BRKS 2015.3.31 10Q
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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, 2015
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 23, 2015: common stock, $0.01 par value and 67,481,408 shares outstanding.
 



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BROOKS AUTOMATION, INC.
Table of Contents
 
 
 
 
PAGE NUMBER
 
 

 

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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,
2015
 
September 30,
2014
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
73,176

 
$
94,114

Marketable securities
69,327

 
68,130

Accounts receivable, net
94,679

 
80,106

Inventories
90,558

 
93,567

Deferred tax assets
18,871

 
19,009

Prepaid expenses and other current assets
14,841

 
19,387

Total current assets
361,452

 
374,313

Property, plant and equipment, net
46,833

 
50,183

Long-term marketable securities
64,601

 
83,212

Long-term deferred tax assets
69,595

 
67,563

Goodwill
118,264

 
109,501

Intangible assets, net
59,693

 
59,550

Equity method investments
27,027

 
28,944

Other assets
9,490

 
4,772

Total assets
$
756,955

 
$
778,038

Liabilities and equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
43,610

 
$
33,740

Capital lease obligation
881

 
881

Deferred revenue
19,943

 
26,279

Accrued warranty and retrofit costs
6,203

 
6,499

Accrued compensation and benefits
15,345

 
21,663

Accrued restructuring costs
3,297

 
3,475

Accrued income taxes payable
2,789

 
1,808

Deferred tax liabilities
458

 
808

Accrued expenses and other current liabilities
15,027

 
18,688

Total current liabilities
107,553

 
113,841

Long-term capital lease obligation
7,173

 
7,417

Long-term tax reserves
4,175

 
5,708

Long-term deferred tax liabilities
3,418

 
2,567

Long-term pension liability
2,342

 
1,774

Other long-term liabilities
3,467

 
3,842

Total liabilities
128,128

 
135,149

Commitments and contingencies (Note 18)

 

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, 80,943,277 shares issued and 67,481,408 shares outstanding at March 31, 2015, 80,375,777 shares issued and 66,913,908 shares outstanding at September 30, 2014
809

 
804

Additional paid-in capital
1,840,426

 
1,834,619

Accumulated other comprehensive income
9,333

 
15,687

Treasury stock at cost, 13,461,869 shares
(200,956
)
 
(200,956
)
Accumulated deficit
(1,020,785
)
 
(1,007,265
)
Total equity
628,827

 
642,889

Total liabilities and equity
$
756,955

 
$
778,038


The accompanying notes are an integral part of these unaudited consolidated financial statements.
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BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
 
Three months ended
March 31,
 
Six months ended
March 31,
 
2015
 
2014
 
2015
 
2014
Revenue
 
 
 
 
 
 
 
Product
$
116,395

 
$
102,534

 
$
216,125

 
$
195,664

Services
22,918

 
23,366

 
45,924

 
47,308

Total revenue
139,313

 
125,900

 
262,049

 
242,972

Cost of revenue
 
 
 
 
 
 
 
Product
79,048

 
64,786

 
149,268

 
125,522

Services
14,240

 
16,816

 
27,668

 
32,261

Total cost of revenue
93,288

 
81,602

 
176,936

 
157,783

Gross profit
46,025

 
44,298

 
85,113

 
85,189

Operating expenses
 
 
 
 
 
 
 
Research and development
12,678

 
12,493

 
26,167

 
25,044

Selling, general and administrative
29,609

 
28,637

 
59,020

 
54,772

Restructuring and other charges
685

 
772

 
3,353

 
1,519

Total operating expenses
42,972

 
41,902

 
88,540

 
81,335

Operating income (loss)
3,053

 
2,396

 
(3,427
)
 
3,854

Interest income
228

 
258

 
479

 
504

Interest expense
(98
)
 

 
(200
)
 

Other income, net
1,161

 
56

 
2,180

 
315

Income (loss) before income taxes and equity in earnings (losses) of equity method investments
4,344

 
2,710

 
(968
)
 
4,673

Income tax provision (benefit)
1,560

 
1,117

 
(1,550
)
 
1,910

Income before equity in earnings (losses) of equity method investments
2,784

 
1,593

 
582

 
2,763

Equity in earnings (losses) of equity method investments
(73
)
 
510

 
(605
)
 
1,259

Income (loss) from continuing operations
2,711

 
2,103

 
(23
)
 
4,022

Income from discontinued operations, net of tax

 
1,162

 

 
2,739

Net income (loss)
2,711

 
3,265

 
(23
)
 
6,761

Net income attributable to noncontrolling interests

 
(76
)
 

 
(124
)
Net income (loss) attributable to Brooks Automation, Inc.
$
2,711

 
$
3,189

 
$
(23
)
 
$
6,637

Basic net income (loss) per share attributable to Brooks Automation, Inc. common stockholders:
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
0.04

 
$
0.03

 
$

 
$
0.06

Net income from discontinued operations, net of tax

 
0.02

 

 
0.04

Basic net income (loss) per share attributable to Brooks Automation, Inc.
$
0.04

 
$
0.05

 
$

 
$
0.10

Diluted net income (loss) per share attributable to Brooks Automation, Inc. common stockholders:
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
0.04

 
$
0.03

 
$

 
$
0.06

Net income from discontinued operations, net of tax

 
0.02

 

 
0.04

Diluted net income (loss) per share attributable to Brooks Automation, Inc.
$
0.04

 
$
0.05

 
$

 
$
0.10

Dividend declared per share
$
0.10

 
$
0.08

 
$
0.20

 
$
0.16

 
 
 
 
 
 
 
 
Shares used in computing earnings (loss) per share:
 
 
 
 
 
 
 
Basic
67,387

 
66,646

 
67,255

 
66,499

Diluted
68,414

 
67,505

 
67,255

 
67,383


The accompanying notes are an integral part of these unaudited consolidated financial statements.
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BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(In thousands)
 
 
Three months ended
March 31,
 
Six months ended
March 31,
 
2015
 
2014
 
2015
 
2014
Net income (loss)
$
2,711

 
$
3,265

 
$
(23
)
 
$
6,761

Comprehensive income (loss):
 
 
 
 
 
 
 
Change in cumulative translation adjustment
(2,423
)
 
(547
)
 
(6,565
)
 
(841
)
Change in unrealized gain on marketable securities
267

 
22

 
202

 
21

Change in fair value on cash flow hedges

 
(37
)
 

 
68

Actuarial gain (loss)
(13
)
 
10

 
9

 
21

Comprehensive income (loss)
542

 
2,713

 
(6,377
)
 
6,030

Comprehensive income attributable to noncontrolling interests

 
(76
)
 

 
(124
)
Comprehensive income (loss) attributable to Brooks Automation, Inc.
$
542

 
$
2,637

 
$
(6,377
)
 
$
5,906



The accompanying notes are an integral part of these unaudited consolidated financial statements.
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BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
 
Six months ended March 31,
 
2015
 
2014
Cash flows from operating activities
 
 
 
Net income (loss)
$
(23
)
 
$
6,761

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
12,733

 
11,170

Impairment of intangible assets

 
398

Stock-based compensation
7,108

 
6,516

Amortization of premium on marketable securities
634

 
610

Undistributed losses (earnings) of equity method investments
605

 
(1,259
)
Deferred income tax provision (benefit)
(2,728
)
 
2,269

(Gain) loss on disposal of long-lived assets
(4
)
 
39

Changes in operating assets and liabilities, net of acquisitions and disposals:
 
 
 
Accounts receivable
(13,269
)
 
(6,057
)
Inventories
2,474

 
276

Prepaid expenses and other current assets
(5,365
)
 
1,546

Accounts payable
8,345

 
248

Deferred revenue
(3,868
)
 
13,408

Accrued warranty and retrofit costs
(274
)
 
(951
)
Accrued compensation and benefits
(6,200
)
 
2,730

Accrued restructuring costs
(6
)
 
141

Accrued expenses and other current liabilities
4,791

 
(2,194
)
Net cash provided by operating activities
4,953

 
35,651

Cash flows from investing activities
 
 
 
Purchases of property, plant and equipment
(3,647
)
 
(2,696
)
Purchases of marketable securities
(30,739
)
 
(63,561
)
Sale/maturity of marketable securities
47,625

 
46,551

Acquisitions, net of cash acquired
(17,257
)
 

Proceeds from the sale of property, plant and equipment
6

 

Other investment
(5,000
)
 
(4,000
)
Decrease in restricted cash

 
177

Net cash used in investing activities
(9,012
)
 
(23,529
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of common stock, net of issuance costs
867

 
967

Principal repayment of capital lease obligation
(244
)
 

Common stock dividend paid
(13,480
)
 
(10,800
)
Net cash used in financing activities
(12,857
)
 
(9,833
)
Effects of exchange rate changes on cash and cash equivalents
(4,022
)
 
21

Net increase (decrease) in cash and cash equivalents
(20,938
)
 
2,310

Cash and cash equivalents, beginning of period
94,114

 
82,971

Cash and cash equivalents, end of period
$
73,176

 
$
85,281

 
 
 
 
Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Acquisition of buildings and land through capital lease
$

 
$
8,537


The accompanying notes are an integral part of these unaudited consolidated financial statements.
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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 the opinion of management, all material adjustments, which are of a normal and recurring nature, and necessary for a fair presentation of the financial position and results of operations for the periods presented have been reflected. 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.
In the second quarter of fiscal year 2014, the Company determined that its Granville-Phillips Gas Analysis & Vacuum Measurement ("Granville-Phillips") business met the criteria to be reported as a discontinued operation. As a result, the Company’s historical financial statements have been revised to present the operating results of the Granville-Phillips business as a discontinued operation. The results of operations from the Granville-Phillips business are presented as “Income from discontinued operations, net of tax” in the Consolidated Statements of Operations. The discussion in the notes to these consolidated financial statements, unless otherwise noted, relate solely to the Company's continuing operations (See Note 3).
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, 2014 (the "2014 Annual Report on Form 10-K").
Use of Estimates and Summary of Significant Accounting Policies
The preparation of 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 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 become known.
The Company’s significant accounting policies are described in Note 2 in the 2014 Annual Report on Form 10-K.    
Recently Enacted Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board ("FASB") issued an amendment to the accounting guidance for presentation of unrecognized tax benefits. The prior guidance related to unrecognized tax benefits did not explicitly address financial statement presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. The amended guidance eliminates the existing diversity in practice in the presentation of unrecognized tax benefits in these instances. Under the amended guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, will be presented in the financial statements as a reduction of a deferred tax asset when an operating loss carryforward, a similar tax loss or a tax credit carryforward exists, with limited exceptions. On October 1, 2014 the Company adopted this guidance, which had no impact on its financial position or 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. Under the amended guidance, 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 new guidance allows companies to have significant continuing involvement and continuing cash flows with the discontinued operation. The amended guidance is effective for fiscal years beginning on or after December 15, 2014. Early adoption is permitted for disposals, or classifications as held for sale, that have not been previously reported in financial statements. The Company has not considered this amended guidance in regard to the Granville-Phillips discontinued operation.
In May 2014, the FASB issued new accounting guidance for reporting revenue recognition. The guidance recognizes revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is

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expected to be received for those goods or services. The five step process may make it possible that more judgment and estimation is required within the revenue recognition process than required under existing 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. This guidance is effective for fiscal years beginning after December 15, 2016. Early adoption is not permitted. The Company is evaluating the impact that the adoption of this guidance will have 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 GAAP. As a result, items that are both unusual and infrequent will no longer be separately reported net of tax after continuing operations. This guidance is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The adoption of this guidance will have no 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 by changing the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted. The Company is evaluating this standard and assessing the potential impact on its financial position and results of operations.
2. 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.
The following table reflects stock-based compensation expense, excluding amounts related to discontinued operations, recorded during the three and six months ended March 31, 2015 and 2014 (in thousands):
 
Three months ended
March 31,
 
Six months ended
March 31,
 
2015
 
2014
 
2015
 
2014
Restricted stock units
$
3,512

 
$
3,683

 
$
6,884

 
$
6,293

Employee stock purchase plan
113

 
112

 
224

 
225

 
$
3,625

 
$
3,795

 
$
7,108

 
$
6,518

The fair value per share of a restricted stock unit is equal to the quoted price of the Company’s common stock on the date of grant, net of estimated forfeitures. The expense related to these awards is being recorded ratably over the vesting period. In addition, for stock-based awards where vesting is dependent upon achieving certain operating performance goals, the Company estimates the likelihood of achieving the performance goals against previously established performance targets in accordance with the Company's long-term equity incentive plan.
The Company grants restricted stock units that vest over a required service period and awards where vesting is dependent upon achieving certain operating performance goals. Restricted stock units granted with performance goals also have a required service period. The following table reflects restricted stock units granted, including awards related to the discontinued operation, during the six months ended March 31, 2015 and 2014:
 
Total Units
 
Time-Based and Board of Directors' Units
 
Performance-Based Units
Six months ended March 31, 2015
1,443,959

 
619,709

 
824,250

Six months ended March 31, 2014
1,409,557

 
601,432

 
808,125

Time-based and Board of Directors' Grants
Units granted with a required service period typically have three year vesting schedules in which, subject to the award holder meeting service requirements, one-third vest at the first anniversary of the date of grant, one-third vest at the second anniversary of the date of grant and one-third vest at the third anniversary of the date of grant. The Company granted 62,405 stock units and 77,557 stock units for the six months ended March 31, 2015 and 2014, respectively, to the Company’s Board of Directors, which vest immediately.
Performance-based Grants
Performance-based units have performance criteria established by the Company’s Human Resources and Compensation Committee and the Board of Directors. The criteria for performance-based awards are weighted and have minimum performance thresholds, which if not met result in no vesting as to that metric’s weighted percentage.

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Performance-based awards granted in fiscal year 2014 included provisions where participants could achieve up to 200% of the targeted number of performance-based awards if the Company’s performance exceeds the target. The measurement of achievement against performance-based units granted in fiscal year 2014 occurred at the end of fiscal year 2014 to determine the number of earned units eligible for subsequent vesting, in which one-half vest at the second anniversary of the date of grant and one-half vest at the third anniversary of the date of grant, subject to the award holder meeting service requirements.
The Company exceeded the fiscal year 2014 financial objectives associated with the performance-based awards which were granted in the first quarter of fiscal year 2014. Under the terms of the award, a total of 1,250,169 units could vest, subject to award holders satisfying the service requirement, which is an increase of 442,044 units over the target grant. Units granted to the employees of Granville-Phillips were forfeited upon completion of the sale.
Performance-based awards granted in fiscal year 2015 included provisions where participants could achieve up to 200% of the targeted number of performance-based awards if the Company’s performance exceeds the target objectives.
Sixty percent of the performance-based units granted in fiscal year 2015 have certain performance criteria to be measured at the end of fiscal year 2015 to determine the number of earned units, in which one-half vest at the second anniversary of the date of grant and one-half vest at the third anniversary of the date of grant, subject to the award holder meeting service requirements. Forty percent of the performance-based units granted in fiscal year 2015 have certain performance criteria to be measured over a three year period to be measured at the end of fiscal year 2017 with any earned units vesting at the third anniversary of the date of the grant, subject to award holders satisfying the service requirement.
Stock Option Activity
The following table summarizes stock option activity for the six months ended March 31, 2015:
 
Number of
Options
 
Weighted-
Average
Remaining
Contractual Term
 
Weighted
Average
Exercise Price
 
Aggregate
Intrinsic Value
(In Thousands)
Outstanding at September 30, 2014
5,550

 
 
 
$
13.20

 
 
Forfeited/expired
(5,550
)
 
 
 
13.20

 
 
Outstanding at March 31, 2015

 
0.0 years
 
$

 
$

Vested at March 31, 2015

 
0.0 years
 
$

 
$

Options exercisable at March 31, 2015

 
0.0 years
 
$

 
$

No stock options were granted during the three or six months ended March 31, 2015 or 2014. There were no stock option exercises in the three or six months ended March 31, 2015 or 2014.
As of March 31, 2015, there was no future compensation cost related to stock options as all outstanding stock options have vested.
Restricted Stock Unit Activity
The following table summarizes restricted stock unit activity for the six months ended March 31, 2015:
 
Restricted Stock Units
 
Weighted
Average
Grant-Date
Fair Value
Outstanding at September 30, 2014
2,726,485

 
$
11.05

Restricted stock units granted
1,443,959

 
11.95

Restricted stock units vested
(659,120
)
 
11.93

Restricted stock units canceled
(241,072
)
 
10.52

Outstanding at March 31, 2015
3,270,252

 
$
11.90

The fair value of restricted stock units vested during the three months ended March 31, 2015 and 2014 was $1.0 million and $1.8 million, respectively. The fair value of restricted stock units vested during the six months ended March 31, 2015 and 2014 was $7.9 million and $4.9 million, respectively.
As of March 31, 2015, the unrecognized compensation cost related to restricted stock units that is expected to vest is $21.7 million and will be recognized over an estimated weighted average service period of 1.9 years.

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Employee Stock Purchase Plan
A total of 96,415 shares were purchased under the employee stock purchase plan during the three and six months ended March 31, 2015 for aggregate proceeds of $0.9 million. A total of 115,132 shares were purchased under the employee stock purchase plan during the three and six months ended March 31, 2014 for aggregate proceeds of $1.0 million.
3. Discontinued Operations
The Granville-Phillips business unit developed, manufactured, sold and serviced vacuum measurement and gas analysis instrumentation to semiconductor and non-semiconductor customers. In March 2014, the Company entered into an agreement to sell this business for $87.0 million in cash. The sale was completed on May 30, 2014. The Company’s historical financial statements have been revised to present the operating results of the Granville-Phillips business as a discontinued operation. The presentation of the Granville-Phillips business as a discontinued operation had no impact on previously reported net income (loss) or stockholders' equity.
4. Acquisitions
Acquisitions Completed in Fiscal Year 2015
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 assets and liabilities associated with FluidX at their fair values as of the acquisition date. The preliminary amounts recorded were as follows (in thousands):
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 on certain working capital adjustments with the sellers of FluidX stock. On February 3, 2015, the Company paid such proceeds to the seller which increased the purchase price by $0.1 million. At March 31, 2015, the Company had $1.5 million in a general escrow account. The Company has not yet completed the final allocation of the consideration in connection with the acquisition of FluidX, but expects to do so in the measurement period.
The Company used the relief-from-royalty method, a form of the income approach, to value the trademarks and existing technology acquired. The principle behind this method is 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. The Company used the excess-earnings method, a form of the income approach, to value the customer relationships acquired. The principle behind this method is that 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 periods for intangible assets acquired in the FluidX acquisition are 7.0 years for each of completed technology, trademarks, and customer relationships. The intangible assets acquired will be amortized using an accelerated depreciation method which approximates the pattern in which the economic benefits are expected to be realized.

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Goodwill represents the excess of the consideration transferred over 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. Goodwill arising from the acquisition of FluidX 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. Revenue from FluidX for the three months ended March 31, 2015 was $3.8 million and the net income was $0.4 million. Revenue from FluidX for the six months ended March 31, 2015 was $7.4 million and the net loss was $0.1 million. The net income (loss) for the three and six months ended March 31, 2015 includes charges to expense of $0.0 million and $1.0 million, respectively, related to the step-up in value of the acquired inventories. The net income (loss) for the three and six months ended March 31, 2015 also includes amortization expense of $0.3 million and $0.7 million, respectively.
Acquisitions Completed in Fiscal Year 2014
    On April 30, 2014, the Company acquired all the outstanding stock of Dynamic Micro Systems Semiconductor Equipment GmbH (“DMS”), a German provider of automated contamination control solutions for front opening unified pod, or "FOUP," carriers and reticle storage, targeted at improving yield of semiconductor processes at semiconductor fabrication plants. The Company paid, in cash, aggregate merger consideration of $31.6 million, net of cash acquired. The acquisition of DMS expanded the Company’s capabilities at semiconductor fabrication plants for yield improvement on new technology nodes.
The Company recorded the assets and liabilities associated with DMS at their fair values as of the acquisition date. The preliminary amounts recorded were as follows (in thousands):
Accounts receivable
$
15,262

Inventory
9,750

Prepaid and other current assets
2,727

Property, plant and equipment
2,049

Completed technology
3,610

Customer relationships
7,100

Goodwill
11,939

Accounts payable
(10,393
)
Accrued liabilities
(5,522
)
Deferred revenue
(1,309
)
Long-term deferred tax liabilities
(3,588
)
Total purchase price, net of cash acquired
$
31,625

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.
The Company reached settlement on certain working capital adjustments and other issues with the sellers of DMS' stock in the fourth quarter of fiscal year 2014. As a result of this settlement, the Company received $2.2 million in the first quarter of fiscal year 2015 from certain escrows established at the date of acquisition. At March 31, 2015, $2.7 million remained in escrow related to potential future claims against the sellers of DMS' stock. The Company has not yet completed the final allocation of the consideration paid in connection with the acquisition of DMS with respect to matters associated with the balances held in escrow and the potential impact of these matters on deferred tax liabilities. However, the Company expects to complete the final allocation within the measurement period.
The Company used the relief-from-royalty method, a form of the income approach, to value the completed technology acquired. The principle behind this method is 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. The Company used the excess-earnings method, a form of the income approach, to value the customer relationships acquired. The principle behind this method is that 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 periods for intangible assets acquired in the DMS acquisition are 5.0 years for completed technologies and 8.0 years for customer relationships. The intangible assets acquired will be amortized using methods that approximate the pattern in which the economic benefits are expected to be realized, including variable declining balance and straight-line methods.
Goodwill represents the excess of the consideration transferred over 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 DMS with the Company. Goodwill arising from the acquisition of DMS is not deductible for tax purposes. In the first quarter of fiscal year 2015, the Company increased the opening goodwill balance by $0.3 million as a result of a fair value

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adjustment recorded to inventory.   
The operating results of DMS have been included in the results of operations for the Brooks Product Solutions segment from the date of the acquisition. Revenue from DMS for the three months ended March 31, 2015 was $9.0 million and the net income was $0.1 million. Revenue from DMS for the six months ended March 31, 2015 was $16.1 million and the net loss was $0.2 million. The net income for the three and six months ended March 31, 2015 includes charges to expense of $0.0 million and $0.6 million, respectively, related to the step-up in value of the acquired inventories. The net income for the three and six months ended March 31, 2015 also includes amortization of acquired intangible assets of $0.6 million and $1.1 million, respectively.
The following pro forma summary presents consolidated information of the Company as if the acquisition of DMS occurred on October 1, 2013 (in thousands):
 
Three months ended March 31, 2014
 
Six months ended March 31, 2014
Revenue
$
140,408

 
$
259,853

Net income attributable to Brooks Automation, Inc.
3,467

 
2,860

The pro forma net income has been adjusted to reflect additional amortization from adjustments to intangible assets as if those adjustments had been applied as of October 1, 2013.
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. The Company performs an annual impairment test of its goodwill on September 30 of each fiscal year unless interim indicators of impairment exist. The Company did not identify any indicators of goodwill impairment during the six month period ended March 31, 2015 that would warrant an interim test.
The components of the Company’s goodwill, excluding amounts related to the discontinued operations, by business segment at March 31, 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

Less: aggregate impairment charges recorded
(437,706
)
 
(151,238
)
 

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

 
5,554

 
47,378

 

 
109,501

Acquisitions and adjustments during the six months ended March 31, 2015
516

 

 
8,247

 

 
8,763

Goodwill, less accumulated impairments at March 31, 2015
$
57,085

 
$
5,554

 
$
55,625

 
$

 
$
118,264

Components of the Company’s identifiable intangible assets, excluding amounts related to the discontinued operations, are as follows (in thousands): 
 
March 31, 2015
 
September 30, 2014
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
Patents
$
7,808

 
$
7,347

 
$
461

 
$
7,808

 
$
7,300

 
$
508

Completed technology
58,409

 
44,141

 
14,268

 
57,155

 
41,539

 
15,616

Trademarks and trade names
4,240

 
3,546

 
694

 
3,496

 
3,496

 

Customer relationships
77,916

 
33,646

 
44,270

 
73,389

 
29,963

 
43,426

 
$
148,373

 
$
88,680

 
$
59,693

 
$
141,848

 
$
82,298

 
$
59,550

The Company recorded an increase to goodwill in the amount of $8.8 million during the six months ended March 31, 2015. This increase includes $8.2 million related to the acquisition of FluidX, representing the excess of the consideration transferred over the net assets acquired from FluidX. This increase also includes $0.3 million due to a fair value adjustment recorded to DMS inventory, resulting in an increase to opening goodwill.
The Company is required to test certain long-lived assets when indicators of impairment are present. The Company

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evaluated the existence of impairment indicators on long-lived assets for the six months ended March 31, 2015 and determined that the indicators were not present. The Company initially determined that impairment indicators were present for the long-lived assets related to the Celigo product line as of September 30, 2013. The long-lived assets in question were tested for recoverability, which resulted in the conclusion that the carrying amounts of the assets were not fully recoverable. As a result of this analysis, management determined that an impairment loss of $2.0 million had occurred as of September 30, 2013. The Company revised its estimate of the fair value of these assets during the three months ended December 31, 2013 and determined that an additional impairment loss of $0.4 million, representing the remaining carrying value of the long-lived assets, was required. These impairment losses were recorded in the Brooks Life Science Systems segment. The Company completed the sale of the Celigo product line in the second quarter of fiscal year 2014.
6. Income Taxes
The Company recorded an income tax provision (benefit) of $1.6 million and $(1.6) million for the three and six months ended March 31, 2015, respectively. The tax provision is driven by global income during the current quarter and interest related to unrecognized tax benefits. The tax benefit is driven by U.S. pre-tax losses in the first quarter of fiscal 2015, $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 are partially offset by foreign income taxes and interest related to unrecognized tax benefits.
The Company recorded an income tax provision of $1.1 million and $1.9 million for the three and six months ended March 31, 2014, respectively. These tax provisions substantially consist of U.S. and foreign income taxes, as well as interest related to unrecognized tax benefits.
The Company evaluates the realizability of its deferred tax assets by jurisdiction and assesses the need for a valuation allowance on a quarterly basis. As of March 31, 2015, the Company has continued to maintain a valuation allowance in the U.S. against certain tax credits and state net operating losses due to the uncertainty of their realization based on long-term Company forecasts and the expiration dates on these attributes. The Company has also continued to maintain a valuation allowance in certain jurisdictions that have not generated historical cumulative profitability.
The Company is subject to U.S. federal income tax and various state, local and foreign income taxes in various jurisdictions. The amount of income taxes paid is subject to the Company's interpretation of applicable tax laws in the jurisdictions in which it files. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company has income tax audits in progress in various jurisdictions in which it operates. In the Company's U.S. and foreign jurisdictions, the years that may be examined vary, with the earliest tax year being 2008. Based on the outcome of these examinations, or the expiration of statutes of limitations for specific jurisdictions, the related unrecognized tax benefits could change from those recorded in the Company's Consolidated Balance Sheets. It is reasonably possible that the unrecognized tax benefit will be reduced by approximately $1.3 million during the next twelve months as the result of the expiration of statutes of limitations.
7. Earnings per Share
Below is a reconciliation of weighted average common shares outstanding for purposes of calculating basic and diluted earnings per share (in thousands):
 
Three months ended
March 31,
 
Six months ended
March 31,
 
2015
 
2014
 
2015
 
2014
Weighted average common shares outstanding used in computing basic earnings per share
67,387

 
66,646

 
67,255

 
66,499

Dilutive common stock options and restricted stock units
1,027

 
859

 

 
884

Weighted average common shares outstanding for purposes of computing diluted earnings per share
68,414

 
67,505

 
67,255

 
67,383

Options to purchase approximately 2,000 and 16,000 shares of common stock and 552,000 and 0 restricted stock units were excluded from the computation of diluted earnings per share attributable to common stockholders for the three months ended March 31, 2015 and 2014, respectively, as their effect would be anti-dilutive. In addition, options to purchase approximately 16,000 shares of common stock and 0 shares of restricted stock were excluded from the computation of diluted earnings per share attributable to common stockholders for the six months ended March 31, 2014, as their effect would be anti-dilutive. All unvested shares of restricted stock units were excluded from the computation of diluted earnings per share for the six months ended March 31, 2015 as a result of the net loss for that period.

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8. Segment Information
The Company reports financial results in three segments: Brooks Product Solutions, Brooks Global Services and Brooks Life Science Systems. A description of segments is included in the 2014 Annual Report on Form 10-K, included in Note 18.
The Company evaluates the performance of, and allocates resources to, each of its segments based on their revenues, 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. Other unallocated corporate expenses, amortization of acquired intangible assets (excluding completed technology) and restructuring and other charges 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, segment headcount, or an analysis of the segments that benefit from a specific administrative function. Segment assets exclude cash, cash equivalents, marketable securities, deferred tax assets and equity method investments.

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Financial information for the Company’s business segments, excluding amounts related to the discontinued operations, is as follows (in thousands):
 
Brooks
Product
Solutions
 
Brooks
Global
Services
 
Brooks
Life Science
Systems
 
Total
Three months ended March 31, 2015
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Product
$
98,958

 
$
4,128

 
$
13,309

 
$
116,395

Services

 
18,709

 
4,209

 
22,918

 
$
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

 
 
 
 
 
 
 
 
Three months ended March 31, 2014
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Product
$
89,897

 
$
4,213

 
$
8,424

 
$
102,534

Services

 
19,178

 
4,188

 
23,366

 
$
89,897

 
$
23,391

 
$
12,612

 
$
125,900

Gross profit
$
31,960

 
$
7,676

 
$
4,662

 
$
44,298

Segment operating income (loss)
$
6,127

 
$
2,248

 
$
(3,565
)
 
$
4,810

 
 
 
 
 
 
 
 
Six months ended March 31, 2015
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Product
$
181,814

 
$
8,236

 
$
26,075

 
$
216,125

Services

 
37,798

 
8,126

 
45,924

 
$
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

 
 
 
 
 
 
 
 
Six months ended March 31, 2014
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
Product
$
171,453

 
$
7,652

 
$
16,559

 
$
195,664

Services

 
39,058

 
8,250

 
47,308

 
$
171,453

 
$
46,710

 
$
24,809

 
$
242,972

Gross profit
$
60,461

 
$
15,501

 
$
9,227

 
$
85,189

Segment operating income (loss)
$
10,455

 
$
5,091

 
$
(7,040
)
 
$
8,506

 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
March 31, 2015
$
259,393

 
$
55,809

 
$
117,249

 
$
432,451

September 30, 2014
$
252,944

 
$
58,678

 
$
103,498

 
$
415,120



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A reconciliation of the Company’s reportable segment operating income (loss) to the corresponding consolidated amounts for the three and six month periods ended March 31, 2015 and 2014 is as follows (in thousands):
 
Three months ended
March 31,
 
Six months ended
March 31,
 
2015
 
2014
 
2015
 
2014
Segment operating income
$
5,712

 
$
4,810

 
$
4,211

 
$
8,506

Amortization of acquired intangible assets
1,914

 
1,460

 
3,826

 
2,916

Restructuring and other charges
685

 
772

 
3,353

 
1,519

Other unallocated corporate expenses
60

 
182

 
459

 
217

Total operating income (loss)
$
3,053

 
$
2,396

 
$
(3,427
)
 
$
3,854

A reconciliation of the Company’s reportable segment assets to the corresponding consolidated amounts as of March 31, 2015 and September 30, 2014 is as follows (in thousands):
 
March 31,
2015
 
September 30,
2014
Segment assets
$
432,451

 
$
415,120

Cash, cash equivalents and marketable securities
207,104

 
245,456

Deferred tax assets
88,466

 
86,572

Equity method investments
27,027

 
28,944

Other unallocated corporate net assets
1,907

 
1,946

Total assets
$
756,955

 
$
778,038

9. Significant Customers
The Company had one customer that accounted for more than 10% of its revenue, at 11% and 10%, in the three months ended March 31, 2015 and 2014, respectively. The Company had one customer that accounted for more than 10% of its revenue at 12%, in each of the six months ended March 31, 2015 and 2014. The Company did not have any customers that accounted for more than 10% of its accounts receivable balance at March 31, 2015 or September 30, 2014.
For purposes of determining the percentage of revenue from any original equipment manufacturer ("OEM") customer, the Company does not include revenue from products sold to a contract manufacturer customer which in turn sells to the OEM. If the Company included revenue from products sold to contract manufacturer customers supporting the Company's OEM customers, the percentage of the Company's total revenue derived from certain OEM customers would be higher.
10. Restructuring and Other Charges
The Company recorded a restructuring charge of $0.7 million for the three months ended March 31, 2015 related to severance costs. These severance costs were driven by actions taken to consolidate global functional support roles and transition the manufacturing of certain product sub-assemblies to third party contract manufacturers within the Brooks Life Science Systems segment. The Company incurred additional severance costs within the Brooks Product Solutions segment related to the transition of manufacturing certain products from the Company's facility in Mistelgau, Germany to a third party contract manufacturer. The Company's manufacturing site in Germany is expected to close in 2016.
The Company recorded a restructuring charge of $3.4 million for the six months ended March 31, 2015, which included $2.1 million of severance costs and $1.2 million of facility exit costs. Included in these restructuring charges are the severance costs described above along with $2.7 million of restructuring costs for the three months ended December 31, 2014 as a result of actions taken to reduce the Company's workforce in order to improve its cost structure and ongoing cost discipline. These restructuring charges related primarily to severance costs of $1.5 million and facility exit related costs of $1.2 million. The reduction in workforce was primarily the result of consolidation of positions in the United States and Germany, including reductions related to the integration of the Company's acquisition of DMS. The facility exit costs were due to the outsourcing of manufacturing certain products in the Company's line of Polycold cryochillers and compressors within the United States to a third party contract manufacturer. The facility exit costs were estimated according to future lease payments and operating costs to be paid until the termination of the lease.
The Company recorded a restructuring charge of $0.8 million and $1.5 million for the three and six months ended March 31, 2014, respectively. These restructuring costs consisted primarily of severance and other workforce-related costs resulting from the consolidation of certain administrative functions in the Brooks Life Science Systems segment, the on-going

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transition of manufacturing certain of the Company’s Polycold products to a third party contract manufacturer and other programs designed to improve the Company’s cost structure.    
The activity for the three and six months ended March 31, 2015 and 2014 related to the Company's restructuring-related accruals, excluding amounts related to the discontinued operations, is summarized below (in thousands):
 
Activity — Three months ended March 31, 2015
 
Balance at
December 31,
2014
 
Expense
 
Utilization
 
Balance at
March 31,
2015
Facilities and other
$
1,175

 
$

 
$
(271
)
 
$
904

Workforce-related
2,753

 
685

 
(1,045
)
 
2,393

 
$
3,928

 
$
685

 
$
(1,316
)
 
$
3,297

 
 
 
 
 
 
 
 
 
Activity — Three Months Ended March 31, 2014
 
Balance at
December 31,
2013
 
Expense
 
Utilization
 
Balance at
March 31,
2014
Facilities and other
$
57

 
$
7

 
$
(64
)
 
$

Workforce-related
1,405

 
765

 
(618
)
 
1,552

 
$
1,462

 
$
772

 
$
(682
)
 
$
1,552

 
 
 
 
 
 
 
 
 
Activity — Six months ended March 31, 2015
 
Balance at
September 30,
2014
 
Expense
 
Utilization
 
Balance at
March 31,
2015
Facilities and other
$
71

 
$
1,205

 
$
(372
)
 
$
904

Workforce-related
3,404

 
2,148

 
(3,159
)
 
2,393

 
$
3,475

 
$
3,353

 
$
(3,531
)
 
$
3,297

 
 
 
 
 
 
 
 
 
Activity — Six months ended March 31, 2014
 
Balance at
September 30,
2013
 
Expense
 
Utilization
 
Balance at
March 31,
2014
Facilities and other
$
155

 
$
13

 
$
(168
)
 
$

Workforce-related
1,257

 
1,506

 
(1,211
)
 
1,552

 
$
1,412

 
$
1,519

 
$
(1,379
)
 
$
1,552

The Company anticipates that the accrued restructuring costs at March 31, 2015 will be substantially paid in the next twelve months.
11. 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 years of service and compensation during active employment; however, the level of benefits varies within the Plans. Eligibility is determined in accordance with local statutory requirements.

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The components of the Company’s net pension cost for the three and six months ended March 31, 2015 and 2014 are as follows (in thousands): 
 
Three months ended
March 31,
 
Six months ended
March 31,
 
2015
 
2014
 
2015
 
2014
Service cost
$
129

 
$
102

 
$
248

 
$
202

Interest cost
33

 
39

 
64

 
78

Amortization of losses

 

 

 
1

Expected return on assets
(58
)
 
(55
)
 
(111
)
 
(108
)
Net periodic pension cost
$
104

 
$
86

 
$
201

 
$
173

12. Other Balance Sheet Information
The following is a summary of accounts receivable at March 31, 2015 and September 30, 2014 (in thousands):
 
March 31,
2015
 
September 30,
2014
Accounts receivable
$
96,066

 
$
81,270

Less allowance for doubtful accounts
(1,261
)
 
(1,031
)
Less allowance for sales returns
(126
)
 
(133
)
 
$
94,679

 
$
80,106

The following is a summary of inventories at March 31, 2015 and September 30, 2014, excluding amounts related to discontinued operations (in thousands):
 
March 31,
2015
 
September 30,
2014
Inventories
 
 
 
Raw materials and purchased parts
$
55,456

 
$
57,250

Work-in-process
19,600

 
20,068

Finished goods
15,502

 
16,249

 
$
90,558

 
$
93,567

Reserves for excess and obsolete inventory were $24.9 million and $26.0 million, excluding amounts related to discontinued operations, at March 31, 2015 and September 30, 2014, respectively.
The Company provides for the estimated cost of product warranties, primarily from historical information, at the time product revenue is recognized and retrofit accruals 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.
Product warranty and retrofit activity on a gross basis for the three and six months ended March 31, 2015 and 2014, excluding amounts related to discontinued operations, is as follows (in thousands):
Activity - Three months ended March 31, 2015
Balance at
December 31,
2014
 
Adjustments for
Acquisitions and Divestitures
 
Accruals
 
Costs Incurred
 
Balance at
March 31,
2015
$
6,255

 
$

 
$
2,428

 
$
(2,480
)
 
$
6,203


Activity - Three months ended March 31, 2014
Balance at
December 31,
2013
 
Adjustments for
Acquisitions and Divestitures
 
Accruals
 
Costs Incurred
 
Balance at
March 31,
2014
$
6,762

 
$

 
$
2,275

 
$
(2,718
)
 
$
6,319



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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


Activity - Six months ended March 31, 2014
Balance at
September 30,
2013
 
Adjustments for
Acquisitions and Divestitures
 
Accruals
 
Costs Incurred
 
Balance at
March 31,
2014
$
7,260

 
$

 
$
4,150

 
$
(5,091
)
 
$
6,319



13. Equity Method Investments
The Company accounts for certain of its investments using the equity method. Under this method of accounting, the Company records in income its proportionate share of the earnings (losses) of the investee 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 (“BioCision”), a privately-held company based in Larkspur, California, for $4.0 million. 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 the level of equity investment at risk was not sufficient for BioCision to finance its activities without additional financial support and as a result, represented a variable interest entity. However, the Company does not have the power to direct the activities that most significantly impact BioCision’s economic performance, and therefore does not qualify as the primary beneficiary. As such, the Company concluded that BioCision will not be consolidated in the Company's financial statements.    
For the three and six months ended March 31, 2015, the Company recorded a loss associated with BioCision of $0.3 million and $0.5 million. At March 31, 2015, the carrying value of the investment in BioCision in the Company’s Consolidated Balance Sheet was $3.2 million.
The Company purchased BioCision five-year convertible debt securities with a warrant agreement to purchase preferred units of BioCision for a total of $2.5 million on December 22, 2014 and February 2, 2015, resulting in a total purchase price of $5.0 million. The convertible debt securities were accounted for under the fair value method, and were recorded at fair value. The warrants were accounted for as a derivative and were recorded at fair value. The Company will re-measure the fair value of the BioCision convertible debt securities and warrants each reporting period, and the respective gain or loss will be recognized in earnings. Interest accrues on the convertible debt securities at a rate of 9% per annum, and is due with the principal upon maturity. As a result of the funding, the Company reconsidered whether BioCision represents a variable interest entity, which is subject to consolidation. The Company concluded that the level of equity investment at risk is still insufficient for BioCision to finance its activities without additional support, thus will remain a variable interest entity. However, the Company still does not have the power to direct the activities that most significantly impact BioCision’s economic performance, and therefore still does not qualify as the primary beneficiary. As such, the Company concluded that BioCision will not be consolidated in the Company's financial statements. As of March 31, 2015, the fair value of the convertible debt securities and warrants was $5.2 million and $70,000, respectively. For further information regarding the convertible debt securities and warrants, see Note 17, “Fair Value Measurements”.

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ULVAC Cryogenics, Inc.
The Company participates in a 50% joint venture, ULVAC Cryogenics, Inc. (“UCI”), with ULVAC Corporation of Chigasaki, Japan. UCI manufactures and sells cryogenic vacuum pumps, principally to ULVAC Corporation. For the three months ended March 31, 2015 and 2014, the Company recorded income associated with UCI of $16,000 and $0.5 million, respectively. For the six months ended March 31, 2015 and 2014, the Company recorded income associated with UCI of $0.4 million and $1.2 million, respectively. At March 31, 2015, the carrying value of UCI in the Company’s Consolidated Balance Sheet was $21.9 million. For each of the three months ended March 31, 2015 and 2014, management fee payments received by the Company from UCI were $0.2 million. For each of the six months ended March 31, 2015 and 2014, management fee payments received by the Company from UCI were $0.3 million. For the three months ended March 31, 2015 and 2014, the Company incurred charges from UCI for products or services of $46,000 and $37,000, respectively. For each of the six months ended March 31, 2015 and 2014, the Company incurred charges from UCI for products or services of $0.1 million. At March 31, 2015 and September 30, 2014, the Company owed UCI $46,000 and $79,000, respectively, in connection with accounts payable for unpaid products and services.
Yaskawa Brooks Automation, Inc.
The Company participates in a 50% joint venture with Yaskawa Electric Corporation (“Yaskawa”) called Yaskawa Brooks Automation, Inc. (“YBA”) to exclusively market and sell Yaskawa’s semiconductor robotics products and Brooks’ 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. On January 22, 2015, the Company entered into an agreement with YBA to facilitate the acquisition of certain assets and certain liabilities by the Company’s subsidiary in Japan. In accordance with the agreement, on March 20, 2015 the Company’s subsidiary in Japan received the net assets of YBA for cash consideration of approximately $1.8 million. The Company recorded the assets received and liabilities assumed from YBA at their fair value as of the acquisition date. As a result of the transaction, the Company recorded $0.2 million of goodwill, representing the excess of the consideration transferred over the net assets acquired. The cash received by YBA will be used to pay off remaining liabilities and the liquidation costs of YBA. Any remaining cash after making these payments will be distributed to the equity partners in the form of a dividend, which is expected to occur by the end of fiscal year 2015.
The Company recorded $0.2 million of income associated with YBA for the three months ended March 31, 2015, compared to $35,000, for the three months ended March 31, 2014. For the six months ended March 31, 2015 and 2014, the Company recorded income (expense) associated with YBA of $(0.5) million and $17,000, respectively. At March 31, 2015, the carrying value of YBA in the Company’s Consolidated Balance Sheet was $1.9 million. For the three months ended March 31, 2015 and 2014, revenue earned by the Company from YBA was $1.0 million and $2.1 million, respectively. For the six months ended March 31, 2015 and 2014, revenue earned by the Company from YBA was $2.1 million and $2.8 million, respectively. For the three months ended March 31, 2015 and 2014, the Company incurred charges from YBA for products or services of $0.5 million and $0.2 million, respectively. For the six months ended March 31, 2015 and 2014, the Company incurred charges from YBA for products or services of $0.9 million and $0.3 million, respectively.
The amount due from YBA included in accounts receivable at March 31, 2015 and September 30, 2014 was $0.0 million and $2.1 million, respectively. At March 31, 2015 and September 30, 2014, the Company owed YBA $0.0 million and $0.1 million, respectively, in connection with accounts payable for unpaid products and services. The Company expects the YBA dissolution to be completed within the fourth quarter of fiscal year 2015.      
14. Note Receivable
In 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 bears interest at a rate of 9% and the outstanding principal and interest was payable 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, first refusal to acquire the Borrower and a redemption premium. The loan was secured by a security agreement granting the Company a first-priority security interest in all of the assets of the Borrower.
The Company determined that the level of equity investment at risk was not sufficient for the entity to finance its activities without additional financial support and as a result, represented a variable interest entity. However, the Company does not have the power to direct the activities that most significantly impact the Borrower's economic performance and would not absorb the majority of the expected losses from the Borrower, and therefore does not qualify as the primary beneficiary. The Company has no future contractual funding commitments to the Borrower and as a result, the Company's exposure to loss was limited to the outstanding principal and interest under the loan.
During the third quarter of 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

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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 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 in the third quarter of fiscal year 2014. The impairment charge, which included the warrant write-off, was recorded in the Consolidated Statements of Operations in selling, general and administrative expenses.
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, less amounts committed by 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 at March 31, 2015 could be different under different conditions or different assumptions, including the varying assumptions regarding future cash flows of the Borrower or discount rates.
15. 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 translation 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 translation. 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 recorded as a component of "Other income, net" in the Consolidated Statements of Operations related to these contracts for the three and six months ended March 31, 2015 and 2014 is as follows (in thousands):
 
 
Three months ended
March 31,
 
Six months ended
March 31,
 
 
2015
 
2014
 
2015
 
2014
Realized gains (losses) on derivative instruments not designated as hedging instruments
 
$
126

 
$
(154
)
 
$
426

 
$
(107
)

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The Company had the following notional amounts outstanding under foreign currency contracts that do not qualify for hedge accounting at March 31, 2015 and September 30, 2014 (in thousands):
March 31, 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
 
1,343

 
Japanese Yen
 
April to June 2015
 
160,000

 
$
5

 
$

British Pound
 
1,098

 
Euro
 
April 2015
 
1,500

 

 
7

U.S. Dollar
 
673

 
Taiwan Dollar
 
April 2015
 
21,000

 
2

 

U.S. Dollar
 
1,248

 
British Pound
 
April 2015
 
840

 

 
1

Euro
 
5,100

 
U.S. Dollar
 
April 2015
 
5,560

 
23

 

Korean Won
 
330,000

 
U.S. Dollar
 
April 2015
 
299

 

 

U.S. Dollar
 
403

 
Japanese Yen
 
April 2015
 
48,000

 
1

 

U.S. Dollar
 
603

 
Israeli Shekel
 
April 2015
 
2,400

 

 
7

 
 
 
 
 
 
 
 
 
 
$
31

 
$
15

September 30, 2014:
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
 
1,736

 
Japanese Yen
 
October 2014 to December 2014
 
190,000

 
$

 
$
11

U.S. Dollar
 
1,395

 
Euro
 
October 2014
 
1,100

 

 
16

U.S. Dollar
 
656

 
Taiwan Dollar
 
October 2014
 
20,000

 

 
5

U.S. Dollar
 
650

 
British Pound
 
October 2014
 
400

 

 
5

U.S. Dollar
 
731

 
Israeli Shekel
 
October 2014
 
2,700

 

 
5

U.S. Dollar
 
76

 
Korean Won
 
October 2014
 
80,000

 

 
1

British Pound
 
3,513

 
Euro
 
October 2014
 
4,500

 

 
15

 
 
 
 
 
 
 
 
 
 
$

 
$
58

The fair values of the forward contracts described above are recorded in the Company's Consolidated Balance Sheets as "Prepaid expenses and other current assets" and "Accrued expenses and other current liabilities".
Stock Warrants
The BioCision warrant agreements contain net share settlement provisions, which permit the Company to pay the warrant exercise price using shares issuable under the warrants (“cashless exercise”). The value of the stock warrants will fluctuate 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 warrants are recognized in "Other income, net" on the Consolidated Statements of Income. See Note 17 “Fair Value Measurements” for further information regarding the fair value of the stock warrants.
16. Marketable Securities
The Company invests in marketable securities and classifies them as available-for-sale. The Company records these securities at fair value. 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. At the time that the maturity dates of these investments become one year or less, the securities are reclassified to current assets. 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. At the time of sale, any gains or losses, calculated by the specific identification method, will be recognized as a component of operating results.

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The following is a summary of marketable securities (included in short and long-term marketable securities in the Consolidated Balance Sheets), including accrued interest receivable, as of March 31, 2015 and September 30, 2014 (in thousands): 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
March 31, 2015:
 
 
 
 
 
 
 
U.S. Treasury securities and obligations of U.S. government agencies
$
27,402

 
$
17

 
$
(2
)
 
$
27,417

Corporate securities
61,377

 
26

 
(38
)
 
61,365

Mortgage-backed securities
911

 
30

 

 
941

Other debt securities
6,270

 
2

 

 
6,272

Municipal securities
19,936

 
2

 
(14
)
 
19,924

Bank certificate of deposits
16,946

 
1,063

 

 
18,009

 
$
132,842

 
$
1,140

 
$
(54
)
 
$
133,928

September 30, 2014:
 
 
 
 
 
 
 
U.S. Treasury securities and obligations of U.S. government agencies
$
26,052

 
$
1

 
$
(39
)
 
$
26,014

Corporate securities
74,614

 
23

 
(174
)
 
74,463

Mortgage-backed securities
964

 
36

 

 
1,000

Other debt securities
7,358

 

 
(10
)
 
7,348

Municipal securities
15,888

 
1

 
(16
)
 
15,873

Bank certificate of deposits
26,645

 
2

 
(3
)
 
26,644

 
$
151,521

 
$
63

 
$
(242
)
 
$
151,342

The fair value of the marketable securities at March 31, 2015 by contractual maturity, are shown below (in thousands):
 
Fair Value
Due in one year or less
$
69,327

Due after one year through five years
61,247

Due after ten years
3,354

 
$
133,928

Expected maturities could differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.
17. Fair Value Measurements
The fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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Assets and liabilities of the Company measured at fair value on a recurring basis as of March 31, 2015 and September 30, 2014 are summarized as follows (in thousands): 
 
 
 
 
Fair Value Measurements at Reporting Date Using
Description
 
March 31,
2015
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
 
Cash equivalents
 
$
10,404

 
$
10,154

 
$
250

 
$

Available-for-sale securities
 
133,928

 

 
133,928

 

Foreign exchange contracts
 
31

 

 
31

 

Convertible debt securities
 
5,207

 

 

 
5,207

Stock warrants
 
70

 

 

 
70

Total Assets
 
$
149,640

 
$
10,154

 
$
134,209

 
$
5,277

Liabilities
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
$
15

 
$

 
$
15

 
$

     The convertible debt securities and stock are included in "Other assets" in the Consolidated Balance Sheets.
 
 
 
 
Fair Value Measurements at Reporting Date Using
Description
 
September 30,
2014
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
 
Cash equivalents
 
$
6,404

 
$
5,166

 
$
1,238

 
$

Available-for-sale securities
 
151,342

 

 
151,342

 

Total Assets
 
$
157,746

 
$
5,166

 
$
152,580

 
$

Liabilities
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
$
58

 
$

 
$
58

 
$

Cash Equivalents
Cash equivalents of $10.2 million and $5.2 million at March 31, 2015 and September 30, 2014, respectively, consisting of Money Market Funds, are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Cash equivalents of $0.3 million and $1.2 million at March 31, 2015 and September 30, 2014, respectively, consisting primarily of Bank Certificate of Deposits, are classified within Level 2 of the hierarchy because they are not actively traded.
Available-For-Sale Securities
Available-for-sale securities of $133.9 million and $151.3 million at March 31, 2015 and September 30, 2014, respectively, consisting of Municipal Securities, Bank Certificate of Deposits, Commercial Paper, U.S. Treasury Securities and Obligations of U.S. Government Agency Securities, and Mortgage-Backed Securities are classified within Level 2 of the fair value hierarchy because they are not actively traded and are valued using matrix pricing and benchmarking. Matrix pricing is a mathematical technique used to value securities by relying on the securities’ relationship to other benchmark quoted prices.
Foreign Exchange Contracts
Foreign exchange contract assets and liabilities are classified within Level 2 of the fair value hierarchy because there may not be an active market for each contract. However, the inputs used to calculate the value of the contract were obtained from an active market.
Convertible Debt Securities
The convertible debt valuation analysis was based on the probability-weighted expected return method (“PWERM”) utilizing various scenarios for the expected payout of the instrument covering the full range of the potential outcomes. The PWERM determines the value of an asset, based upon an analysis of future values for the subject asset, which takes into

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consideration the full range of the potential value of the subject asset. The asset value is based upon the present value of the probability of each future outcome becoming available to the asset, and the economic rights and preferences of each asset.
Stock Warrants
The warrant valuation analysis utilized the Black-Scholes model to determine the fair value of the warrant assets. When applied to a warrant, the Black-Scholes model incorporates the constant price variation of the underlying asset, the time value of money, the warrant’s strike price and the time to the warrant’s expiry. The fair value of the warrants was determined utilizing a five year equity volatility percentage, based on an average equity volatility derived from the comparable public companies.
The following table presents the reconciliation for all assets and liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):
 
 
Convertible Debt Securities
 
Stock Warrants
 
Total
Balance at September 30, 2014
 
$

 
$

 
$

Additions (1)
 
4,934

 
75

 
5,009

Change in fair value
 
273

 
(5
)
 
268

Balance at March 31, 2015
 
$
5,207

 
$
70

 
$
5,277

_________________
(1) Refer to Note 13 "Equity Method Investments".
Nonrecurring Fair Value Measurements
In addition to the assets and liabilities recorded at fair value on a recurring basis, the Company has a note receivable that is measured at fair value on a nonrecurring basis. During the third quarter of fiscal year 2014, the Company evaluated the recoverability of a loan provided to the Borrower and adjusted its value based on fair value methods. The loan is represented by a note receivable, which is classified as a Level 3 instrument, as the inputs used in the analysis are unobservable and required significant management judgment. 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, and the subordination of the Company’s note to debt provided by a new lender as described in "Note 14. Note Receivable." The fair value of the loan could be different under different conditions or different assumptions, including the varying assumptions regarding future cash flows of the Borrower or discount rates.
18. Commitments and Contingencies
Capital Lease Obligation
In March 2014, the Company exercised an option to renew the lease of a building and the related land on the Company's Chelmsford, Massachusetts campus. The Company has leased this building since 2002. By exercising this option, the Company has also contracted to purchase the building at the end of the lease period. The assets acquired under the lease were recorded at the net present value of the minimum lease payments which was then allocated to the building and the land based on their relative fair values. The cost of the building and the land under the capital lease are included in the Consolidated Balance Sheets as "Property, plant and equipment" at $6.4 million and $2.1 million, respectively. Depreciation expense related to the building is computed using the straight-line method over the estimated useful life of the asset. Accumulated amortization related to the lease was $0.2 million at March 31, 2015.
The obligation related to the capital lease is recorded as a short-term or long-term capital lease obligation in the Consolidated Balance Sheets depending on when payments are due. The future minimum lease payments required under the capital lease and the present value of the net minimum lease payments, as of March 31, 2015, are as follows (in thousands):

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Year ended September 30,
 
2015
$
440

2016
881

2017
881

2018
6,901

Total minimum lease payments
9,103

Less amounts representing interest
1,049

Total capital lease obligation
8,054

Less current portion of capital lease obligation
881

Long-term capital lease obligation
$
7,173

Letters of Credit
At March 31, 2015, the Company had approximately $19.9 million of letters of credit outstanding related primarily to customer advances and other performance obligations. These arrangements guarantee the refund of advance payments received from customers in the event that the product is not delivered or warranty obligations are not fulfilled in compliance with the terms of the contract. While the Company does not anticipate that these obligations will be called, they could be called by the beneficiaries at any time before the expiration date of the particular letter of credit should the Company fail to meet certain contractual requirements.
Contingencies
The Company is subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course of business. The Company cannot predict the ultimate outcome of such legal proceedings or in certain instances provide reasonable ranges of potential losses. However, as of the date of this report, the Company believes that none of these claims will have a material adverse effect on its consolidated financial condition or results of operations. In the event of unexpected subsequent developments and given the inherent unpredictability of these legal proceedings, there can be no assurance that the Company's assessment of any claim will reflect the ultimate outcome and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's consolidated financial condition or results of operations in particular quarterly or annual periods.
19. Subsequent Events
On April 28, 2015, the Company’s Board of Directors declared a cash dividend of $0.10 per share payable on June 26, 2015 to common stockholders of record on June 5, 2015. Dividends are declared at the discretion of the Company’s Board of Directors and depend on actual cash from operations, the Company’s financial condition and capital requirements and any other factors the Company’s Board of Directors may consider relevant. Future dividend declarations, as well as the record and payment dates for such dividends, will be determined by the Company’s Board of Directors on a quarterly basis.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
This Quarterly Report on Form 10-Q contains statements that are, or may be considered to be, forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “likely” or similar statements or variations of such terms. Forward-looking statements include, but are not limited to, statements that relate to our future revenue, margin, costs, earnings, product development, demand, acceptance and market share, competitiveness, market opportunities and performance, levels of research and development, or R&D, the success of our marketing, sales and service efforts, outsourced activities and operating expenses, anticipated manufacturing, customer and technical requirements, the ongoing viability of the solutions that we offer and our customers’ success, tax expenses, our management’s plans and objectives for our current and future operations and business focus, the levels of customer spending, general economic conditions, the sufficiency of financial resources to support future operations, and capital expenditures. Such statements are based on current expectations and involve risks, uncertainties and other factors which may cause the actual results, our performance or our achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include the Risk Factors which are set forth in our 2014 Annual Report on Form 10-K and which are incorporated herein by reference. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof

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and are based on information currently and reasonably known to us. We do not undertake any obligation to release the results revisions to these forward-looking statements, which may be made to reflect events or circumstances that occur after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence or effect of anticipated or unanticipated events. Precautionary statements made herein should be read as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report on Form 10-Q. Any additional precautionary statements made in our 2014 Annual Report on Form 10-K should be read as being applicable to all related forward-looking statements whenever they appear in this Quarterly Report on Form 10-Q.
Overview
We are a leading worldwide provider of automation and cryogenic solutions for multiple markets including semiconductor manufacturing and life sciences and are a valued business partner to original equipment manufacturers, or OEMs, and equipment users throughout the world. We serve markets where equipment productivity and availability is a critical factor for our customers’ success, typically in demanding temperature and/or pressure environments. Our largest served market is the semiconductor capital equipment industry. Shipments to these customers by our Brooks Product Solutions segment represented approximately 54% of our consolidated revenue for the first half of fiscal year 2015. The demand for semiconductors and semiconductor manufacturing equipment is cyclical, resulting in periodic expansions and contractions of this market. The non-semiconductor markets we serve include life sciences, industrial capital equipment and other adjacent technology markets.
We expect the semiconductor equipment market will continue to be a key end market for our products, and we continue to make investments to maintain and grow our semiconductor product and service offerings. We acquired Dynamic Micro Systems Semiconductor Equipment GmbH (“DMS”) in April 2014 for $31.6 million. DMS is a German-based provider of automated contamination control solutions for front opening unified pod, or FOUP, carriers and reticle storage, for improving yield of semiconductor processes at semiconductor fabrication plants. In October 2012, we acquired Crossing Automation, Inc. (“Crossing”), a U.S.-based provider of automation solutions and services for semiconductor front-end markets for $59.0 million. The acquisition of these businesses provides us with the opportunity to enhance our existing capabilities with respect to manufacturing of atmospheric and vacuum solutions within the semiconductor front-end market.
We also intend to continue the development and acquisition of technologies that create opportunities outside of the semiconductor market. In October 2014, we acquired FluidX Ltd. (“FluidX”), a UK based provider of biological sample storage tubes and complementary bench-top instruments for $15.5 million, net of cash acquired. In August 2013, we acquired certain assets and liabilities related to biological sample preparation, management and storage solutions from Matrical, Inc. (“Matrical”) for $9.3 million.
In March 2015, we entered into an agreement with Yaskawa Electric Corporation ("Yaskawa") to dissolve the Yaskawa Brooks Automation, Inc. ("YBA") joint venture, which since formed in 2006 exclusively marketed and sold Yaskawa’s semiconductor and robotics products and the Company’s automation hardware products to semiconductor customers in Japan. Our subsidiary in Japan purchased certain assets and liabilities of YBA for $1.8 million, and will market and sell our automation hardware in the Japanese market going forward.
In December 2014, we entered into an agreement to purchase five-year convertible debt securities with a warrant agreement to purchase preferred units from BioCision, a privately held company, for $2.5 million. We purchased additional securities and units in February 2015 for $2.5 million. A portion of the funding will be used to fund a research and development program in accordance with our commercial agreement with BioCision, the remainder will be used by BioCision for general corporate purposes. As of March 31, 2015, the convertible debt securities and stock warrants were recorded at fair value for $5.2 million and $70,000, respectively.
In September 2014, we acquired the remaining interest in the equity of our majority owned subsidiary, Brooks Automation Asia, Ltd. ("BAA") for $3.2 million. We have historically consolidated the financial position and results of operations from BAA and presented the portion of the income attributable to the minority shareholders in the Consolidated Statements of Operations. The acquisition of this additional interest has been accounted for as an equity transaction, and as a result, no additional assets or liabilities were recognized related to the additional interest acquired. We will no longer report a noncontrolling interest.
In March 2014, we entered into an agreement to sell the Granville-Phillips Gas Analysis & Vacuum Measurement, or Granville-Phillips, business unit to MKS Instruments, Inc. for $87.0 million in cash. We completed the sale on May 30, 2014. We recorded a pre-tax gain of $56.8 million and an after-tax gain of $26.9 million. The tax charge of $29.9 million on the gain is substantially non-cash as it is offset by our past net operating losses in the United States. Our historical financial statements have been revised to present the operating results of the Granville-Phillips business as a discontinued operation.
We report financial results in the following three segments:
The Brooks Product Solutions segment provides a variety of products and solutions that enable improved

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throughput and yield in controlled operating environments. Those products include atmospheric and vacuum robots, robotic modules, and tool automation systems that provide precision handling and clean wafer environments as well as cryogenic pumps and compressors that provide vacuum pumping and thermal management solutions used to create and control critical process vacuum applications.
The Brooks Global Services segment provides an extensive range of support services, including repair services, diagnostic support services, and installation services in support of the base equipment installed by our Brooks Product Solutions segment, which enable our customers to maximize process tool uptime and productivity. This segment also provides end-user customers with spare parts and productivity enhancement upgrades to maximize customer tool productivity.
The Brooks Life Science Systems segment provides automated cold sample management systems for compound and bio 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, national laboratories, research institutes and research universities.

Three and Six Months Ended March 31, 2015, Compared to Three and Six Months Ended March 31, 2014
Revenue
We reported revenue of $139.3 million for the three months ended March 31, 2015, compared to $125.9 million in the same prior year period, an increase of $13.4 million or 11%. We reported revenue of $262.0 million for the six months ended March 31, 2015, compared to $243.0 million in the same prior year period, an increase of $19.0 million or 8%. Our growth was driven by our Brooks Product Solutions and Brooks Life Science Systems segments as a result of acquisitions made in the last twelve months and from organic growth in selected product lines. The change in foreign currency exchange rates, compared to the same periods in the prior year, negatively impacted our revenue by $2.0 million and $3.2 million for the three and six months ended March 31, 2015, respectively.
Our Brooks Product Solutions segment reported revenue of $99.0 million for the three months ended March 31, 2015, an increase of 10% from $89.9 million in the same prior year period. This segment reported revenue of $181.8 million for the six months ended March 31, 2015, an increase of 6% from $171.5 million in the same prior year period. The revenue growth was attributable to sales in our DMS business, acquired in April 2014, and from growth in certain product lines including vacuum robots and fab solution products. This growth was partially offset by a decline in vacuum systems and atmospheric robots. Revenue from DMS contributed $9.0 million and $16.1 million for the three and six months ended March 31, 2015, respectively. DMS sales have generated increasing revenue in each sequential quarter since the acquisition. Foreign currency exchange rates negatively impacted revenue by $0.6 million and $1.0 million for the three and six months ended March 31, 2015, respectively.
Our Brooks Global Services segment reported revenue of $22.8 million for the three months ended March 31, 2015, a decrease of 2% from $23.4 million in the same prior year period. This segment reported revenue of $46.0 million for the six months ended March 31, 2015, a decrease of 1% from $46.7 million in the same prior year period. The decline was primarily attributable to the impact of foreign currency exchange rates. Foreign currency exchange rates negatively impacted revenue by $0.9 million and $1.5 million for the three and six months ended March 31, 2015, respectively.
Our Brooks Life Science Systems segment reported revenue of $17.5 million for the three months ended March 31, 2015, an increase of 39% from $12.6 million in the same prior year period. This segment reported revenue of $34.2 million for the six months ended March 31, 2015, an increase of 38%, from $24.8 million in the same prior year period. The revenue growth was attributable to sales in our FluidX business, acquired in October 2014, and organic growth in automated sample stores. Revenue from FluidX was $3.8 million and $7.4 million for the three and six months ended March 31, 2015, respectively. Foreign currency exchange rates negatively impacted revenue by $0.5 million and $0.7 million for the three and six months ended March 31, 2015, respectively.
Gross Margin
We reported gross margins of 33.0% for the three months ended March 31, 2015, compared to 35.2% for the same prior year period. Our gross margins were 32.5% for the six months ended March 31, 2015, compared to 35.1% for the same prior year period. The decrease in the three month results is attributable to a decline in margins in the Brooks Product Solutions segment, the Brooks Global Solutions segment and the Brooks Life Science Systems segment. The decline in the six month results is attributable to reduced margins in the Brooks Product Solutions segment and the Brooks Life Science Systems segment, partially offset by improvements in gross margins in the Brooks Global Services segment. Gross margin for the three and six months ended March 31, 2015 included $0.0 and $1.5 million of charges, respectively, related to the sale of inventories obtained in acquisitions to which a step-up in value was applied in our purchase accounting compared to $0.1 million and $0.4 million of charges for the three and six months ended March 31, 2014, respectively.

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Our Brooks Product Solutions segment reported gross margins of 34.4% for the three months ended March 31, 2015, as compared to 35.6% in the same prior year period and 33.5% for the six months ended March 31, 2015, as compared to 35.3% in the same prior year period. These decreases were primarily attributable to an increase in warranty costs and an unfavorable impact from product line mix. The six month period ended was also impacted by temporary operational transition costs incurred in the first quarter as we transitioned our Polycold product lines to contract manufacturing. Cost included $0.0 and $0.6 million of charges for the three and six months ended March 31, 2015, respectively, related to the sale of inventories obtained in acquisitions to which a step-up in value was applied in our purchase accounting. The prior period results did not include acquisition related charges.
Our Brooks Global Services segment reported gross margins of 30.8% for the three months ended March 31, 2015, as compared to 32.8% in the same prior year period. Our Brooks Global Services segment gross margins were 33.7% for the six months ended March 31, 2015, as compared to 33.2% in the same prior year period. The decrease in gross margins for the three months ended March 31, 2015 was primarily attributable to an unfavorable mix of repair services and higher consumption of materials, partially offset by improved utilization of our field service organization. The increase in gross margins for the six months ended March 31, 2015 was primarily a result of improved utilization of our field service organization.
Our Brooks Life Science Systems segment reported gross margins of 28.5% for the three months ended March 31, 2015 as compared to 37.0% in the same prior year period. Our Brooks Life Science Systems segment gross margins were 25.4% for the six months ended March 31, 2015 as compared to 37.2% in the same prior year period. The decline in margins, for the three and six month periods, was driven by the continuation of certain project cost overruns in our storage systems business which we experienced during the first quarter of fiscal year 2015 and are accounted for on a percentage of completion basis. The increase in costs was primarily due to shortfalls in our materials and resource planning process, which led to premium installation and freight costs in order to meet customer commitments. An additional contributing factor driving lower margins