Acquisitions | 5. Acquisitions Acquisition Completed in Fiscal Year 2020 Acquisition of RURO Inc. On February 11, 2020, the Company acquired RURO, Inc. (“RURO”), an informatics software company based in Frederick, Maryland. RURO provides cloud-based software solutions to manage laboratory workflow and bio-sample data for a broad range of customers in the biotech, healthcare, and pharmaceutical sectors. The addition of RURO's capabilities and offerings will enable the Company to offer enhanced on-site and off-site management of biological sample inventories as well as integration solutions to its customers for their increasingly distributed workflow. The total cash purchase price of the acquisition was $15.6 million, net of cash acquired. The Company recorded the assets acquired and liabilities assumed related to RURO at their fair values as of the acquisition date, from a market participant’s perspective. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed on the acquisition date, its estimates and assumptions are subject to refinement. The finalization of the assignment of fair values will be completed within one year. Fair Value of Assets and Liabilities Accounts receivable $ 1,220 Prepaid expenses and other current assets 29 Goodwill 11,116 Intangible assets 6,042 Other assets 230 Accounts payable (15) Deferred revenue (1,320) Accrued compensation and benefits (344) Other current liabilities (91) Long-term deferred tax liabilities (1,091) Long-term operating lease liabilities (147) Total purchase price, net of cash acquired $ 15,629 The Company applied variations of the income approach to estimate the fair values of the intangible assets acquired. The identifiable intangible assets include customer relationships (excess earnings method) of $2.9 million with a useful life of 12 years , technology (relief from royalty method) of $2.9 million with a useful live of 9 years and trademarks (relief from royalty method) of $0.2 million with a useful life of 5 years . The intangible assets acquired are amortized over the total weighted average period of 10.6 years using methods that approximate the pattern in which the economic benefits are expected to be realized. Goodwill of $11.1 million largely reflects the potential synergies and expansion of the Company’s core technologies and offerings in the Life Sciences business. The goodwill from this acquisition is not tax deductible. The Company reports the results of operations for RURO in the Brooks Life Science segment starting from the acquisition date. The revenues and net income from RURO recognized in the Company's consolidated results of operations were $1.9 million and $0.5 million, respectively, for the three months ended June 30, 2020. The revenues and net income from RURO recognized in the Company's consolidated results of operations were $2.3 million and $0.4 million, respectively, for the period between the acquisition date and June 30, 2020. During three months ended June 30, 2020 and the period between the acquisition date and June 30, 2020, the amortization expense of acquired intangible assets was $0.1 million and $0.2 million, respectively. During three months ended June 30, 2020 and the period between the acquisition date and June 30, 2020, the Company incurred less than $0.1 million and $0.2 million, respectively, in transaction costs, which were recorded in "Selling, general and administrative" expenses within the accompanying unaudited Consolidated Statements of Operations. The Company did not present a pro forma information summary for its consolidated results of operations because such results were immaterial. Acquisition Completed in Fiscal Year 2019 Acquisition of the GENEWIZ Group On November 15, 2018, the Company acquired all the outstanding capital stock of GENEWIZ Group (“GENEWIZ”), a leading global genomics service provider headquartered in South Plainfield, New Jersey. GENEWIZ provides genomics services that enable research scientists to advance their discoveries within the pharmaceutical, academic, biotechnology, agriculture and other markets. It provides gene sequencing and synthesis services for more than 4,000 institutional customers worldwide supported by their global network of laboratories spanning the United States, China, Japan, Germany and the United Kingdom. This transaction has added a new and innovative platform which further enhances the Company’s core capabilities, and added even more value to samples that are under the Company’s care. The total cash purchase price for the acquisition was $442.7 million, net of cash acquired, which included a working capital settlement of $0.4 million. The Company used the proceeds of the incremental term loan described in Note 8, “Debt” to pay a portion of the purchase price. On the acquisition date, the Company paid $32.3 million to escrow accounts related to the satisfaction of the seller's indemnification obligations with respect to their representations and warranties and other indemnities. The Company also retained an amount equal to $1.5 million as collateral for any adjustment shortfall based on the final merger consideration calculation. During the fiscal year 2019, the final merger consideration was calculated to be $4.0 million less than the merger consideration paid at closing. To satisfy the shortfall, the Company reversed the $1.5 million liability associated with the holdback, received approval from the former shareholders to retain $0.7 million of funds the Company received on their behalf, and collected $1.8 million from the escrow accounts. The Company recorded the assets acquired and liabilities assumed related to GENEWIZ at their fair values as of the acquisition date, from a market participant’s perspective. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. The following table presents the net purchase price and the fair values of the assets and liabilities of GENEWIZ (in thousands): Fair Value of Assets and Liabilities Accounts receivable $ 28,566 Inventories 4,370 Prepaid expenses and other current assets 11,635 Property, plant and equipment 36,379 Goodwill 235,160 Intangible assets 189,129 Other assets 15,998 Current portion of long-term debt (3,170) Accounts payable (6,522) Deferred revenue (67) Accrued compensation and benefits (5,145) Other current liabilities (10,073) Long-term debt (2,482) Long-term tax reserves (13,400) Long-term deferred tax liabilities (34,993) Other long-term liabilities (2,681) Total purchase price, net of cash acquired $ 442,704 The Company applied variations of the income approach to estimate the fair values of the intangible assets acquired. The identifiable intangible assets include customer relationships (excess earnings method) of $125.5 million with a useful life of 14 years , completed technology (relief from royalty method) of $44.5 million with useful lives from 10 to 15 years and trademarks (relief from royalty method) of $19.1 million with a useful life of 13 years . The intangible assets acquired are amortized over the total weighted average period of 13.3 years using methods that approximate the pattern in which the economic benefits are expected to be realized. Goodwill of $235.2 million largely reflects the potential synergies and expansion of the Company’s core technologies and offerings in the Life Sciences business. The goodwill from this acquisition is reported within the Brooks Life Sciences segment and is not The revenues and net income from GENEWIZ recognized in the Company's consolidated results of operations were $37.3 million and $0.5 million, respectively, for the three months ended June 30, 2020. The revenues and net loss from GENEWIZ recognized in the Company's consolidated results of operations were $37.1 million and $2.4 million, respectively, for the three months ended June 30, 2019. During the three months ended June 30, 2020, and the comparable reporting period in fiscal year 2019, net income/loss included $5.1 million and $3.3 million, respectively, related to amortization expense of acquired intangible assets. The revenues and net income from GENEWIZ recognized in the Company's consolidated results of operations were $118.3 million and $1.5 million, respectively, for the nine months ended June 30, 2020. The revenues and net income from GENEWIZ recognized in the Company’s consolidated results of operations were $86.3 million and $3.0 million, respectively, during the period from the acquisition date to June 30, 2019. During the nine months ended June 30, 2020 and the comparable reporting period since the acquisition in fiscal year 2019, net income included $15.2 million and $8.2 million, respectively, related to amortization expense of acquired intangible assets. During the three months ended June 30, 2019 and the period from the acquisition date to June 30, 2019, the Company incurred $0.1 million and $6.4 million, respectively, in transaction costs, which were recorded in "Selling, general and administrative" expenses within the accompanying unaudited Consolidated Statements of Operations. During both the three and nine months ended June 30, 2020, the Company incurred less than $0.1 million in transaction costs, which were recorded in "Selling, general and administrative" expenses within the accompanying unaudited Consolidated Statements of Operations. The following unaudited pro forma information reflects the Company’s consolidated results of operations as if the acquisition had taken place on October 1, 2017. The unaudited pro forma information is not necessarily indicative of the results of operations that the Company would have reported had the transaction actually occurred at the beginning of these periods nor is it necessarily indicative of future results. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, including, but not limited to, anticipated costs savings from synergies or other operational improvements (in thousands). The pro forma amounts in the below table were adjusted to reflect a correction made during the 2019 fiscal year, see the 2019 Annual Report on Form 10-K Note 4, “Acquisitions” for further information. Three Months Ended Nine Months Ended June 30, 2019 June 30, 2019 Revenue $ 203,880 $ 598,291 Net income from continuing operations 976 5,062 The unaudited pro forma financial information presented in the table above includes adjustments for the application of the Company’s accounting policies, elimination of related party transactions, depreciation and amortization related to fair value adjustments to property, plant and equipment and intangible assets, and transaction costs, and interest expense on acquisition related debt. To present the Company’s consolidated results of operations as if the acquisition had taken place on October 1, 2017, the unaudited pro forma earnings for the three months ended June 30, 2019 has been adjusted to exclude $0.1 million non-recurring transaction cost. Th e unaudited pro forma earnings for the nine months ended June 30, 2019 has been adjusted to include $1.6 million property, plant, and equipment, leases, and intangible asset step-up depreciation and amortization expense and $2.0 million interest expense related to financing activities and to exclude $42.3 million non-recurring compensation expenses and transaction costs. |