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EX-32 - EXHIBIT 32 - Brooks Automation, Inc.brks20160331ex32.htm
EX-31.1 - EXHIBIT 31.1 - Brooks Automation, Inc.brks20160331ex3101.htm
EX-31.2 - EXHIBIT 31.2 - Brooks Automation, Inc.brks20160331ex3102.htm

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
(Mark One)
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended: March 31, 2016
OR
 
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to _________
Commission File Number 000-25434
 
BROOKS AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
 
 

Delaware
04-3040660
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
15 Elizabeth Drive
Chelmsford, Massachusetts
(Address of principal executive offices) 
 
01824
(Zip Code)
 
Registrant’s telephone number, including area code: (978) 262-2400
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
x
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
 
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date, April 21, 2016: common stock, $0.01 par value and 68,616,306 shares outstanding.
 




BROOKS AUTOMATION, INC.
Table of Contents
 
 
 
 
PAGE NUMBER
 
 

 

2


PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
BROOKS AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except share and per share data)
 
March 31,
2016
 
September 30,
2015
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
62,162

 
$
80,722

Marketable securities
66

 
70,021

Accounts receivable, net
104,225

 
86,448

Inventories
100,738

 
100,619

Deferred tax assets
3,819

 
17,609

Assets held for sale
2,895

 
2,900

Prepaid expenses and other current assets
21,801

 
15,158

Total current assets
295,706

 
373,477

Property, plant and equipment, net
54,957

 
41,855

Long-term marketable securities
6,059

 
63,287

Long-term deferred tax assets
756

 
70,476

Goodwill
202,347

 
121,408

Intangible assets, net
89,495

 
55,446

Equity method investments
25,093

 
24,308

Other assets
9,982

 
9,397

Total assets
$
684,395

 
$
759,654

Liabilities and Stockholders' equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
39,303

 
$
44,890

Deferred revenue
34,419

 
17,886

Accrued warranty and retrofit costs
5,735

 
6,089

Accrued compensation and benefits
17,311

 
20,401

Accrued restructuring costs
7,389

 
2,073

Accrued income taxes payable
6,356

 
6,111

Deferred tax liabilities
335

 
1,251

Accrued expenses and other current liabilities
17,508

 
15,550

Total current liabilities
128,356

 
114,251

Long-term tax reserves
2,989

 
3,644

Long-term deferred tax liabilities
8,052

 
3,196

Long-term pension liabilities
3,181

 
3,118

Other long-term liabilities
3,863

 
3,400

Total liabilities
146,441

 
127,609

Commitments and contingencies (Note 18)

 

Stockholders' equity
 
 
 
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding

 

Common stock, $0.01 par value, 125,000,000 shares authorized, 82,078,175 shares issued and 68,616,306 shares outstanding at March 31, 2016; 81,093,052 shares issued and 67,631,183 shares outstanding at September 30, 2015
821

 
811

Additional paid-in capital
1,849,655

 
1,846,357

Accumulated other comprehensive income
10,823

 
5,898

Treasury stock at cost- 13,461,869 shares
(200,956
)
 
(200,956
)
Accumulated deficit
(1,122,389
)
 
(1,020,065
)
Total stockholders' equity
537,954

 
632,045

Total liabilities and stockholders' equity
$
684,395

 
$
759,654


The accompanying notes are an integral part of these unaudited consolidated financial statements.
3


BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2016
 
2015
 
2016
 
2015
Revenue
 
 
 
 
 
 
 
Product
$
101,462

 
$
116,395

 
$
190,642

 
$
216,125

Services
33,819

 
22,918

 
64,594

 
45,924

Total revenue
135,281

 
139,313

 
255,236

 
262,049

Cost of revenue
 
 
 
 
 
 
 
Product
65,346

 
79,048

 
123,496

 
149,268

Services
23,135

 
14,240

 
44,386

 
27,668

Total cost of revenue
88,481

 
93,288

 
167,882

 
176,936

Gross profit
46,800

 
46,025

 
87,354

 
85,113

Operating expenses
 
 
 
 
 
 
 
Research and development
13,111

 
12,678

 
26,389

 
26,167

Selling, general and administrative
32,692

 
29,609

 
66,813

 
59,020

Restructuring and other charges
7,336

 
685

 
8,811

 
3,353

Total operating expenses
53,139

 
42,972

 
102,013

 
88,540

Operating (loss) income
(6,339
)
 
3,053

 
(14,659
)
 
(3,427
)
Interest income
50

 
228

 
255

 
479

Interest expense
(16
)
 
(98
)
 
(19
)
 
(200
)
Other (loss) income, net
(124
)
 
1,161

 
(183
)
 
2,180

(Loss) income before income taxes and equity in earnings (losses) of equity method investments
(6,429
)
 
4,344

 
(14,606
)
 
(968
)
Income tax provision (benefit)
78,220

 
1,560

 
74,850

 
(1,550
)
(Loss) income before equity in earnings (losses) of equity method investments
(84,649
)
 
2,784

 
(89,456
)
 
582

Equity in earnings (losses) of equity method investments
710

 
(73
)
 
869

 
(605
)
Net (loss) income
(83,939
)
 
2,711

 
(88,587
)
 
(23
)
Basic net (loss) income per share
$
(1.22
)
 
$
0.04

 
$
(1.30
)
 
$

Diluted net (loss) income per share
$
(1.22
)
 
$
0.04

 
$
(1.30
)
 
$

Dividend declared per share
$
0.10

 
$
0.10

 
$
0.20

 
$
0.20

 
 
 
 
 
 
 
 
Weighted average shares outstanding used in computing net (loss) income per share:
 
 
 
 
 
 
 
Basic
68,556

 
67,387

 
68,342

 
67,255

Diluted
68,556

 
68,414

 
68,342

 
67,255


The accompanying notes are an integral part of these unaudited consolidated financial statements.
4


BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(unaudited)
(In thousands)
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2016
 
2015
 
2016
 
2015
Net (loss) income
$
(83,939
)
 
$
2,711

 
$
(88,587
)
 
$
(23
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Cumulative foreign translation adjustments
5,740

 
(2,423
)
 
5,027

 
(6,565
)
Unrealized gain (loss) on marketable securities, net of tax effects of $(10) and ($58) during the three and six months ended March 31, 2016 and $(99) and $(75) during the three and six months ended March 31, 2015
16

 
267

 
(103
)
 
202

Actuarial gain, net of tax effects of $2 and $0 during the three and six months ended March 31, 2016 and $3 and ($2) during the three and six months ended March 31, 2015
(5
)
 
(13
)
 
3

 
9

Total other comprehensive income (loss), net of tax
5,751

 
(2,169
)
 
4,927

 
(6,354
)
Comprehensive (loss) income, net of tax
$
(78,188
)
 
$
542

 
$
(83,660
)
 
$
(6,377
)


The accompanying notes are an integral part of these unaudited consolidated financial statements.
5


BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
 
Six Months Ended March 31,
 
2016
 
2015
Cash flows from operating activities
 
 
 
Net loss
$
(88,587
)
 
$
(23
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
13,849

 
12,733

Stock-based compensation
6,568

 
7,108

Amortization of premium on marketable securities
315

 
634

Undistributed (earnings) losses of equity method investments
(869
)
 
605

Deferred income tax provision (benefit)
73,454

 
(2,728
)
Gain on disposal of long-lived assets

 
(4
)
Changes in operating assets and liabilities, net of acquisitions and disposals:
 
 
 
Accounts receivable
(664
)
 
(13,269
)
Inventories
(374
)
 
2,474

Prepaid expenses and other current assets
(2,046
)
 
(5,365
)
Accounts payable
(7,073
)
 
8,345

Deferred revenue
15,538

 
(3,868
)
Accrued warranty and retrofit costs
(333
)
 
(274
)
Accrued compensation and benefits
(7,297
)
 
(6,200
)
Accrued restructuring costs
5,323

 
(6
)
Accrued expenses and other current liabilities
(7,433
)
 
4,791

Net cash provided by operating activities
371

 
4,953

Cash flows from investing activities
 
 
 
Purchases of property, plant and equipment
(6,090
)
 
(3,647
)
Purchases of marketable securities
(12,900
)
 
(30,739
)
Sales and maturities of marketable securities
139,388

 
47,625

Disbursement for a loan receivable
(741
)
 

Acquisitions, net of cash acquired
(125,498
)
 
(17,257
)
Proceeds from sales of property, plant and equipment

 
6

Purchases of other investments
(250
)
 
(5,000
)
Net cash used in investing activities
(6,091
)
 
(9,012
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of common stock
948

 
867

Principal repayments of capital lease obligations

 
(244
)
Common stock dividends paid
(13,738
)
 
(13,480
)
Net cash used in financing activities
(12,790
)
 
(12,857
)
Effects of exchange rate changes on cash and cash equivalents
(50
)
 
(4,022
)
Net decrease in cash and cash equivalents
(18,560
)
 
(20,938
)
Cash and cash equivalents, beginning of period
80,722

 
94,114

Cash and cash equivalents, end of period
$
62,162

 
$
73,176

 
 
 
 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
6


BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Basis of Presentation
The unaudited consolidated financial statements of Brooks Automation, Inc. and its subsidiaries (“Brooks” or the “Company”) included herein have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all material adjustments, which are of a normal and recurring nature and necessary for a fair statement of the financial position and results of operations and cash flows for the periods presented, have been reflected in the accompanying unaudited consolidated financial statements. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted and, accordingly, the accompanying financial information should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) for the fiscal year ended September 30, 2015 (the "2015 Annual Report on Form 10-K"). The accompanying consolidated balance sheet as of September 30, 2015 was derived from the audited annual consolidated financial statements as of the period then ended.
2. Summary of Significant Accounting Policies

Computer Software Developed for Internal Use

        Computer software developed for internal use is capitalized in accordance with provisions of the Accounting Standards Codification, or ASC, Topic 350-40, Intangibles Goodwill and Other—Internal Use Software. The Company capitalizes direct costs incurred to develop internal-use software during the application development stage after determining software technological requirements and obtaining management approval for funding projects probable of completion. Capitalization of the internal-use software development costs ceases upon substantially completing the project and placing the software into service based on its intended use.

During the six months ended March 31, 2016, the Company capitalized direct costs of $1.9 million associated with development of software for its internal use which are included within "Property, plant and equipment, net" in the accompanying unaudited consolidated balance sheets. There were no internal-use software development costs as of September 30, 2015.
Use of Estimates
The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are associated with accounts receivable, inventories, goodwill, intangible assets other than goodwill, long-lived assets, derivative financial instruments, deferred income taxes, warranty obligations, revenue recognized using the percentage of completion method, pension obligations and stock-based compensation expense. The Company bases its estimates on historical experience and various other assumptions, including in certain circumstances, future projections that management believes to be reasonable under the circumstances. Although the Company regularly assesses these estimates, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they occur and become known.
Recently Issued Accounting Pronouncements
In April 2016, the Financial Accounting Standards Board, or FASB, issued an amendment to the revenue recognition guidance released in May 2014. The amendment clarifies the implementation guidance on identifying performance obligations and licensing. Specifically, the amendment reduces the cost and complexity of identifying promised goods or services and improves the guidance for determining whether promises are separately identifiable. The amendment also provides implementation guidance on determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and should be applied at the time of the adoption of the revenue recognition guidance issued in May 2014. Early adoption of the newly issued guidance is not permitted. The Company expects to adopt the guidance during the first

7


quarter of fiscal year 2019 and is currently evaluating the impact of this guidance on its financial position and results of operations.
In March 2016, the FASB issued an amendment to the accounting guidance to simplify accounting for share-based payment awards issued to employees. The amendment requires recognition of excess tax benefits or deficiencies within income tax expense or benefit and changes their presentation requirements on the statement of cash flows. Additionally, the entity can make an accounting policy election to either estimate the number of awards that are expected to vest, consistent with the current accounting guidance, or account for forfeitures as they occur. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption of the newly issued guidance is permitted. The Company expects to adopt the guidance during the first quarter of fiscal year 2018 and is currently evaluating the impact of this guidance on its financial position and results of operations.
In March 2016, the FASB issued an amendment to the revenue recognition guidance released in May 2014. The amendment clarifies the application of the principal versus agent guidance, identification of the units of accounting, as well as application of the control principle to certain types of arrangements within the scope of the guidance. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and should be applied at the time of the adoption of the revenue recognition guidance issued in May 2014. Early adoption of the newly issued guidance is not permitted. The Company expects to adopt the guidance during the first quarter of fiscal year 2019 and is currently evaluating the impact of this guidance on its financial position and results of operations.
In February 2016, the FASB, issued a new accounting guidance for reporting lease transactions. In accordance with provisions of the newly issued guidance, a lessee should recognize at the inception of the arrangement a right-of-use asset and a corresponding lease liability initially measured at the present value of lease payments over the lease term. For finance leases, interest on a lease liability should be recognized separately from the amortization of the right-of-use asset, while for operating leases, total lease costs are recorded on a straight-line basis over the lease term. For leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying assets to forgo a recognition of right-of-use assets and corresponding lease liabilities and record a lease expense on a straight-line basis. Entities should determine at the inception of the arrangement whether a contract represents a lease or contains a lease which is defined as a right to control the use of identified property for a period of time in exchange for consideration. Additionally, entities should separate the lease components from the non-lease components and allocate the contract consideration on a relative standalone price basis in accordance with provisions of ASC Topic 606, Revenue from Contracts with Customers. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 and should be adopted via a modified retrospective approach with certain optional practical expedients that entities may elect to apply. The Company expects to adopt the guidance during the first quarter of fiscal year 2020 and is currently evaluating the impact of this guidance on its financial position and results of operations.
In November 2015, the FASB issued an amendment to the accounting guidance to simplify the presentation of deferred income tax assets and liabilities in a statement of financial position. Deferred income tax assets, net of a corresponding valuation allowance, and liabilities related to a particular tax-paying component of an entity within a particular tax jurisdiction shall be offset and presented as a single noncurrent amount in a statement of financial position. Deferred income tax assets and liabilities attributable to different tax-paying components of an entity or different tax jurisdictions shall not be offset and be presented separately. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The guidance can be adopted via either a prospective or a retrospective approach for all deferred income tax assets and liabilities presented in a statement of financial position. The Company is currently evaluating the impact of this guidance on its financial position and results of operations.
In September 2015, the FASB issued a new accounting guidance to simplify the presentation of measurement-period adjustments recognized in business combinations. Measurement-period adjustments will no longer be recognized by the acquirer retrospectively and will be recorded by the acquirer during the period in which they were determined. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015 and should be applied prospectively to the adjustments that occur after the effective date of the guidance. Early adoption is permitted for the financial statements that have not been issued, and the Company adopted the guidance during the first quarter of fiscal year 2016 to simplify the presentation of the measurement period adjustments in its consolidated financial statements. During the six months ended March 31, 2016, the Company recorded a measurement period adjustment of $1.1 million related to the acquisition of Contact Co., Ltd and recognized its impact in the accompanying consolidated balance sheets as of the period then ended in accordance with the provisions of the newly adopted guidance. There was no impact on the results of operations during the six months ended March 31, 2016 as a result of this adjustment. This adjustment would have been applied retrospectively and recognized as a reclassification in the accompanying consolidated balance sheets as of September 30, 2015 in accordance with provisions of the previous guidance.

8


In August 2015, the FASB issued an amendment to the accounting guidance which clarified the presentation and subsequent measurement of debt issuance costs related to line of credit arrangements based on the SEC's Staff announcement made in June 2015. In accordance with the guidance, debt issuance costs related to line of credit arrangements can be presented as an asset and subsequently amortized ratably over the term of the arrangement, regardless of whether there are any outstanding borrowings on the arrangement. The guidance became effective upon its issuance and was adopted by the Company during the fourth quarter of fiscal year 2015. The adoption of the guidance did not have an impact on the Company's financial position and results of operations.
In February 2015, the FASB issued an amendment to the accounting guidance for consolidations of financial statements by changing the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted. The guidance can be adopted either via a full retrospective approach or a modified retrospective approach by recording a cumulative-effect adjustment to beginning equity in the period of adoption. The Company expects to adopt the guidance during the first quarter of fiscal year 2017. The Company is currently evaluating the impact of the guidance on its financial position and results of operations.
In January 2015, the FASB issued new accounting guidance to simplify income statement classification by removing the concept of extraordinary items from Generally Accepted Accounting Principles, or GAAP. As a result, items that are both unusual in nature and infrequent in occurrence will no longer be separately reported net of tax after the results of continuing operations. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015 and can be adopted retrospectively or prospectively based on an entity's election. Early adoption is permitted. The Company expects to adopt the guidance during the first quarter of fiscal year 2017. The adoption of the guidance is not expected to have a material impact on its financial position and results of operations.
In May 2014, the FASB issued new accounting guidance for reporting revenue recognition. The guidance provides for the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. A five-step process set forth in the guidance may require more judgment and estimation within the revenue recognition process than the current GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The guidance was initially effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. In August 2015, the FASB issued an amendment deferring the effective date of the guidance by one year. The guidance should be adopted retrospectively either for each reporting period presented or via recognizing the cumulative effect at the date of the initial application. Early adoption is permitted only as of annual reporting periods, including the interim periods, beginning after December 15, 2016. The Company expects to adopt the guidance during the first quarter of fiscal year 2019 and is currently evaluating the impact of this guidance on its financial position and results of operations.
In April 2014, the FASB issued an amendment to the accounting guidance for reporting discontinued operations. The amended guidance raises the threshold for disposals to qualify as a discontinued operation by requiring a component of an entity that is held for sale, or has been disposed of by sale, to represent a strategic shift that has or will have a major effect on operations and financial results. A strategic shift could include the disposal of a major line of business, a major geographical area, a major equity method investment or other major parts of an entity. In addition, the guidance allows companies to have significant continuing involvement and continuing cash flows with the discontinued operation. The guidance became effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2014 and is applied prospectively. The Company adopted the guidance during the first quarter of fiscal year 2016. The adoption of the guidance did not have an impact on the Company's financial position and the results of operations.
Other
For further information with regard to the Company's Significant Accounting Policies, please refer to Note 2 "Summary of Significant Accounting Policies" to the Company's consolidated financial statements included in the 2015 Annual Report on Form 10-K.
3. Marketable Securities
The Company invests in marketable securities that are classified as available-for-sale and records them at fair value in the Company's unaudited consolidated balance sheets. Marketable securities reported as current assets represent investments that mature within one year from the balance sheet date. Long-term marketable securities represent investments with maturity dates greater than one year from the balance sheet date.
Unrealized gains and losses are excluded from earnings and reported as a separate component of accumulated other comprehensive income until the security is sold or matures. Gains or losses realized from sales of marketable securities are

9


computed based on the specific identification method and recognized as a component of "Other (loss) income, net" in the accompanying unaudited consolidated statements of operations. During the three months ended March 31, 2016, the Company sold marketable securities with a fair value and amortized cost of $3.5 million and recognized gross losses of approximately $17,000 on sale of marketable securities. The Company collected cash proceeds of $3.5 million from the sale of marketable securities and reclassified unrealized net holding losses of approximately $17,000 on the marketable securities from accumulated other comprehensive income into "Other (loss) income, net" in the accompanying unaudited consolidated statements of operations as a result of these transactions. During the six months ended March 31, 2016, the Company sold marketable securities with a fair value of $127.6 million and amortized cost of $127.7 million and recognized gross losses of approximately $158,000 and gross gains of approximately $3,000 on sale of marketable securities. The Company collected cash proceeds of $127.0 million from the sale of marketable securities and reclassified unrealized net holding losses of approximately $155,000 on the marketable securities from accumulated other comprehensive income into "Other (loss) income, net" in the accompanying unaudited consolidated statements of operations as a result of these transactions. There were no sales of marketable securities during the three and six months ended March 31, 2015.
There were no unrealized gains or losses on available for sale securities presented as a component of accumulated other comprehensive income as of March 31, 2016. Unrealized gains on available for sale securities presented as a component of accumulated other comprehensive income were approximately $102,300 at September 30, 2015. Net unrealized holding gains on available for sale securities recorded as a component of other comprehensive income (loss) before the impact of reclassifications were approximately $22,000 and $202,000, respectively, during the six months ended March 31, 2016 and 2015.
The following is a summary of the amortized cost and the fair value, including accrued interest receivable, as well as unrealized holding gains (losses) on the short-term and long-term marketable securities as of March 31, 2016 and September 30, 2015 (in thousands):
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
March 31, 2016:
 
 
 
 
 
 
 
Corporate securities
$
2,283

 
$

 
$

 
$
2,283

Other debt securities
66

 

 

 
66

Municipal securities
3,775

 
2

 
(1
)
 
3,776

Total marketable securities
$
6,124

 
$
2

 
$
(1
)
 
$
6,125

September 30, 2015:
 
 
 
 
 
 
 
U.S. Treasury securities and obligations of U.S. government agencies
$
30,343

 
$
39

 
$

 
$
30,382

Corporate securities
54,725

 
13

 
(48
)
 
54,690

Mortgage-backed securities
857

 
27

 

 
884

Other debt securities
5,056

 
3

 

 
5,059

Municipal securities
30,258

 
18

 
(9
)
 
30,267

Bank certificate of deposits
12,024

 
2

 

 
12,026


$
133,263

 
$
102

 
$
(57
)
 
$
133,308

The fair values of the marketable securities by contractual maturities at March 31, 2016 are presented below (in thousands):
 
Fair Value
Due in one year or less
$
66

Due after one year through five years
3,776

Due after ten years
2,283

Total marketable securities
$
6,125

Expected maturities could differ from contractual maturities because the security issuers may have the right to prepay obligations without prepayment penalties. 
The Company reviews the marketable securities for impairment at each reporting period to determine if any of the securities have experienced an other-than-temporary decline in fair value. The Company considers factors, such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the

10


issuer, the Company's intent to sell, or whether it is more likely than not it will be required to sell the investment before recovery of its amortized cost basis. If the Company believes that an other-than-temporary decline in fair value has occurred, it writes down the investment to fair value and recognizes the credit loss in earnings and the non-credit loss in accumulated other comprehensive income. As of March 31, 2016 and September 30, 2015, fair value of the marketable securities in unrealized loss position was $2.0 million and $40.4 million, respectively. These securities were not considered other-than-temporarily impaired and, as such, the Company did not recognize impairment losses during the periods then ended. The unrealized losses are attributable to changes in interest rates which impact the value of the investments.
4. Acquisitions
Acquisitions Completed in Fiscal Year 2016
Acquisition of BioStorage Technologies, Inc.
On November 30, 2015, the Company completed its acquisition of BioStorage Technologies, Inc., or BioStorage, an Indiana-based global provider of comprehensive sample management and integrated cold chain solutions for the biosciences industry. These solutions include collection, transportation, processing, storage, protection, retrieval and disposal of biological samples. These solutions combined with the Company's existing offerings, particularly automation for sample storage and formatting, provide customers with fully integrated sample management cold chain solutions which will help them increase productivity, efficiencies and speed to market. This acquisition will allow the Company to access a broader customer base that is storing samples at ultra cold temperatures and simultaneously provide opportunities for BioStorage to use the Company's capabilities to expand into new markets.
The Company acquired 100% of the issued and outstanding shares of BioStorage. A cash payment of $130.7 million, net of the seller's cash of $2.8 million, resulted in a net cash outflow of $128.0 million, including $125.5 million ascribed to the purchase price and $2.5 million for retention arrangements with certain employees based on the completion of a service retention period. The cash payment included a debt repayment of $3.2 million and transaction costs of $2.9 million paid by the Company on behalf of BioStorage.
The Company recorded the assets acquired and liabilities assumed related to BioStorage at their preliminary fair values as of the acquisition date, from a market participant’s perspective. The purchase price allocation was prepared on a preliminary basis and is subject to further adjustments as additional information becomes available concerning the fair value of the assets acquired and liabilities assumed. The preliminary fair values of the tangible and intangible assets acquired were based upon preliminary valuations and the Company's estimates and assumptions that are subject to change within the measurement period. As of March 31, 2016, the primary areas that remained preliminary included fair values of intangible assets acquired, certain tangible assets, tax-related matters and residual goodwill. The Company expects to continue obtaining information to assist it with determining the fair values of the net assets acquired during the measurement period. Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the acquisition date.
The preliminary amounts recorded were as follows (in thousands):

11


 
Fair Value of Assets and Liabilities
Accounts receivable
$
16,942

Prepaid expenses and other current assets
321

Property, plant and equipment
14,345

Intangible assets
41,460

Goodwill
79,889

Other assets
53

Debt assumed
(385
)
Accounts payable
(1,708
)
Accrued liabilities
(9,423
)
Deferred revenue
(1,766
)
Long-term deferred tax liabilities
(14,169
)
Other liabilities
(61
)
Total purchase price, net of cash acquired
$
125,498

At the closing of the acquisition of BioStorage, a cash payment of $5.4 million was placed into escrow which consisted of $2.9 million ascribed to the purchase price and $2.5 million related to retention arrangements with certain employees. The payment of $2.9 million included $1.9 million related to satisfaction of the sellers' indemnification obligations with respect to BioStorage's representations and warranties and other indemnities, as well as $1.0 million related to potential purchase price adjustments. The remaining escrow balance of $2.5 million is payable to certain employees upon completion of a service retention period. Such retention payments were not considered a part of the purchase price, but rather recorded as a separate asset acquired and included within "Prepaid expenses and other current assets" in the accompanying consolidated balance sheets. The escrow balance related to such retention payments was reduced by $0.6 million during the second quarter of fiscal year 2016 and had a balance of $1.9 million. All remaining escrow balances were unchanged as of March 31, 2016.
The fair value of customer relationship intangible assets of $36.6 million was estimated based on the income approach in accordance with the excess-earnings method. In accordance with the excess-earnings method, the value of the intangible asset is equal to the present value of the after-tax cash flows attributable to the intangible asset only. The weighted average amortization period for the customer relationships intangible assets acquired in the BioStorage acquisition is 11.0 years.
The fair value of the trademark intangible assets acquired of $4.9 million was estimated based on the income approach in accordance with the relief-from-royalty method. In accordance with the relief-from-royalty method, the value of an intangible asset is equal to the present value of the after-tax royalty savings attributable to owning that intangible asset. The weighted average amortization period for the trademark intangible assets acquired in the BioStorage acquisition is 8.0 years.
The intangible assets acquired are amortized using an accelerated depreciation method which approximates the pattern in which the economic benefits are expected to be realized.
Fair values of intangible assets and their estimated useful lives are determined based on estimates of future expected after-tax cash flows and royalty savings, customer attrition rates, discount rates, as well as assumptions about the period of time over which the Company will be deriving economic benefits from the acquired intangible assets.
Goodwill represents the excess of the consideration transferred over the fair value of the net assets acquired and has been assigned to the Company's Brooks Life Science Systems segment. Goodwill is primarily the result of expected synergies from combining the operations of BioStorage with the Company and is not deductible for tax purposes.
The operating results of BioStorage have been reflected in the results of operations for the Brooks Life Science Systems segment from the date of the acquisition, which included one month of activity during the first quarter of fiscal year 2016. During the three months ended March 31, 2016, revenue and net loss from BioStorage recognized in the Company’s results of operations were $11.4 million and $0.2 million, respectively. During the six months ended March 31, 2016, revenue and net loss from BioStorage recognized in the Company’s results of operations were $17.9 million and $0.8 million, respectively. During the three and six months ended March 31, 2016, the net loss included amortization expense of $0.8 million and $1.2 million, respectively, related to acquired intangible assets.
During the six months ended March 31, 2016, the Company incurred $3.1 million in non-recurring transaction costs with

12


respect to the BioStorage acquisition which were recorded in "Selling, general and administrative" expenses within the unaudited consolidated statements of operations. The retention payment of $2.5 million was recorded within prepaid expenses and other current assets at the acquisition date and will be recognized as compensation expense over the service period or upon a triggering event in the underlying change in control agreements. During the three and six months ended March 31, 2016, the Company recorded $0.4 million and $0.5 million, respectively, of compensation expense related to this arrangement.
The following unaudited proforma financial information represents a summary of the consolidated results of operations for the Company and BioStorage as if the acquisition of BioStorage occurred on October 1, 2014 (in thousands):
 
Three Months Ended, March 31,
 
Six Months Ended, March 31,
 
2016
 
2015
 
2016
 
2015
  Revenue
$
135,281

 
$
148,873

 
$
266,282

 
$
281,272

  Net (loss) income
(83,117
)
 
2,172

 
(83,188
)
 
(6,715
)
 
 
 
 
 
 
 
 
Basic (loss) income per share
$
(1.21
)
 
$
0.03

 
$
(1.22
)
 
$
(0.10
)
Diluted (loss) income per share
$
(1.21
)
 
$
0.03

 
$
(1.22
)
 
$
(0.10
)
 
 
 
 
 
 
 
 
Weighted average shares outstanding used in computing net loss per share:
 
 
 
 
 
 
 
Basic
68,556

 
67,387

 
68,342

 
67,255

Diluted
68,556

 
68,414

 
68,342

 
67,255

    
The unaudited pro forma information presented above reflects historical operating results of the Company and BioStorage and includes the impact of certain adjustments directly attributable to the business combination. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition of BioStorage had taken place on October 1, 2014. Amortization expense of $0.7 million and restructuring charges of $0.8 million were included in proforma net loss during the three months ended March 31, 2015. During the three months ended March 31, 2015, the adjustments reflected in the unaudited pro forma information included tax effects of $0.8 million, respectively. The impact of the restructuring charges was excluded from the proforma net loss during the three months ended March 31, 2016. During the six months ended March 31, 2016 and 2015, the adjustments reflected in the unaudited pro forma information included amortization expense of $0.5 million and $1.4 million, respectively, and tax effects of $0.5 million and $2.1 million, respectively. Additionally, transaction costs of 2.9 million and restructuring charges of $1.6 million were included in the proforma net loss during the six months ended March 31, 2015. The impact of the transaction costs and the restructuring charges was excluded from the proforma net loss during the six months ended March 31, 2016.
Acquisitions Completed in Fiscal Year 2015
Acquisition of Contact Co., Ltd.
On August 14, 2015, the Company acquired all of the outstanding stock of Contact Co., Ltd., or Contact, a Japanese-based provider of automated cleaner products for wafer carrier devices used in the global semiconductor markets. The acquisition of Contact expands the Company's offerings of contamination control solutions within its Brooks Product Solutions segment, strengthens its current capabilities and technology used in its contamination control solutions business and enhances its long-term strategy of gaining share in its core semiconductor markets.
The aggregate purchase price of $6.8 million, net of cash acquired, consisted of a cash payment of $1.9 million, the assumption of the seller's debt of $8.8 million, seller's cash of $4.8 million and contingent consideration of $0.8 million payable upon achievement of certain specified targets and events. The entire debt amount was fully repaid as of September 30, 2015.
The Company recorded the assets acquired and liabilities assumed related to Contact at their preliminary fair values as of the acquisition date. The purchase price allocation was prepared on a preliminary basis and is subject to further adjustments as additional information becomes available concerning the fair value of the assets acquired and liabilities assumed. The preliminary fair values of the tangible and intangible assets acquired were based upon preliminary valuations and the Company's estimates and assumptions that are subject to change within the measurement period. As of March 31, 2016, the primary areas that remained preliminary included fair values of intangible assets acquired, certain tangible assets, tax-related matters and residual goodwill. The Company expects to continue obtaining information to assist it with determining the fair values of the net assets acquired during the measurement period. Any adjustments to the purchase price allocation will be made

13


as soon as practicable but no later than one year from the acquisition date.
During the first quarter of fiscal year 2016, the Company finalized the valuation of property, plant and equipment reported at fair value at the acquisition date. As a result, the Company recorded a measurement period adjustment of $1.1 million as a decrease in the tangible assets' fair value and a corresponding increase in goodwill. There was no impact on the depreciation expense as a result of the tangible assets' fair value revision during the period then ended. The Company adopted Accounting Standards Update, or ASU, 2015-16, Simplifying the Accounting for Measurement Period Adjustments, during the first quarter of fiscal year 2016 and recognized the impact of the measurement period adjustment in the accompanying unaudited consolidated balance sheets as of March 31, 2016 in accordance with the provisions of the newly adopted guidance.
The impact of the measurement period adjustment is reflected in the following preliminary purchase price allocation table (in thousands):
 
Fair Value of Assets and Liabilities
Accounts receivable
$
42

Inventories
2,020

Prepaid expenses and other current assets
484

Property, plant and equipment
79

Completed technology
2,290

Goodwill
4,195

Other assets
1,410

Accounts payable
(1,089
)
Accrued liabilities
(1,823
)
Long-term deferred tax liabilities
(774
)
Total purchase price, net of cash acquired
$
6,834

Fair value of the contingent consideration of $0.8 million was determined based on a probability-weighted average discounted cash flow model and recorded in "Accrued expenses and other current liabilities" in the Company's unaudited Consolidated Balance Sheets. The Company remeasures the fair value of the contingent consideration at each reporting date until the arrangement is settled. Fair value of the contingent consideration was $0.5 million at March 31, 2016, and the Company recognized a corresponding gain of $0.2 million and $0.3 million, respectively, on the fair value remeasurement during the three and six months ended March 31, 2016. Please refer to Note 17 “Fair Value Measurements” for further information on the fair value measurement of the contingent consideration.
At March 31, 2016, the Company had approximately $750,000 in an escrow account which related to potential working capital adjustments and the sellers' satisfaction of general representations and warranties. At the closing of the acquisition of Contact, the escrow balance was $1.5 million which was reduced by approximately $750,000 during the second quarter of fiscal year 2016 as a result of a payment made to the sellers upon termination of a certain third-party arrangement.
Fair value of the completed technology intangible assets was estimated based on the income approach in accordance with the excess-earnings method. The weighted average amortization period for the completed technology intangible assets acquired in the Contact acquisition is 5.0 years. The intangible assets acquired are amortized using an accelerated depreciation method which approximates the pattern in which the economic benefits are expected to be realized.
Goodwill represents the excess of the consideration transferred over the fair value of the net assets acquired and has been assigned to the Company's Brooks Product Solutions segment. Goodwill is primarily the result of expected synergies from combining the operations of Contact with the Company and is not deductible for tax purposes.
The operating results of Contact have been included in the results of operations for the Brooks Product Solutions segment from the date of the acquisition. During the three months ended March 31, 2016, revenue and net loss from Contact recognized in the Company's results of operations were $1.5 million and $0.1 million, respectively. During the six months ended March 31, 2016, revenue and net loss from Contact recognized in the Company's results of operations were $2.2 million and $0.6 million, respectively. During the three and six months ended March 31, 2016, the net loss included charges of $0.2 million and $0.4 million, respectively, related to the step-up in value of the acquired inventories and amortization expense of $0.2 million and $0.4 million, respectively, related to acquired intangible assets.
The Company did not present a pro forma information summary for its consolidated results of operations for the three and

14


six months ended March 31, 2015 as if the acquisition of Contact occurred on October 1, 2014 because such results were insignificant.
Acquisition of FluidX Ltd.
On October 1, 2014, the Company acquired all of the outstanding stock of FluidX Ltd. (“FluidX”), a UK-based provider of biological sample storage tubes and complementary bench-top instruments. The Company paid, in cash, aggregate merger consideration of $15.5 million, net of cash acquired. The acquisition of FluidX provides the Company with the opportunity to enhance its existing capabilities with respect to biobanking solutions in the Brooks Life Science Systems segment.
The Company recorded the following amounts for the assets acquired and liabilities assumed related to FluidX at their fair values as of the acquisition date (in thousands):
 
Fair Values of Assets and Liabilities
Accounts receivable
$
1,980

Inventory
2,857

Prepaid and other current assets
213

Property, plant and equipment
101

Completed technology
1,230

Trademarks and trade names
750

Customer relationships
4,810

Goodwill
8,247

Accounts payable
(2,079
)
Deferred revenue
(72
)
Accrued liabilities
(992
)
Long-term deferred tax liabilities
(1,540
)
Total purchase price, net of cash acquired
$
15,505

The purchase price was allocated based on the fair value of the identified assets acquired and liabilities assumed as of the acquisition date from a market participant’s perspective.
On January 23, 2015, the Company reached a settlement with respect to certain working capital adjustments with the sellers of FluidX stock. On February 3, 2015, the Company made a payment to the sellers as a result of this settlement, which increased the purchase price by $0.1 million. At March 31, 2016, the Company had $1.5 million in a general escrow account held by the unrelated third party. The Company finalized the purchase price allocation for FluidX acquisition within the measurement period. Adjustments to the initial purchase price allocation recorded during the measurement period were not material to the Company's financial position.
Fair values of the trademarks and the existing technology acquired were estimated based on the income approach in accordance with the relief-from-royalty method, which states that the value of an intangible asset is equal to the present value of the after-tax royalty savings attributable to owning that intangible asset. Fair value of customer relationships acquired was estimated based on the income approach in accordance with the excess-earnings method. The weighted average amortization periods for intangible assets acquired in the FluidX acquisition are 5.0 years for each of completed technology, trademarks, and customer relationships.
The intangible assets acquired are amortized using an accelerated depreciation method which approximates the pattern in which the economic benefits are expected to be realized.
Goodwill represents the excess of the consideration transferred over the fair value of the net assets acquired and has been assigned to the Company's Brooks Life Science Systems segment. Goodwill is primarily the result of expected synergies from combining the operations of FluidX with the Company and is not deductible for tax purposes.
The operating results of FluidX have been included in the results of operations for the Brooks Life Science Systems segment from the date of the acquisition. During the three months ended March 31, 2016, revenue and net loss from FluidX were $3.9 million and $0.3 million, respectively. During the six months ended March 31, 2016, revenue and net loss from FluidX were $7.6 million and $0.4 million, respectively. The net loss during the three and six months ended March 31, 2016 included amortization expense of $0.3 million and $0.6 million, respectively, related to acquired intangible assets. During the three months ended March 31, 2015, revenue and net income from FluidX were $3.8 million and $0.4 million, respectively. During the six months ended March 31, 2015, revenue and net loss from FluidX were $7.4 million and $0.1 million,

15


respectively. The net income (loss) during the three and six months ended March 31, 2015 included amortization expense of $0.3 million and $0.7 million, respectively, related to acquired intangible assets.
The Company incurred $0.3 million during the six months ended March 31, 2015 in non-recurring transaction costs with respect to the FluidX acquisition which were recorded in "Selling, general and administrative" expenses within the unaudited Consolidated Statements of Operations.
5. Goodwill and Intangible Assets
Goodwill represents the excess of net book value over the estimated fair value of net tangible and identifiable intangible assets of a reporting unit. Goodwill is tested for impairment annually or more often if impairment indicators are present at the reporting unit level. During fiscal year 2015, the Company completed the annual goodwill impairment test and determined that no adjustment to goodwill was necessary since the fair value of all reporting units substantially exceeded their respective carrying values. If events occur or circumstances change that would more likely than not reduce fair values of the reporting units below their carrying values, goodwill will be evaluated for impairment between annual tests.
During the second quarter of 2016, the Company concluded that recent operating trends and declining forecasts for the Polycold reporting unit represented indicators of potential goodwill impairment. As a result, the Company performed the first step of the quantitative goodwill impairment test as of February 1, 2016. The carrying amount of the goodwill as of the testing date was $24.0 million. As a result of the test, the Company determined that the fair value exceeded the carrying value by 18%, and that no goodwill impairment existed.
The Company determined Polycold's fair value based on an Income Approach in accordance with the Discounted Cash Flow method, or DCF Method, which is based on future cash flow forecasts discounted at a weighted-average cost of capital. The DCF model also includes a terminal value calculation which is based upon an expected long-term capital growth rate for the reporting unit. The estimated fair value assumed a taxable transaction. If 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 were incorporated into the DCF model, different estimates of the Polycold's fair value may have been computed as of February 1, 2016.
The components of the Company’s goodwill by business segment at March 31, 2016 and September 30, 2015 are as follows (in thousands): 
 
Brooks
Product
Solutions
 
Brooks
Global
Services
 
Brooks
Life Science
Systems
 
Other
 
Total
Gross goodwill, at September 30, 2014
$
494,275

 
$
156,792

 
$
47,378

 
$
26,014

 
$
724,459

Accumulated goodwill impairments
(437,706
)
 
(151,238
)
 

 
(26,014
)
 
(614,958
)
Goodwill, net of accumulated impairments, at September 30, 2014
56,569

 
5,554

 
47,378

 

 
109,501

Acquisitions and adjustments
3,660

 

 
8,247

 

 
11,907

Gross goodwill, at September 30, 2015
497,935

 
156,792

 
55,625

 
26,014

 
736,366

Accumulated goodwill impairments
(437,706
)
 
(151,238
)
 

 
(26,014
)
 
(614,958
)
Goodwill, net of accumulated impairments, at September 30, 2015
60,229

 
5,554

 
55,625

 

 
121,408

Acquisitions and adjustments
1,050

 

 
79,889

 

 
80,939

Gross goodwill, at March 31, 2016
498,985

 
156,792

 
135,514

 
26,014

 
817,305

Accumulated goodwill impairments
(437,706
)
 
(151,238
)
 

 
(26,014
)
 
(614,958
)
Goodwill, net of accumulated impairments, at March 31, 2016
$
61,279

 
$
5,554

 
$
135,514

 
$

 
$
202,347

During the six months ended March 31, 2016, the Company recorded a goodwill increase of $79.9 million related to the acquisition of BioStorage which represented the excess of the consideration transferred over the fair value of the net assets acquired. Additionally, the Company recorded a measurement period adjustment related to the acquisition of Contact which resulted in a decrease in the tangible assets' fair value of $1.1 million and a corresponding increase in goodwill. Please refer to the Note 4 "Acquisitions" for further information on the measurement period adjustment recorded during the first quarter of fiscal year 2016.
The components of the Company’s identifiable intangible assets as of March 31, 2016 and September 30, 2015 are as follows (in thousands): 

16


 
March 31, 2016
 
September 30, 2015
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
Patents
$
7,808

 
$
7,440

 
$
368

 
$
7,808

 
$
7,394

 
$
414

Completed technology
60,695

 
48,738

 
11,957

 
60,748

 
46,718

 
14,030

Trademarks and trade names
9,150

 
3,858

 
5,292

 
4,241

 
3,604

 
637

Customer relationships
114,059

 
42,181

 
71,878

 
77,716

 
37,351

 
40,365

Total intangible assets
$
191,712

 
$
102,217

 
$
89,495

 
$
150,513

 
$
95,067

 
$
55,446

Amortization expense for intangible assets was $3.8 million and $3.2 million, respectively, during the three months ended March 31, 2016 and 2015 and $7.3 million and $6.4 million, respectively, during the six months ended March 31, 2016 and 2015.
Estimated future amortization expense for the intangible assets for the remainder of fiscal year 2016 and the subsequent four fiscal years is as follows (in thousands):
Fiscal year ended September 30,
 
2016
$
7,659

2017
15,566

2018
14,052

2019
13,713

2020
12,909

Thereafter
25,596

 
$
89,495

6. Equity Method Investments
The Company accounts for certain of its investments using the equity method of accounting and records its proportionate share of the investee's earnings (losses) in its results of operations with a corresponding increase (decrease) in the carrying value of the investment.
BioCision, LLC
In March 2014, the Company acquired a 22% equity interest in BioCision, LLC, or BioCision, a privately-held company based in Larkspur, California, for $4.0 million. During fiscal year 2015, the Company's equity investment was diluted from 22% to 20% as a result of stock options granted to new employees. BioCision develops, manufactures and markets cell cryopreservation products used to improve and standardize the tools and methods for biomaterial sample handling. The Company determined that BioCision represented a variable interest entity since the level of equity investment at risk was not sufficient to finance its activities without additional financial support. However, the Company does not qualify as a primary beneficiary since it does not have the power to direct BioCision's product research, development, selling and marketing activities that have the most significant impact on its economic performance. The Company's loss exposure is limited to the amount of investment and loan funding provided to BioCision. As such, the Company concluded that BioCision should not be consolidated in its financial statements.
During the three months ended March 31, 2016 and 2015, the Company recorded a loss associated with BioCision of approximately $19,200 and $0.3 million, respectively. During the six months ended March 31, 2016 and 2015, the Company recorded a loss associated with BioCision of $0.3 million and $0.5 million. At March 31, 2016 and September 30, 2015, the carrying value of the investment in BioCision in the Company’s unaudited Consolidated Balance Sheets was $2.3 million and $2.7 million, respectively. At March 31, 2016, amount payable to BioCision was approximately $43,000 .
The Company purchased BioCision's five-year convertible debt securities with a warrant agreement to purchase preferred units of BioCision for $2.5 million on each of the following dates of December 22, 2014 and February 2, 2015, resulting in a total purchase price of $5.0 million. Interest accrues on the convertible debt securities at a rate of 9% per annum, and is due with the principal at maturity. The convertible debt securities were recorded at fair value and accounted for in accordance with the fair value method. The warrant was recorded at fair value and accounted for as a derivative instrument. As of March 31, 2016, the fair value of the convertible debt securities and the warrant was $5.7 million and $49,180, respectively. As of September 30, 2015, the fair value of the convertible debt securities and the warrant was $5.3 million and $0.1 million, respectively.

17


For further information regarding the convertible debt securities and the warrant, refer to Note 17, “Fair Value Measurements”. The Company re-measures the fair values of the BioCision convertible debt securities and the warrant during each reporting period and recognizes the respective gains or losses as a component of "Other (loss) income, net" in the accompanying unaudited consolidated statements of operations. The Company recognized remeasurement gains of $0.1 million and $0.3 million, respectively, during the three and six months ended March 31, 2016.
During the six months ended March 31, 2016, the Company provided a series of bridge loans to BioCision with an aggregate principal amount of $600,000 bearing an annual interest rate of 10% to support BioCision's working capital requirements. On March 8, 2016, we made an additional loan of $150,000 to BioCision and the bridge loans were converted into a part of the permanent term loan, collectively, the" loan", which provides for financing of an aggregate principal amount up to $1.5 million, including this first $750,000 tranche and a second tranche of $750,000 which may be borrowed by BioCision at its option at a later date to support its working capital requirements. All principal and accrued interest outstanding on the loan mature on December 31, 2019 or at an earlier date upon the occurrence of certain events. In the event that BioCision obtains a certain equity investment or has a liquidity event, in either case, on or before September 30, 2016, all accrued and unpaid interest will be due and payable, and interest will thereafter accrue and be due and payable monthly in arrears. If no such equity investment or liquidity event occurs on or before September 30, 2016, all accrued and unpaid interest will be converted into additional loan principal and thereafter interest will accrue and be due and payable monthly in arrears. The financing supports growing working capital requirements in part due to BioCision entering into a supply agreement with a certain customer. The Company will be entitled to receive quarterly royalty payments from BioCision equal to 15% of the revenue generated from this certain customer arrangement until the earlier of: (i) the termination of the customer arrangement, (ii) the receipt by the Company of an aggregate amount of $1.5 million of royalty proceeds, and (iii) the date the loan is repaid in full. All outstanding and unpaid royalties become immediately due and payable to the Company if the customer arrangement is terminated. The loan is secured by a first priority perfected lien on BioCision's cash flows from the aforementioned customer arrangement, as well as a second priority perfected subordinated security interest and a lien on its personal property and other intangible assets, including intellectual property. At March 31, 2016, the loan of $750,000 was recorded at its carrying value and included in "Other assets" in the accompanying unaudited Consolidated Balance Sheets.    
As a result of each of the funding rounds described above, the Company reconsidered whether BioCision represents a variable interest entity subject to consolidation. The Company concluded that BioCision remains a variable interest entity since the level of equity investment at risk is not sufficient to finance its activities without additional financial support. However, the Company does not qualify as a primary beneficiary since it does not have the power to direct BioCision's product research, development, selling and marketing activities that have the most significant impact on its economic performance. As such, the Company concluded that BioCision will not be consolidated in the Company's financial statements.
ULVAC Cryogenics, Inc.
The Company participates in a 50% joint venture, ULVAC Cryogenics, Inc., or UCI, with ULVAC Corporation of Chigasaki, Japan. UCI manufactures and sells cryogenic vacuum pumps, principally to ULVAC Corporation.
The carrying value of the investment in UCI was $22.7 million and $21.5 million, respectively, at March 31, 2016 and September 30, 2015. During the three months ended March 31, 2016 and 2015, the Company recorded income of $0.8 million and $16,000, respectively, representing its proportionate share of UCI's earnings. During the six months ended March 31, 2016 and 2015, the Company recorded income of $1.3 million and $0.4 million, respectively, representing its proportionate share of UCI's earnings. Management fee payments received by the Company from UCI were $0.2 million each during the three months ended March 31, 2016 and 2015. Management fee payments received by the Company from UCI were $0.4 million and $0.3 million, respectively, during the six months ended March 31, 2016 and 2015. During the three months ended March 31, 2016 and 2015, the Company incurred charges from UCI's for products or services of $0.1 million and $46,000, respectively. During the six months ended March 31, 2016 and 2015, the Company incurred charges from UCI's for products or services of $0.2 million and $0.1 million, respectively. At March 31, 2016 and September 30, 2015, the Company owed UCI approximately $98,000 and $54,000, respectively, in connection with accounts payable for unpaid products and services.
Yaskawa Brooks Automation, Inc.
During fiscal year 2015, the Company participated in a 50% joint venture with Yaskawa Electric Corporation, or Yaskawa, called Yaskawa Brooks Automation, Inc., or YBA, which came to closure in March 2015 and was liquidated on September 3, 2015. YBA exclusively marketed and sold Yaskawa’s semiconductor robotics products and the Company’s automation hardware products to semiconductor customers in Japan. During the first quarter of fiscal year 2015, the Company and Yaskawa agreed in principle to dissolve the joint venture. In connection with the planned dissolution, YBA assessed the recoverability of assets held by the joint venture and notified its equity partners of an asset impairment. As a result, the Company recorded an impairment charge of $0.7 million related to the write down of the carrying value of the equity investment in YBA to fair value during the first quarter of fiscal year 2015.

18


During the three and six months ended March 31, 2015, the Company earned revenue of $1.0 million and $2.1 million, respectively, from YBA and incurred charges of $0.5 million and $0.9 million, respectively, from YBA for products or services. Net income (loss) associated with YBA recognized by the Company during the three and six months ended March 31, 2015 was $0.2 million and $(0.5) million, respectively. There were no amounts receivable by the Company from YBA or owed by the Company to YBA at September 30, 2015.
7. Note Receivable
In fiscal year 2012, the Company provided a strategic partner (the “Borrower”) a loan of $3.0 million to support the Borrower's future product development and other working capital requirements. The loan initially bore a stated interest rate of 9%, and the outstanding principal and interest were initially due in May 2015. The Company also received a warrant to purchase the Borrower's common stock in the event of an equity offering by the Borrower and certain other rights related to conversion of the loan, including the first refusal to acquire the Borrower and a redemption premium. The loan was initially secured by a security agreement granting the Company a first-priority security interest in all of the Borrower's assets.
The Company determined that the Borrower represented a variable interest entity since the level of equity investment at risk was not sufficient for the entity to finance its activities without additional financial support. However, the Company does not qualify as the primary beneficiary since it would not absorb the majority of the expected losses from the Borrower and does not have the power to direct the Borrower's product research, development and marketing activities that have the most significant impact on its economic performance. The Company has no future contractual funding commitments to the Borrower and, as a result, the Company's exposure to loss is limited to the outstanding principal and interest due on the loan.
During fiscal year 2014, the Borrower informed the Company of its intent to secure additional funding from an investment program funded by the Commonwealth of Massachusetts designed to support early-stage companies. In connection with the Borrower’s efforts to secure additional financing, the Company agreed to subordinate its security interest in the assets of the Borrower to the new lender. Additionally, the Company agreed to extend the due date of its loan by approximately 5 years, to September 2019, in order to coincide with the due date of the new loan. The amended loan has a stated interest rate of 10%.
In connection with its efforts to secure additional financial support, the Borrower developed revised assumptions about its future cash flows. Based on the information provided by the Borrower and the subordination of the loan to the new lender, the Company determined it was probable that it would not recover all amounts due from the loan and recorded an impairment charge of $2.6 million during fiscal year 2014. The impairment charge included the warrant write-off and was recorded in the "Selling, general and administrative" expenses in the Company's Consolidated Statements of Operations.
The fair value of the loan was determined by considering the fair value of the collateral using valuation techniques, principally the discounted cash flow method, reduced by the amounts committed to the new lender. The observable inputs used in the Company's analysis were limited primarily to the discount rate, which was based on a rate commensurate with the risks and uncertainties of the Borrower. As a result, the fair value of the loan could vary under different conditions or assumptions, including the varying assumptions regarding future cash flows of the Borrower or discount rates.
At March 31, 2016 and September 30, 2015, the carrying value of the note receivable was $1.0 million. No triggering events indicating impairment of the note receivable occurred during the three and six months ended March 31, 2016 and 2015, respectively.
8. Income Taxes
The Company recorded an income tax provision of $78.2 million and $74.9 million, respectively, for the three and six months ended March 31, 2016. The provision recorded in each period was primarily driven by the change in a valuation allowance against U.S. net deferred tax assets during the three months ended March 31, 2016. Partially offsetting the valuation allowance provision were benefits related to pre-tax losses in the U.S., the reinstatement of the U.S. research and development tax credit retroactive to January 1, 2015, and reductions of reserves for unrecognized tax benefits resulting from the expiration of the statute of limitations.
The Company recorded an income tax provision (benefit) of $1.6 million and $(1.6) million, respectively, for the three and six months ended March 31, 2015. The tax benefit of $(1.6) million was primarily driven by $0.6 million of reductions in unrecognized tax benefits resulting from the expiration of the statute of limitations in various foreign jurisdictions and $0.9 million of tax benefits resulting from the reinstatement of the U.S. federal research and development tax credit, retroactive to January 1, 2014. These benefits were partially offset by foreign income taxes and interest related to unrecognized tax benefits. The tax provision of $1.6 million for the second quarter of fiscal year 2015 was driven by U.S. pre-tax income along with foreign income taxes and interest related to unrecognized tax benefits.
ASC Topic 740, Income Taxes, requires that all available evidence, both positive and negative, be considered in determining, based on the weight of that evidence, whether a valuation allowance is needed. The weight given to the potential

19


effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, (a) the more positive evidence is necessary and (b) the more difficult it is to support a conclusion that a valuation allowance is not needed for some portion or all of the deferred tax asset. A cumulative loss in recent years is considered a significant piece of negative evidence that is difficult to overcome in assessing the need for a valuation allowance.
The Company evaluates the realizability of its deferred tax assets by tax-paying component and assesses the need for a valuation allowance on an annual and quarterly basis. The Company evaluates the profitability of each tax-paying component on a historic cumulative basis and on a forward looking basis in the course of performing this analysis. The Company has evaluated all positive and negative evidence in concluding it is appropriate to establish a full valuation allowance against U.S. net deferred tax assets at this time.
The Company evaluated negative evidence to assess if it is more likely than not that the Company could make use of the U.S. deferred tax assets before they expire. In reviewing performance over the recent years, the Company currently shows cumulative income. This history considers earnings in recent years from the discontinued operations of Granville-Phillips, which was divested during the fiscal year 2014 and freed up capital for investments in strategic growth businesses. In evaluating the historical results of the continuing businesses, the Company has not yet demonstrated profitability with losses in recent periods. The Company reported U.S. pre-tax losses during fiscal year 2015 and the first two quarters of fiscal year 2016. The loss in the current quarter included a significant charge for restructuring actions which are ultimately expected to improve future profitability. However, because of the restructuring charges and loss in the second quarter of fiscal year 2016, the Company now projects a net loss for the full fiscal year 2016. These factors present significant negative evidence in the evaluation.
The Company also considered positive evidence such as expected improvements that are the results of investments in growth businesses. The Company prepares comprehensive forecasts based on the cyclical trends of the semiconductor industry, expected capital spending in the industry and demand for new product offerings. The Company's forecast of future improved profits includes a portion related to foreign operations, specifically in the Contamination Control Solutions business, which are excluded from the evaluation of U.S. deferred tax assets. The forecast of future improved profits also includes a portion related to U.S. operations. The Brooks Life Science Systems segment has driven cumulative losses in the U.S. in the past years, but is expected to provide growth in revenue and improved profitability resulting in increased profits in the U.S. After extensive review, despite significant projected improvements, the forecasted income is not considered to be objectively verifiable evidence because the revenue growth expected for the future periods is based on projections and not significantly supported by specific bookings and backlog of orders for product in place as of the end of the quarter. The evidence is therefore considered more subjective than objective under the accounting rules. Accordingly, this positive evidence is given less weight than the negative evidence discussed above.
A cumulative loss is difficult negative evidence to overcome on a more likely than not basis. Future income projections can only overcome this negative evidence if the projections are considered objectively verifiable. Since the income projections are not considered objectively verifiable, the Company determined that realization of the U.S. net deferred tax assets should not be viewed as more likely than not until the projected profits are supported with objectively verifiable evidence of the improvements. As a result of this change in assessment, the Company recorded a tax provision of $79.3 million to establish the valuation allowance against U.S. net deferred tax assets during the three months ended March 31, 2016. The Company will continue to maintain a full valuation allowance on our U.S. deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.
The Company is subject to U.S. federal income tax and various state, local and international income taxes in various jurisdictions. The amount of income taxes paid is subject to the Company's interpretation of applicable tax laws in the jurisdictions in which it files tax returns. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company has income tax audits in progress in various jurisdictions in which it operates. The years subject to examination vary for the U.S. and international jurisdictions, with the earliest tax year being 2009. It is reasonably possible that the related unrecognized tax benefits could change from those recorded in the Company's unaudited Consolidated Balance Sheets based on the outcome of these examinations or the expiration of statutes of limitations for specific jurisdictions. The Company currently anticipates that it is reasonably possible that the unrecognized tax benefits will be reduced by approximately $1.2 million within the next twelve months as a result of the lapse of statutes of limitations in multiple jurisdictions.
9. Other Balance Sheet Information
The following is a summary of accounts receivable at March 31, 2016 and September 30, 2015 (in thousands):

20


 
March 31,
2016
 
September 30,
2015
Accounts receivable
$
106,090

 
$
87,582

Less: allowance for doubtful accounts
(1,753
)
 
(1,019
)
Less: allowance for sales returns
(112
)
 
(115
)
Accounts receivable, net
$
104,225

 
$
86,448

The following is a summary of inventories at March 31, 2016 and September 30, 2015 (in thousands):
 
March 31,
2016
 
September 30,
2015
Inventories:
 
 
 
Raw materials and purchased parts
$
58,112

 
$
62,441

Work-in-process
17,238

 
21,563

Finished goods
25,388

 
16,615

Total inventories
$
100,738

 
$
100,619

Reserves for excess and obsolete inventory were $24.1 million and $23.8 million at March 31, 2016 and September 30, 2015, respectively.
As of March 31, 2016 and September 30, 2015, the building and the underlying land located in Oberdiessbach, Switzerland were presented at fair value of $2.9 million as "Assets Held for Sale" in the accompanying unaudited Consolidated Balance Sheets. The Company determined fair value of the assets held for sale based on indication of value resulting from marketing the building and the land to prospective buyers. Please refer to Note 17, "Fair Value Measurements" for further information on such measurements.
The Company establishes reserves for estimated cost of product warranties based on historical information. Product warranty reserves are recorded at the time product revenue is recognized, and retrofit accruals are recorded at the time retrofit programs are established. The Company’s warranty obligation is affected by product failure rates, utilization levels, material usage, service delivery costs incurred in correcting a product failure and supplier warranties on parts delivered to the Company.
The following is a summary of product warranty and retrofit activity on a gross basis for the three and six months ended March 31, 2016 and 2015 (in thousands):
Activity - Three Months Ended March 31, 2016
Balance at
December 31,
2015
 
Accruals
 
Costs Incurred
 
Balance at
March 31,
2016
$
5,767

 
$
2,376

 
$
(2,408
)
 
$
5,735

Activity - Three months ended March 31, 2015
Balance at
December 31,
2014
 
Accruals
 
Costs Incurred
 
Balance at
March 31,
2015
$
6,255

 
$
2,428

 
$
(2,480
)
 
$
6,203


Activity - Six Months Ended March 31, 2016
Balance at
September 30,
2015
 
Accruals
 
Costs Incurred
 
Balance at
March 31,
2016
$
6,089

 
$
4,712

 
$
(5,066
)
 
$
5,735


Activity - Six Months Ended March 31, 2015
Balance at
September 30,
2014
 
Adjustments for
Acquisitions and Divestitures
 
Accruals
 
Costs Incurred
 
Balance at
March 31,
2015
$
6,499

 
$
81

 
$
5,145

 
$
(5,522
)
 
$
6,203



21


10. Derivative Instruments
The Company has transactions and balances denominated in currencies other than the U.S. dollar. Most of these transactions or balances are denominated in Euros, British Pounds and a variety of Asian currencies. These transactions and balances, including short-term advances between the Company and its subsidiaries, subject the Company's operations to exposure from exchange rate fluctuations. The impact of currency exchange rate movement can be positive or negative in any period. The Company mitigates the impact of potential currency transaction gains and losses on short-term intercompany advances through timely settlement of each transaction, generally within 30 days.
The Company also enters into foreign exchange contracts to reduce its exposure to currency fluctuations. Under forward contract arrangements, the Company typically agrees to purchase a fixed amount of U.S. dollars in exchange for a fixed amount of a foreign currency on specified dates with maturities of three months or less. These transactions do not qualify for hedge accounting. Net gains and losses related to these contracts are recorded as a component of "Other (loss) income, net" in the accompanying unaudited Consolidated Statements of Operations and are as follows for the three and six months ended March 31, 2016 and 2015 (in thousands):
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
 
2016
 
2015
 
2016
 
2015
Realized gains on derivative instruments not designated as hedging instruments
 
$
736

 
$
126

 
$
997

 
$
426


22


The Company had the following notional amounts outstanding under foreign currency contracts that do not qualify for hedge accounting at March 31, 2016 and September 30, 2015 (in thousands):
March 31, 2016:
Buy Currency
 
Notional Amount
of Buy Currency
 
Sell Currency
 
Maturity
 
Notional Amount
of Sell Currency
 
Fair Value of
Assets
 
Fair Value of
Liabilities
British Pound
 
425

 
Norwegian Krone
 
April 2016
 
3,600

 
2

 

British Pound
 
252

 
Swedish Krona
 
April 2016
 
2,100

 
2

 

Korean Won
 
2,212

 
U.S. Dollar
 
April 2016
 
2,580,000

 

 
(8
)
British Pound
 
1,678

 
Euro
 
April 2016
 
1,500

 

 
(2
)
Korean Won
 
22

 
Singapore Dollar
 
April 2016
 
30

 

 

U.S. Dollar
 
675

 
Taiwan Dollar
 
April 2016
 
22,000

 
2

 

U.S. Dollar
 
5,959

 
Chinese Yuan
 
April 2016
 
39,000

 

 
(30
)
Korean Won
 
44

 
Japanese Yen
 
April 2016
 
44

 

 
(1
)
Euro
 
18,525

 
U.S. Dollar
 
April 2016
 
20,800

 
110

 

U.S. Dollar
 
7,300

 
British Pound
 
April 2016
 
10,410

 

 
(68
)
U.S. Dollar
 
2,081

 
Japanese Yen
 
April 2016
 
236,000

 

 
(5
)
Singapore Dollar
 
629

 
U.S. Dollar
 
April 2016
 
860

 

 
(2
)
U.S. Dollar
 
59

 
Israeli Shekel
 
April 2016
 
227

 

 

 
 
 
 
 
 
 
 
 
 
116

 
(116
)
September 30, 2015:
Buy Currency
 
Notional Amount
of Buy Currency
 
Sell Currency
 
Maturity
 
Notional Amount
of Sell Currency
 
Fair Value of
Assets
 
Fair Value of
Liabilities
U.S. Dollar
 
1,543

 
Korean Won
 
October 2015
 
1,852,000

 
$

 
$
(6
)
British Pound
 
2,157

 
Euro
 
October 2015
 
1,600

 

 
(29
)
U.S. Dollar
 
662

 
Taiwan Dollar
 
October 2015
 
22,000

 

 
(1
)
U.S. Dollar
 
4,308

 
British Pound
 
October 2015
 
6,520

 
32

 

Euro
 
9,300

 
U.S. Dollar
 
October 2015
 
8,253

 
40

 

U.S. Dollar
 
5,177

 
Chinese Yuan
 
October 2015
 
33,000

 
15

 

U.S. Dollar
 
425

 
Japanese Yen
 
October 2015
 
51,000

 

 

U.S. Dollar
 
1,336

 
Japanese Yen
 
December 2015
 
160,000

 
2

 

U.S. Dollar
 
457

 
Israeli Shekel
 
October 2015
 
1,800

 

 

 
 
 
 
 
 
 
 
 
 
$
89

 
$
(36
)
The fair values of the forward contracts described above are recorded in the Company's accompanying unaudited Consolidated Balance Sheets as "Prepaid expenses and other current assets" and "Accrued expenses and other current liabilities".
Stock Warrant
The BioCision warrant agreement contains net share settlement provisions, which permit the Company to pay the warrant exercise price using shares issuable under the warrant (“cashless exercise”). The value of the stock warrant fluctuates primarily in relation to the value of BioCision's underlying securities, either providing an appreciation in value or potentially expiring with no value. Gains and losses on the revaluation of the stock warrant are recognized as a component of "Other (loss) income, net" in the accompanying unaudited consolidated statements of operations. Please refer to Note 17 “Fair Value Measurements” for further information regarding the fair value of the stock warrant.
11. Stock-Based Compensation
The Company may issue restricted stock units and restricted stock awards (collectively "restricted stock units") and stock options which vest upon the satisfaction of a performance condition and/or a service condition. In addition, the Company issues shares to participating employees pursuant to an employee stock purchase plan.

23


The following table reflects stock-based compensation expense recorded during the three and six months ended March 31, 2016 and 2015 (in thousands):
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2016
 
2015
 
2016
 
2015
Restricted stock units
$
1,723

 
$
3,512

 
$
6,299

 
$
6,884

Employee stock purchase plan
132

 
113

 
269

 
224

Total stock-based compensation
$
1,855

 
$
3,625

 
$
6,568

 
$
7,108

The fair value of restricted stock units is determined based on the number of shares granted and the closing price of the Company's common stock quoted on NASDAQ on the date of grant. The Company recognizes stock-based compensation expense on a straight-line basis, net of estimated forfeitures, over the requisite service period. Additionally, the Company assesses the likelihood of achieving the performance goals against previously established performance targets in accordance with the Company's long-term equity incentive plan for stock-based awards that vest after the satisfaction of these goals.
The Company grants restricted stock units that vest over a required service period and awards for which vesting is dependent upon achievement of certain operating performance goals. Restricted stock units granted with performance goals may also have a required service period following the achievement of all or a portion of the goals. The following table reflects restricted stock units granted during the six months ended March 31, 2016 and 2015:
 
Total Units
 
Time-Based Units
 
Stock Grants
 
Performance-Based Units
Six months ended March 31, 2016
1,361,998

 
441,750

 
83,998

 
836,250

Six months ended March 31, 2015
1,443,959

 
551,250

 
68,459

 
824,250

Time-Based Grants
Restricted stock units granted with a required service period typically have three year vesting schedules in which one-third of awards vest at the first anniversary of the grant date, one-third vest at the second anniversary of the grant date and one-third vest at the third anniversary of the grant date, subject to the award holders meeting service requirements.
Stock Grants
During the six months ended March 31, 2016 and 2015, the Company granted 83,998 and 68,459 units to the members of the Company's Board of Directors, including compensation-related restricted stock units of 55,380 and 49,267, respectively. Certain members of its Board of Directors previously elected to defer receiving their annual awards of unrestricted shares of the Company stock and quarterly dividends until a future date. During the six months ended March 31, 2016 and 2015, the Company issued 25,560 and 13,318 units, respectively, related to such annual restricted share awards. During the six months ended March 31, 2016 and 2015, the Company issued 3,058 and 6,054 units, respectively, related to deferred quarterly dividends in an amount equal to the value of cash dividends that would be paid on the number of deferred shares based on the closing price of the Company’s stock on each dividend record date. These units vested upon issuance, but receipt of the Company shares is deferred until the holders attain a certain age or cease to provide services to the Company in their capacity as Board members.
Performance-Based Grants
Performance-based restricted stock units are earned based on the achievement of performance criteria established by the Human Resources and Compensation Committee of the Board of Directors. The criteria for performance-based awards are weighted and have threshold, target and maximum performance goals.
Performance-based awards granted in fiscal year 2016 allow participants to earn 100% of a targeted number of restricted stock units if the Company’s performance meets its target for each applicable financial metric, and up to a maximum of 200% of the restricted stock units if the Company’s performance for such metrics meets the maximum threshold. Performance below the minimum threshold for each financial metric results in award forfeitures. Performance goals will be measured over a three year period at the end of fiscal year 2018 to determine the number of units earned by recipients that continue to meet a service requirement. Units held by recipients that fail to meet the continued service requirement are forfeited. Earned units for recipients that continue to meet the service requirements vest on the date the Company’s Board of Directors determines the number of units earned, which will be approximately the third anniversary of the grant date.
Performance-based awards granted in fiscal year 2015 include provisions similar to fiscal 2016 awards that allow participants to earn threshold, target and maximum awards ranging from 0% of the award for performance below the minimum threshold, 100% of the award for performance at target, and up to a maximum of 200% of the award if the Company achieves

24


the maximum performance goals.
Sixty percent of the performance-based units granted in fiscal year 2015 had certain performance goals that were measured at the end of fiscal year 2015 to determine the number of earned units eligible for subsequent vesting. The Company performed below the target levels relative to the performance criteria for these awards and as a result these awards were not eligible for subsequent vesting, which resulted in a forfeiture of 495,684 units.
Forty percent of the performance-based units granted in fiscal year 2015 have performance goals which will be measured over a three year period at the end of fiscal year 2017 to determine the number of earned units eligible for vesting. Earned units vest on the third anniversary of the grant date, subject to award holders satisfying the service requirements. 351,066 units, or 40%, of performance-based awards granted in fiscal year 2015 are eligible for vesting. The total number of performance-based units to be earned by the participants will be based on the achievement against the Company's performance targets. The vesting of the units is subject to award holders satisfying the service requirements.
Restricted Stock Unit Activity
The following table summarizes restricted stock unit activity for the six months ended March 31, 2016:
 
Shares
 
Weighted
Average
Grant-Date
Fair Value
Outstanding at September 30, 2015
3,257,413

 
$
9.95

Granted
1,361,998

 
11.14

Vested
(1,239,497
)
 
9.52

Forfeited
(1,109,039
)
 
11.27

Outstanding at March 31, 2016
2,270,875

 
$
10.91

The weighted average grant date fair value of restricted stock units granted during the three months ended March 31, 2016 and 2015 was $9.37 and $12.12, respectively. The weighted average grant date fair value of restricted stock units granted during the six months ended March 31, 2016 and 2015 was $11.14 and $11.95, respectively. The fair value of restricted stock units vested during the three months ended March 31, 2016 and 2015 was $0.6 million and $1.0 million, respectively. The fair value of restricted stock units vested during the six months ended March 31, 2016 and 2015 was $14.0 million and $7.9 million, respectively. The Company paid $4.4 million and $2.2 million for withholding taxes on vested restricted stock units during the six months ended March 31, 2016 and 2015, respectively. Additionally, 1,109,039 shares of restricted stock units were forfeited during the six months ended March 31, 2016 primarily as a result of failure to achieve certain performance thresholds for performance-based restricted stock units and because the restructuring action initiated during the second quarter of fiscal year 2016. Please refer to Note 13, "Restructuring and Other Charges" for further information on the restructuring action.
As of March 31, 2016, the unrecognized compensation cost related to restricted stock units that are expected to vest is $16.0 million and will be recognized over an estimated weighted average service period of approximately 1.8 years.
Employee Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan that allows its employees to purchase shares of common stock at a price equal 85% of the fair market value of the Company's stock at the beginning or the end of the semi-annual period, whichever is lower. During the three and six months ended March 31, 2016, the Company issued 118,548 shares under the employee stock purchase plan for $0.9 million. The Company issued 96,415 shares under the employee stock purchase plan for $0.9 million during the corresponding periods of the prior fiscal year.

25


12. Earnings per Share
The calculations of basic and diluted net (loss) income per share and basic and diluted weighted average shares outstanding are as follows for the three and six months ended March 31, 2016 and 2015 (in thousands, except per share data): 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2016
 
2015
 
2016
 
2015
Net (loss) income
$
(83,939
)
 
$
2,711

 
$
(88,587
)
 
$
(23
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding used in computing basic earnings per share
68,556

 
67,387

 
68,342

 
67,255

Dilutive restricted stock units

 
1,027

 

 

Weighted average common shares outstanding used in computing diluted earnings per share
68,556

 
68,414

 
68,342

 
67,255

 
 
 
 
 
 
 
 
Basic net income (loss) per share
$
(1.22
)
 
$
0.04

 
$
(1.30
)
 
$

Diluted net income (loss) per share
$
(1.22
)
 
$
0.04

 
$
(1.30
)
 
$

Options to purchase approximately 2,000 shares of common stock and 552,000 of restricted stock units were excluded from the computation of diluted earnings per share during the three months ended March 31, 2015 as their effect would be anti-dilutive based on the treasury stock method. Restricted stock units of 1,194,000 during the three months ended March 31, 2016, as well as 1,457,000 and 1,164,000, respectively, of restricted stock units during the six months ended March 31, 2016 and 2015 were excluded from the computation of diluted earnings per share as a result of a net loss incurred during these periods. There were no options outstanding as of March 31, 2016 and 2015.
13. Restructuring and Other Charges

Three Months Ended March 31, 2016
The Company recorded restructuring charges of $7.3 million during the three months ended March 31, 2016, which included severance costs of $7.2 million and facility-related costs of $0.2 million. The charges consisted of $5.2 million attributable to actions initiated during the three months ended March 31, 2016 and $2.1 million attributable to actions initiated in prior periods.
The Company’s restructuring action initiated during the three months ended March 31, 2016 included streamlining business operations as part of a company-wide initiative to improve profitability and competitiveness. This action resulted in $5.2 million of severance costs, which was attributable to the elimination of positions across the Company, including certain senior management positions. The restructuring action is expected to be substantially completed by June 30, 2016, and result in additional restructuring charges in future periods of $0.5 million. Restructuring charges incurred during the period from this action are $5.2 million and expected to benefit all segments. Total severance costs expected to be incurred in connection with the action are $5.7 million.
The Company’s restructuring actions initiated in prior periods resulted in $1.6 million of costs attributable to Brooks Life Science Systems and $0.4 million of costs attributable to Brooks Product Solutions during the three months ended March 31, 2016. The Brooks Life Science Systems actions were primarily related to streamlining the management structure of this segment, integrating BioStorage, and the closure of the segment’s Spokane, Washington facility in March 2016. These restructuring actions are expected to be substantially completed by June 30, 2016 and not expected to result in any additional restructuring charges in future periods. Total severance costs expected to be incurred in connection with these actions are $2.4 million, of which $0.8 million was recognized prior to the second quarter of fiscal year 2016 and $1.6 million was recognized during the three months ended March 31, 2016. The restructuring actions related to Brooks Product Solutions were primarily related to the integration of Contact, as well as the closure and transfer of our Mistelgau, Germany manufacturing operations to a contract manufacturer. These restructuring actions were substantially completed as of March 31, 2016. Total severance costs incurred in connection with these actions are $5.0 million, of which $4.6 million was recognized prior to the second quarter of fiscal year 2016 and $0.4 million was recognized during the three months ended March 31, 2016.

Six Months Ended March 31, 2016
The Company recorded restructuring charges of $8.8 million during the six months ended March 31, 2016 related to

26


severance costs which included of $5.2 million of charges related to restructuring actions initiated during the six months ended March 31, 2016 that benefited all segments. Additional charges of $3.6 million were related to restructuring actions initiated in prior periods, as described above, and consisted of $1.2 million of costs attributable to Brooks Product Solutions segment and $2.4 million of costs attributable to Brooks Life Science Systems segment.

Three Months Ended March 31, 2015
The Company recorded restructuring charges of $0.7 million during the three months ended March 31, 2015 related to severance costs. Such costs were attributable to Brooks Product Solutions segment for the integration of Dynamic Micro Systems Semiconductor Equipment GmbH, or DMS, with the Company's operations and the transition of manufacturing of certain products from the Company's facility in Mistelgau, Germany to a third party contract manufacturer. Total cumulative severance costs incurred in connection with these restructuring plans were $1.9 million and were substantially completed on December 31, 2015.

Six Months Ended March 31, 2015
The Company recorded restructuring charges of $3.4 million during the six months ended March 31, 2015, which included severance costs of $2.1 million and facility-related costs of $1.2 million.
Severance costs of $2.1 million were attributable to Brooks Product Solutions segment in connection with the restructuring actions described above. Total cumulative severance costs incurred in connection with these restructuring actions were $5.0 million.
    Facility exit costs of $1.2 million attributable to Brooks Product Solutions segment were related to the outsourcing of manufacturing certain of the Company’s line of Polycold cryochillers and compressors within the United States to a third party contract manufacturer. The facility exit costs represented future lease payments and expected operating costs to be paid until the termination of the facility lease. The Company terminated the lease on October 27, 2015 and fully paid the related restructuring liability during the first quarter of fiscal year 2016.    
The following is a summary of activity related to the Company’s restructuring and other charges for the three and six months ended March 31, 2016 and 2015 (in thousands):
 
Activity — Three Months Ended March 31, 2016
 
Balance at
December 31,
2015
 
Expenses
 
Payments
 
Balance at
March 31,
2016
Facilities and other contract termination costs
$

 
$
160

 
$
(64
)
 
$
96

Workforce-related termination benefits
1,654

 
7,176

 
(1,537
)
 
7,293

Total restructuring liabilities
$
1,654

 
$
7,336

 
$
(1,601
)
 
$
7,389

 
 
 
 
 
 
 
 
 
Activity — Three Months Ended March 31, 2015
 
Balance at
December 31,
2014
 
Expenses
 
Payments
 
Balance at
March 31,
2015
Facilities and other contract termination costs
$
1,175

 
$

 
$
(271
)
 
$
904

Workforce-related termination benefits
2,753

 
685

 
(1,045
)
 
2,393

Total restructuring liabilities
$
3,928

 
$
685

 
$
(1,316
)
 
$
3,297

 
 
 
 
 
 
 
 

27


 
Activity — Six Months Ended March 31, 2016
 
Balance at
September 30,
2015
 
Expenses
 
Payments
 
Balance at
March 31,
2016
Facilities and other contract termination costs
$
433

 
$
25

 
$
(362
)
 
$
96

Workforce-related termination benefits
1,640

 
8,786

 
(3,133
)
 
7,293

Total restructuring liabilities
$
2,073

 
$
8,811

 
$
(3,495
)
 
$
7,389

 
 
 
 
 
 
 
 
 
Activity — Six Months Ended March 31, 2015
 
Balance at
September 30,
2014
 
Expenses
 
Payments
 
Balance at
March 31,
2015
Facilities and other contract termination costs
$
71

 
$
1,205

 
$
(372
)
 
$
904

Workforce-related termination benefits
3,404

 
2,148

 
(3,159
)
 
2,393

Total restructuring liabilities
$
3,475

 
$
3,353

 
$
(3,531
)
 
$
3,297

Accrued restructuring costs of $7.4 million at March 31, 2016 are expected to be paid within the next twelve months.
14. Employee Benefit Plans
The Company has two active defined benefit pension plans (collectively, the “Plans”). The Plans cover substantially all of the Company’s employees in Switzerland and Taiwan. Retirement benefits are generally earned based on the years of service and the level of compensation during active employment, but the level of benefits varies within the Plans. Eligibility is determined in accordance with local statutory requirements.
The components of the Company’s net pension cost for the three and six months ended March 31, 2016 and 2015 are as follows (in thousands): 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2016
 
2015
 
2016
 
2015
Service cost
$
136

 
$
129

 
$
272

 
$
248

Interest cost
18

 
33

 
36

 
64

Amortization of losses
4

 

 
8

 

Expected return on assets
(39
)
 
(58
)
 
(79
)
 
(111
)
Net periodic pension cost
$
119

 
$
104

 
$
237

 
$
201


15. Segment Information
Operating segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and to assess performance. The Company's Chief Executive Officer is the Company's chief operating decision maker.
The Company reports its financial results for three operating and reportable segments: (i) Brooks Product Solutions, (ii) Brooks Global Services and (iii) Brooks Life Science Systems.
The Brooks Product Solutions segment provides a variety of products and solutions that enable improved throughput and yield in controlled operating environments. Those products include integrated systems that contain atmospheric and vacuum robots, as well as cryogenic pumps and cryochillers that provide vacuum pumping solutions.
The Brooks Global Services segment provides an extensive range of support services, including repair services, diagnostic support services, and installation services, which enable its 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 Science Systems segment provides automated cold sample management systems for compound and biological sample storage, equipment for sample preparation and handling, consumables, and parts and support services to a wide range of life science customers including pharmaceutical companies, biotechnology companies, biobanks and research

28


institutes. During the first quarter of fiscal year 2016, we completed an acquisition of BioStorage, a global provider of comprehensive outsource biological sample service solutions, including collection, transportation, processing, storage, protection, retrieval and disposal of biological samples. These solutions combined with the Company's existing offerings, particularly automation for sample storage and formatting, provide customers with fully integrated sample management cold chain solutions which will help them increase productivity, efficiencies and speed to market.
The Company evaluates the performance and future opportunities of its segments and allocates resources to them based on their revenue, operating income (loss) and returns on invested assets. Operating income (loss) for each segment includes selling, general and administrative expenses directly attributable to the segment. Amortization of acquired intangible assets (excluding completed technology), restructuring and other charges, pension settlement, in-process research and development, as well as other unallocated corporate expenses are excluded from the segments’ operating income (loss). The Company’s indirect overhead costs, which include various general and administrative expenses, are allocated among the segments based upon multiple cost drivers associated with the respective administrative function, including segment revenue, headcount, or benefits that each segment derives from a specific administrative function. Segment assets exclude cash, cash equivalents, marketable securities, deferred tax assets, assets held for sale and equity method investments.

29


The following is the summary of the financial information for the Company’s operating and reportable segments for the three and six months ended March 31, 2016 and 2015 (in thousands):
 
Brooks
Product
Solutions
 
Brooks
Global
Services
 
Brooks
Life Science
Systems
 
Total
Three Months Ended March 31, 2016:
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Product
$
86,790

 
$
3,448

 
$
11,224

 
$
101,462

Services

 
18,581

 
15,238

 
33,819

Total revenue
$
86,790

 
$
22,029

 
$
26,462

 
$
135,281

Gross profit
$
30,570

 
$
6,373

 
$
9,857

 
$
46,800

Segment operating income (loss)
$
4,791

 
$
1,867

 
$
(2,217
)
 
$
4,441

 
 
 
 
 
 
 
 
Three Months Ended March 31, 2015:
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Product
$
98,958

 
$
4,128

 
$
13,309

 
$
116,395

Services

 
18,709

 
4,209

 
22,918

Total revenue
$
98,958

 
$
22,837

 
$
17,518

 
$
139,313

Gross profit
$
33,995

 
$
7,043

 
$
4,987

 
$
46,025

Segment operating income (loss)
$
7,995

 
$
2,108

 
$
(4,391
)
 
$
5,712

 
 
 
 
 
 
 
 
Six Months Ended March 31, 2016:
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Product
$
163,351

 
$
6,066

 
$
21,225

 
$
190,642

Services

 
38,478

 
26,116

 
64,594

Total revenue
$
163,351

 
$
44,544

 
$
47,341

 
$
255,236

Gross profit
$
57,671

 
$
13,931

 
$
15,752

 
$
87,354

Segment operating income (loss)
$
5,128

 
$
4,470

 
$
(6,819
)
 
$
2,779

 
 
 
 
 
 
 
 
Six Months Ended March 31, 2015:
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Product
$
181,814

 
$
8,236

 
$
26,075

 
$
216,125

Services

 
37,798

 
8,126

 
45,924

Total revenue
$
181,814

 
$
46,034

 
$
34,201

 
$
262,049

Gross profit
$
60,917

 
$
15,506

 
$
8,690

 
$
85,113

Segment operating income (loss)
$
8,457

 
$
5,661

 
$
(9,907
)
 
$
4,211

 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
March 31, 2016
$
277,897

 
$
51,545

 
$
254,125

 
$
583,567

September 30, 2015
$
260,011

 
$
57,058

 
$
110,910

 
$
427,979

    
The following is a reconciliation of the Company’s operating and reportable segments' operating income (loss) and segment assets to the corresponding amounts presented in the accompanying unaudited Consolidated Balance Sheets and Consolidated

30


Statements of Operations for the three and six months ended March 31, 2016 and 2015 (in thousands):
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2016
 
2015
 
2016
 
2015
Segment operating income (loss)
$
4,441

 
$
5,712