWIZ, which added, $39.8 million of expense.

Restructuring Charges

We recorded restructuring charges of $1.9 million during fiscal year 2019 as compared to $0.7 million during fiscal year 2018.

Restructuring Charges Incurred During Fiscal Year Ended September 30, 2019

Restructuring charges of $1.9 million incurred during fiscal year 2019 were related to severance costs and consisted primarily of actions initiated during the second half of fiscal year 2019.

Of these charges, $1.3 million related to the continued action to eliminate redundancies in both our Brooks Life Sciences segment and our Brooks Semiconductor Solutions Group segment primarily due to acquisitions.

Cost savings realized during fiscal year 2019 related to these actions were $0.4 million in the Brooks Life Sciences segment and $0.6 million in the Brooks Semiconductor Solutions Group segment.

During the fourth quarter of fiscal year 2019, the Company initiated the first phase of an action to eliminate costs within our Brooks Life Sciences segment’s sample management business.

During the fourth quarter of fiscal year 2019, the Brooks Life Sciences segment incurred severance costs related to this action of $0.6 million.

Cost savings realized during fiscal year 2019 related to this action were nominal as it was initiated in the fourth quarter of fiscal year 2019.

Restructuring Charges Incurred During Fiscal Year Ended September 30, 2018

Restructuring charges of $0.7 million incurred during fiscal year 2018 were related to severance costs and consisted primarily of actions initiated during the fourth quarter of fiscal year 2018.

Of these charges, $0.3 million related to the integration of Tec-Sem which was acquired during fiscal year 2018 as part of our Brooks Semiconductor Solutions Group segment and $0.3 million related to the announced closure of our Denmark facility which will eliminate redundancies in our Brooks Life Sciences segment.

Cost savings realized during fiscal year 2019 related to these actions in our Brooks Semiconductor Solutions Group and our Brooks Life Sciences segment Group were $0.4 million and $0.5 million, respectively.

Cost savings realized during fiscal year 2018 related to these actions were nominal as these actions were initiated during the fourth quarter of fiscal year 2018.

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 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 2019 and 2018, we recorded interest income of $1.5 million and $1.9 million respectively, which represented interest earned on our marketable securities.

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 increase in interest expense during fiscal year 2019 primarily related to the incremental term loan originated in November 2018.

Please refer to the “Liquidity and Capital Resources” section below for further information on the term loan.

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.

2 unchanged sentences

Other expenses, net – During fiscal years 2020 and 2019 we recorded other expenses, net of $1.4 million and $1.5 million, respectively.

The $1.8 million decrease in expense was primarily attributable to higher foreign currency exchange losses of $1.5 million recognized during fiscal year 2018 as compared to the current fiscal year period.

Please refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk – Currency Rate Exposure” in this Annual Report on Form 10-K for additional information about these currency exchange losses.

Income Tax Provision

We recorded an income tax benefit on continuing operations of $0.1 million in fiscal year 2019 compared to an income tax benefit of $47.3 million in fiscal year 2018.

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.

1 unchanged sentence

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 recorded during 2018.

The provision was the result of a change in tax legislation

and the completion of all accounting of the charge under Staff Accounting Bulletin No.118.

The overall benefit for fiscal year 2019 was partially offset by the tax provisions on earnings in our foreign jurisdictions during the year.

The income tax benefit during fiscal year 2018 was driven primarily by the reversal of the valuation allowance against a substantial portion of the U.S.

net deferred tax assets, offset by the estimated toll charge of $8.0 million on our taxable foreign earnings, net of foreign tax credits, associated with the enactment of the Tax Cuts and Jobs Act during fiscal year 2018.

The tax benefit for fiscal year 2018 also included a $0.7 million tax benefit related to the re-measurement of net U.S.

deferred tax liabilities to account for the reduced 21 percent statutory federal income tax rate.

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.

1 unchanged sentence

On July 1, 2019, we completed the sale of the semiconductor cryogenics business which we include as a discontinued operation.

We incurred revenue from discontinued operations of $109.5 million for fiscal year 2019 and $427.9 million of net income for fiscal year 2019, which includes the net gain on sale of the business of $408.6 million.

We incurred revenue and net income related to the semiconductor cryogenics business of $196.1 million and $48.7 million, respectively for fiscal year 2018.

The net income is also inclusive of income from the UCI joint venture in 2019 and 2018.

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 Cryogenics business, and which will remain as part of the continuing operations, are not reflected in income from discontinued operations.

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

1 unchanged sentence

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 make it difficult for us to predict longer-term liquidity requirements with sufficient certainty.

The cyclical nature of our served markets and uncertainty in the current global economic environment, including the uncertainty related 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.

2 unchanged sentences

Overview of Cash Flows and Liquidity

Our cash, cash equivalents and marketable securities as of September 30, 2019 and 2018 consist of the following (in thousands):

Our cash and cash equivalents, restricted cash and marketable securities as of September 30, 2020 and 2019 consist of the following (in thousands):

Year Ended September 30,

3 unchanged sentences

Long-term marketable securities

Our cash, cash equivalents, restricted cash and marketable securities were $342.1 million as of September 30, 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.

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 not result in U.S.

tax legislation, any repatriation in the future would likely not result in U.S.

federal income tax.

Our intent is to permanently reinvest these funds outside of the U.S.

and our current operating plans do not demonstrate a need to repatriate these funds for our U.S.

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.

We had marketable securities of $3.2 million and $37.0 million as of September 30, 2020 and 2019, respectively.

1 unchanged sentence

Fiscal Year Ended September 30, 2020 Compared to Fiscal Year Ended September 30, 2019

Cash and cash equivalents, restricted cash and marketable securities were $342.1 million at September 30, 2019 as compared to $251.2 million at September 30, 2018.

The increase in cash and cash equivalents, restricted cash and marketable securities of $90.9 million was primarily attributable to cash inflows of $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 proceeds received and principal payments made on our term loans, cash dividends paid of $28.9 million, and capital expenditures of $23.9 million.

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 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.

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.

3 unchanged sentences

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 million related to the sale of our semiconductor cryogenics business, as well as decreases in accounts receivable, prepaids and other current assets and an increase of deferred revenue.

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.

Cash flows provided by operating activities were $74.0 million during fiscal year 2018 comprised primarily of earnings of $120.6 million, including net income of $116.5 million and the impact of non-cash related charges of $4.1 million.

Partially offsetting these items were the uses of cash of $46.6 million related to the changes in our 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 as a result of higher revenue and an increase in inventory levels to support the growth of our business.

These uses of cash were partially offset by sources of cash related primarily to increases in accounts payable as well as increased accrued compensation and tax withholdings.

Net income from discontinued operations contributed $427.9 million and $48.7 million for fiscal years ended 2019 and 2018, respectively, in the net income referenced for the respective periods above.

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 and may negatively impacted in future periods by the completion of sale of our cryogenic business.

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.

Cash used in investing activities of $148.5 million during fiscal year 2018 included cash payments of $85.8 million for acquisitions, $69.7 million for purchases of marketable securities and $12.8 million of capital expenditures, partially offset by cash inflows from sales and maturities of marketable securities of $19.1 million and $0.7 million in proceeds from other investments and sales of property, plant and equipment.

Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development and improving information technology infrastructure.

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.

2 unchanged sentences

Cash outflows also included cash dividends paid of $28.9 million.

Cash provided by financing activities was $170.3 million during fiscal year 2018 as compared to $25.9 million used in financing activities during fiscal year 2017.

Cash provided by financing activities during fiscal year 2018 included cash inflows of $197.6 million related to proceeds from the term loan originated in October 2017, partially offset by cash dividend payments to our shareholders of $28.3 million and principal payments on the term loan of $1.5 million.

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 an infrastructure to support future growth.

The facility will be constructed in two phases.

We expect to incur $50.0 to $55.0 million of capital expenditures related to this facility over the next five years, of which $0.7 million was incurred during fiscal year 2019.

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

5 unchanged sentences

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.

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.

6 unchanged sentences

The total amount of debt extinguished on July 1, 2019 was $495.3 million.

At September 30, 2019, the outstanding term loan principal balance was $51.1 million, excluding unamortized deferred financing costs of $0.5 million.

The credit agreement, as amended, for contains certain customary representations and warranties, covenants and events of default.

3 unchanged sentences

The two one-year short term loans matured and were repaid in full as of September 30, 2019.

At September 30, 2019, the aggregate outstanding principal balance of all of the outstanding term loans was $51.1 million, excluding unamortized deferred financing costs of $0.5 million.

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.

5 unchanged sentences

Line of Credit Facility

We maintain a revolving line of credit with Wells Fargo Bank, N.A.

and JPMorgan Chase Bank, N.A that provides for revolving credit financing of up to $75.0 million, subject to borrowing base availability, as defined in the credit agreement.

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.

2 unchanged sentences

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 line of credit arrangement may fluctuate each period based on our borrowing base availability.

The line of credit 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 line of credit covenants as of September 30, 2019.

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.

Shelf Registration Statement

On August 8, 2019, we filed a registration statement on Form S-3 with the SEC to sell securities, including common stock, preferred stock, warrants, debt securities, depository shares, purchase contracts and purchase units in amounts to be determined at the time of an offering.

Any such offering, if it does occur, may happen in one or more transactions.

The specific terms of any securities to be sold will be described in supplemental filings with the SEC.

This registration statement will expire on August 7, 2022.

Our Board of Directors declared the following dividends during the fiscal years 2020 and 2019 (in thousands, except per share data):

26 unchanged sentences

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, capital requirements and any other factors our Board of Directors may consider relevant.

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.

We may reduce, delay or cancel a quarterly cash dividend based on the severity of a cyclical downturn.

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

5 unchanged sentences

Contractual Cash Obligations:

Operating leases

Capital leases

Pension and other post-retirement benefit plans

11 unchanged sentences

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, 2019, the total amount of net unrecognized tax benefits for uncertain tax positions and the accrual for the related interest was $18.3 million, all of which represents a potential future cash outlay.

In comparison to September 30, 2018 where the balance was $3.5 million.

The increase results from a $13.4 million of unrecognized tax benefits recorded with the acquisition of GENEWIZ.

We are unable to make a reasonably reliable estimate of the timing of the cash settlement for this liability since the timing of future tax examinations by various tax jurisdictions and the related resolution is uncertain, however, we have an indemnification agreement in place for any liabilities associated with the unrecognized tax benefits recorded with the acquisition of GENEWIZ.

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

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis