The Management's Discussion and Analysis of Financial Condition and Results of
Operations, or MD&A, describes principal factors affecting the results of our
operations, financial condition and liquidity as well as our critical accounting
policies and estimates that require significant judgment and thus have the most
significant potential impact on our unaudited consolidated financial statements
included elsewhere in this Quarterly Report on Form 10-Q. Our MD&A is organized
as follows:
Overview. This section provides a general description of our business and
? operating segments as well as a brief discussion and overall analysis of our
business and financial performance, including key developments affecting the
Company during the three and nine months ended June 30, 2020 and 2019.
Critical Accounting Policies and Estimates. This section discusses accounting
policies and estimates that require us to exercise subjective or complex
? judgments in their application. We believe these accounting policies and
estimates are important to understanding the assumptions and judgments
incorporated in our reported financial results.
Results of Operations. This section provides an analysis of our financial
? results for the three and nine months ended June 30, 2020 compared to the three
and nine months ended June 30, 2019.
Liquidity and Capital Resources. This section provides an analysis of our
? liquidity and changes in cash flows as well as a discussion of available
borrowings and contractual commitments.
You should read the MD&A in conjunction with our unaudited consolidated
financial statements and related notes included elsewhere in this Quarterly
Report on Form 10-Q. In addition to historical information, the MD&A contains
forward-looking statements that involve risks and uncertainties. You should read
"Information Related to Forward-Looking Statements" below for a discussion of
important factors that could cause our actual results to differ materially from
our expectations.
In the fourth quarter of fiscal year 2018, we entered into a definitive
agreement to sell our semiconductor cryogenics business to Edwards Vacuum LLC (a
member of the Atlas Copco Group) for approximately $675.0 million in cash
subject to customary adjustments. We originally acquired the semiconductor
cryogenics business in 2005 as part of the acquisition of Helix Technology
Corporation. On July 1, 2019, we completed the sale of the semiconductor
cryogenics business for $675.0 million in cash, subject to adjustments for
working capital and other items. As part of this sale, we transferred our
intellectual property, or IP, for our cryogenics pump products, but not our IP
related to our semiconductor automation or life sciences businesses. The
semiconductor cryogenics business has been classified as discontinued operations
and, unless otherwise noted, the description of our business and the results of
operations in this MD&A relates solely to our continuing operations and does not
include the operations of the semiconductor cryogenics business.
Impact of the COVID-19 Pandemic
During the COVID-19 pandemic, our facilities have remained operational with only
required personnel on site, and the balance of employees working from home.
Both business segments fall within the classification of "Essential Critical
Infrastructure Sector" as defined by the U.S. Department of Homeland Security
and have continued operations during the COVID-19 pandemic. We have followed
government guidance in each region and have implemented Centers for Disease
Control and Prevention social distancing guidelines and other best practices to
protect the health and safety of our employees. In the Life Sciences business,
our operations are accepting customer orders for all of their offerings and are
fast tracking customer requests which support research and development and
testing related to the COVID-19 virus. The Semiconductor Solutions business
continues to supply critical chip manufacturing equipment and support services
globally. The COVID-19 pandemic has not had a substantial impact on our
financial results and a portion of this impact has been mitigated by our
realignment of resources to satisfy incremental orders related to virus
research. Future impacts on the Company's financial results will depend on
multiple variables which are not fully determinable, as the full impact of the
pandemic on the economy and markets which we serve is as yet unknown. The
variables are many,
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but fundamentally include reduced demand from the Company's customers, the
degree that the supply chain may be constrained to impact the Company's delivery
of product, the potential impact to our operations if there is a significant
outbreak among our employees, as well as the amount of incremental demand caused
by research and treatments in the areas of COVID-19 or related threats.
Information Related to 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, or the Exchange Act. 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, margins,
costs, earnings, profitability, product development, demand, acceptance and
market share, competitiveness, market opportunities and performance, levels of
research and development, the success of our marketing, sales and service
efforts, outsourced activities, operating expenses, anticipated manufacturing,
customer and technical requirements, the ongoing viability of the solutions that
we offer and our customers' success, tax expenses, our management's plans and
objectives for our current and future operations and business focus, the impact
of the COVID-19 pandemic, the expected benefits and other statements relating to
our divestitures and acquisitions, the material weaknesses identified in our
internal control over financial reporting, including the impact thereof and our
remediation plan, our adoption of the newly issued accounting guidance, the
levels of customer spending, general economic conditions, the sufficiency of
financial resources to support future operations, and capital expenditures. Such
statements are based on current expectations and 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 Annual Report on
Form 10-K for the fiscal year ended September 30, 2019, or the 2019 Annual
Report on Form 10-K , and which are incorporated herein by reference, as
updated and/or supplemented in subsequent filings with the U.S. Securities and
Exchange Commission, or SEC. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date hereof and
are based on information currently and reasonably known to us. We do not
undertake any obligation to release revisions to these forward-looking
statements, 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 2019 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.
Unless the context indicates otherwise, references in this Quarterly Report on
Form 10-Q to "we", "us", "our" and "the Company" refer to Brooks
Automation, Inc. and its subsidiaries.
OVERVIEW
We are a leading provider of semiconductor manufacturing automation solutions
and life science sample-based services and solutions worldwide. In the
semiconductor manufacturing market, we have been a provider of precision
robotics, integrated automation systems and services for more than 40 years. In
the life sciences market, we apply our automation and cryogenics expertise to
offer a full suite of sample-based services and products, including a full line
of cold chain management solutions for handling and storing biological and
chemical compound samples used in areas such as drug development, clinical
research and advanced cell therapies. We are also a global provider of gene
sequencing and gene synthesis services. We believe our leadership positions and
our global support capability in each of these markets make us a valued business
partner to the largest semiconductor capital equipment device makers, and
pharmaceutical and life science research institutions in the world. In total, we
employ approximately 3,000 full-time employees worldwide and have sales in more
than 50 countries. We are headquartered in Chelmsford, Massachusetts and have
operations in North America, Asia, and Europe.
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In the semiconductor capital equipment market, equipment productivity and
availability are critical factors for our customers, who typically operate
equipment under demanding temperature and/or pressure environments. We are a
leader in wafer handling automation and contamination controls solutions and
services that are designed to improve throughput, yield, and cost of ownership
of tools in semiconductor fabs. Our product offerings include vacuum and
atmospheric robots, turnkey vacuum and atmospheric wafer handling systems, as
well as wafer carrier cleaning and reticle storage systems. We also capture the
complete life cycle of value through our global service network of expert
application and field engineers who are located close to our customers. Our
services include rapid refurbishment of robots to stringent specifications,
upgrades to improve equipment productivity, and proactive monitoring and
diagnostics for predictive risk management and improved up-time of the installed
base. Although the demand for semiconductors and semiconductor manufacturing
equipment is cyclical, resulting in periodic expansions and contractions, we
expect the semiconductor equipment market to remain one of our principal markets
as we continue making investments to maintain and grow our semiconductor product
and service offerings. A majority of our research and development spending
advances our current product lines and drives innovations for new product
offerings. We invest in research and development initiatives within the Brooks
Semiconductor Solutions Group segment to maintain continued leadership position
in the markets we serve. We launched our newest Vacuum Automation platform,
MagnaTran LEAP™, for the rapidly emerging advanced technologies related to
manufacturing 10 nanometer and below design rule semiconductor chips. MagnaTran
LEAP™ is well positioned to deliver clean, accurate and fast wafer transport for
the fast-growing Deposition and Etch markets. In addition, we expect to continue
to support and expand our technology and product offerings for the semiconductor
market through acquisitions. In fiscal year 2018, we acquired Tec-Sem Group AG,
or Tec-Sem, a Switzerland-based provider of semiconductor fabrication automation
equipment with a focus on reticle management. The acquisition has enhanced our
contamination controls solutions offerings.
In the life sciences sample management market, we utilize our core technology
competencies and capabilities in automation and cryogenics to provide
comprehensive bio-sample management solutions to a broad range of end markets
within the life sciences industry. Our offerings include automated ultra-cold
storage freezers, consumable sample storage containers, instruments which assist
in the workflow of sample management, and both on-site and off-site full sample
management services. We expect the life sciences sample management market to
remain one of our principal markets for our product and service offerings and
provide favorable opportunities for the growth of our overall business. Over the
past several years, we have acquired and developed essential capabilities
required to strategically address the sample management needs across multiple
end markets within the life sciences industry. In October 2017, we acquired all
of the outstanding capital stock of 4titude Limited, or 4titude, a U.K.-based
manufacturer of scientific consumables for biological sample materials used in a
variety of genomic and DNA analytical applications. The acquisition has expanded
our existing offerings of consumables and instruments within the Brooks Life
Sciences segment. In April 2018, we acquired BioSpeciMan Corporation, a Canadian
provider of storage services for biological sample materials. The acquisition
has expanded customer relationships and geographic reach within our growing
sample management storage services business. On November 15, 2018, we acquired
GENEWIZ Group, or GENEWIZ, a leading global genomics service provider
headquartered in South Plainfield, New Jersey. GENEWIZ is a global leader in
genomics services that enable research scientists to advance their discoveries
within the pharmaceutical, academic, biotechnology, agriculture and other
markets. GENEWIZ provides gene sequencing and synthesis services for more than
4,000 institutional customers worldwide supported by their global network of
laboratories spanning the United States, China, Japan, Germany, France and the
United Kingdom. This transaction has added a new and innovative platform which
we expect to leverage, along with our core capabilities, to add even more value
to samples under our care. Please refer to Note 4, "Acquisitions" to the
Company's consolidated financial statements included in the 2019 Annual Report
on Form 10-K for further information on these transactions. On February 11,
2020, we acquired RURO, Inc. or RURO, a laboratory software company based in
Frederick, Maryland. The acquisition will enable us to offer enhanced onsite and
off-site management of biological sample inventories as well as integration
solutions to our customers. Since entering the life sciences industry, we have
also strengthened and broadened our product portfolio and market reach by
investing in internal product development and sales and marketing
infrastructure. We expect to continue investing in research and development and
making strategic acquisitions and other investments with the objective of
expanding our offerings in the life sciences sample management market.
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Business and Financial Performance
Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019
Results of Operations - Revenue for the three months ended June 30, 2020
increased 8% to $220.4 million, as compared to the corresponding period of the
prior fiscal year. Gross margin was 42.1% for the three months ended June 30,
2020, as compared to 41.0% for the corresponding period of the prior
fiscal year, an increase in gross profit of $9.3 million. Operating expenses
were $73.7 million during the three months ended June 30, 2020, as compared to
$67.1 million during the corresponding period of the prior fiscal year, an
increase of $6.6 million. Operating income was $19.1 million during the third
quarter of fiscal year 2020, as compared to $16.4 million for the corresponding
period of the prior fiscal year. Income from continuing operations was $13.7
million for the third quarter of fiscal year 2020, as compared to $0.9 million
for the corresponding period of the prior fiscal year.
Nine Months Ended June 30, 2020 Compared to Nine Months Ended June 30, 2019
Results of Operations - Revenue for the nine months ended June 30, 2020
increased by 12% to $651.1 million, as compared to the corresponding period of
the prior fiscal year. Gross margin was 41.2% for the nine months ended June 30,
2020, as compared to 40.6% for the corresponding period of the prior
fiscal year, an increase in gross profit of $31.9 million. Operating expenses
were $223.7 million during the nine months ended June 30, 2020, as compared to
$200.7 million during the corresponding period of the prior fiscal year, an
increase of $23.0 million. Operating income was $44.3 million during the nine
months ended June 30, 2020, as compared to $35.4 million for the corresponding
period of the prior fiscal year. Income from continuing operations was $36.1
million for the nine months ended June 30, 2020, as compared to $4.4 million for
the corresponding period of the prior fiscal year. The prior year fiscal period
included a loss on extinguishment of debt of $9.1 million.
June 30, 2020 Compared to September 30, 2019
Cash Flows and Liquidity - Cash, cash equivalents, restricted cash and
marketable securities were $263.3 million at June 30, 2020, as compared to
$342.1 million at September 30, 2019. The decrease of $78.9 million from
September 30, 2019 was comprised of cash outflows of $13.9 million from
operating activities, $29.7 million for capital expenditures, $15.7 million for
acquisitions, and $22.1 million for dividends. Cash outflows from operating
activities was comprised of $91.5 million of cash taxes paid for the gain on the
sale of the semiconductor cryogenics business and $12.1 million uses of cash
from the changes in operating assets and liabilities, partially offset by $89.6
million of earnings, comprised of $35.9 million of net income and $53.7 million
of adjustments to net income for non-cash items.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our unaudited consolidated financial statements are prepared in accordance with
Generally Accepted Accounting Principles, or GAAP. The preparation of the
interim consolidated financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates, including those related to revenue,
intangible assets, goodwill, inventories, income taxes, and stock-based
compensation. We base our estimates on historical experience and various other
assumptions that are believed to be reasonable under the circumstances. We
evaluate current and anticipated worldwide economic conditions, both in general
and specifically in relation to the semiconductor and life science industries,
that serve as a basis for making judgments about the carrying values of assets
and liabilities that are not readily determinable based on information from
other sources. Actual results may differ from these estimates under different
assumptions or conditions that could have a material impact on our financial
condition and results of operations.
For further information with regard to our significant accounting policies and
estimates, please refer to Note 2, "Summary of Significant Accounting Policies"
in the Notes to the unaudited consolidated financial statements included in
Item 1 "Consolidated Financial Statements" of this Quarterly Report on Form 10-Q
and in the Notes to our audited consolidated financial statements included in
Part II, Item 8 "Financial Statements and Supplementary Data" in our 2019 Annual
Report on Form 10-K.
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Recently Issued Accounting Pronouncements
For a summary of recently issued accounting pronouncements applicable to our
unaudited consolidated financial statements, please refer to Note 2, "Summary of
Significant Accounting Policies" in the Notes to the unaudited consolidated
financial statements included in Item 1 "Consolidated Financial Statements" of
this Quarterly Report on Form 10-Q.
RESULTS OF OPERATIONS
Three and Nine Months Ended June 30, 2020 Compared to Three and Nine Months
Ended June 30, 2019
Revenue
We reported revenue of $220.4 million for the three months ended June 30, 2020,
as compared to $203.9 million for the corresponding period of the prior
fiscal year, an increase of $16.5 million, or 8%. We reported revenue of $651.1
million for the nine months ended June 30, 2020, as compared to $581.6 million
for the corresponding period of the prior fiscal year, an increase of $69.4
million, or 12%. The COVID-19 pandemic has had varying impacts on our business
for the three and nine months ended June 30, 2020. Further discussion of the
impacts by each segment are discussed in the paragraphs below.
Our Brooks Semiconductor Solutions Group segment reported revenue of $127.1
million for the three months ended June 30, 2020, compared to $116.0 million for
the corresponding period of the prior fiscal year, an increase of $11.0 million,
or 9%. We reported increases in contamination control solutions revenue of $6.2
million, automation revenue of $4.2 million, and services revenue of $0.6
million. For the nine months ended June 30, 2020, our Brooks Semiconductor
Solutions Group segment reported revenue of $370.8 million, as compared to
$341.6 million for the corresponding period of the prior fiscal year, an
increase of $29.2 million, or 9%. We reported increases in contamination control
solutions revenue of $38.0 million and services revenue of $0.1 million,
partially offset by a decrease in automation revenue of $8.9 million. The
decrease in automation revenue is driven by lower systems revenue partially
offset by higher vacuum robot revenue. The semiconductor markets are cyclical
and may fluctuate significantly from quarter to quarter. Demand for our Brooks
Semiconductor Solutions Group products and services is affected by these cycles
and a prolonged effect of the COVID-19 pandemic could negatively impact demand
for our products and services in this segment. To date, we have experienced some
disruption in our supply chain as a result of the COVID-19 pandemic, which has
constrained our ability to ship some of the orders in our backlog. However, we
do not believe that COVID-19 pandemic has impacted our bookings or demand for
our products.
Our Brooks Life Sciences segment reported revenue of $93.3 million for the
three months ended June 30, 2020, as compared to $87.8 million for the
corresponding period of the prior fiscal year, an increase of $5.5 million, or
6%. We reported increases in Life Sciences Products revenue of $2.4 million,
driven by higher sales of consumables and instruments, which delivered record
revenue levels driven by COVID-19 related demand, partially offset by lower
automation systems revenue, which experienced schedule delays in the
installation of large stores due to COVID-19. We reported increases in Sample
Repository Solutions revenue of $2.8 million primarily driven by informatics
revenue and genomic services. Informatics revenue included $1.9 million from
product lines that we acquired in February 2020 in connection with the purchase
of RURO in February 2020. We reported increases in GENEWIZ revenue of $0.2
million driven by higher gene synthesis services, partially offset by lower
Sanger sequencing revenue, which was impacted by academic and institutional
delays in non-essential research projects. For the nine months ended June 30,
2020, our Brooks Life Sciences segment reported revenue of $280.3 million, as
compared to $240.0 million for the corresponding period of the prior fiscal
year, an increase of $40.3 million or 17%. We reported increases of $31.9
million from GENEWIZ, which is composed of $20.0 million of revenue from the
additional months of ownership for the nine months ended June 30, 2020, compared
to the nine months ended June 30, 2019, and $11.9 million from organic growth.
Revenue from our Life Sciences Products business increased $4.2 million, driven
by consumables and instruments and B3 cryo systems, offset by a decline in
automated systems due to COVID-19 related delays in store installations as noted
above. We reported increases in Sample Repository Services revenue of $3.8
million. The increase was primarily driven by Informatics, which included $2.3
million of revenue from product lines acquired in connection with the purchase
of RURO in February 2020, storage revenue, and genomic services. The increases
were offset by
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declines in transportation revenue. We estimated the impact of the COVID-19
pandemic on our revenue for the three and nine months ended June 30, 2020, were
net reductions of revenue of approximately $11 million and $14 million,
respectively. The impact of the COVID-19 pandemic on our revenue is primarily
attributable to a slow-down in the marketplace, reflecting the absence of a
portion of the workforces within our customers. This slow-down was first
present in the China market in the early part of the second quarter ended March
31, 2020 and began surfacing in the rest of the world in the latter part of
March 2020. Partially offsetting these declines, we have experienced an
increase in demand for gene synthesis services and consumables and instruments,
in support of numerous activities including research and development in the
areas of virus detection and vaccines.
Revenue generated outside the United States was $141.3 million, or 64% of total
revenue, for the three months ended June 30, 2020, as compared to $115.7
million, or 57% of total revenue, for the corresponding period of the prior
fiscal year. Revenue generated outside the United States was $407.2 million, or
63% of total revenue, for the nine months ended June 30, 2020, as compared to
$342.4 million, or 59% of total revenue, for the corresponding period of the
prior fiscal year. We had one customer that accounted for more than 10% of our
consolidated revenue for the nine months ended June 30, 2020. We had no customer
that accounted for more than 10% of our consolidated revenue for the three
months ended June 30, 2020. We had no customer that accounted for more than 10%
of our consolidated revenue in either of the three and nine months ended June
30, 2019.
Operating Income
We reported operating income of $19.1 million for the three months ended June
30, 2020, as compared to $16.4 million for the three months ended June 30, 2019.
The increase of 16% was driven by higher gross profit of $9.3 million, partially
offset by an increase in operating expenses of $6.6 million. Within operating
expenses, selling, general, and administrative expenses increased $7.1 million
while research and development expenses and restructuring expenses decreased
$0.2 million and $0.3 million, respectively. During the nine months ended June
30, 2020, we reported operating income of $44.3 million, as compared to $35.4
million for the corresponding period of the prior fiscal year. The increase of
25% was driven by higher gross profit of $31.9 million, partially offset by an
increase in operating expenses of $23.0 million. Within operating expenses,
selling, general, and administrative expenses increased $20.4 million, research
and development expenses increased $2.2 million and restructuring expenses
decreased $0.3 million. The drivers of the changes in gross profit, research and
development, and selling, general and administrative expenses for the periods
presented are discussed in further detail below.
Operating income for our Brooks Semiconductor Solutions Group segment was $22.7
million for the three months ended June 30, 2020, as compared to $19.3 million
for the corresponding period of the prior fiscal year. Operating income for the
three months ended June 30, 2020 included $0.7 million of charges for
amortization related to completed technology, as compared to $0.9 million
incurred during the corresponding period of the prior fiscal year. Adjusted
operating income for our Brooks Semiconductor Solutions Group segment, which
excludes the charges mentioned above, was $23.4 million for the three months
ended June 30, 2020, as compared to $20.2 million for the corresponding period
of the prior fiscal year. Operating income for our Brooks Semiconductor
Solutions Group segment was $52.9 million for the nine months ended June 30,
2020, as compared to $53.5 million for the corresponding period of prior fiscal
year. Operating income for the nine months ended June 30, 2020 included $2.2
million of charges for amortization related to completed technology, as compared
to $2.7 million incurred during the corresponding period of the prior fiscal
year. The nine months ended June 30, 2019 also includes inventory step-up
charges of $0.2 million. Adjusted operating income for our Brooks Semiconductor
Solutions Group segment, which excludes the charges mentioned above, was $55.1
million for the nine months ended June 30, 2020, compared to $56.4 million for
the corresponding period of the prior fiscal year. Please refer to Note 15,
"Segment Information".
Operating income for our Brooks Life Sciences segment was $4.2 million for the
three months ended June 30, 2020, as compared to $4.2 million for the
corresponding period of the prior fiscal year. Operating income for our Brooks
Life Sciences segment includes charges for amortization related to completed
technology of $2.1 million and $2.0 million for the three months ended June 30,
2020 and 2019, respectively. Adjusted operating income for our Brooks Life
Sciences segment, which excludes the charges mentioned above, was $6.6 million
for the three months ended June 30, 2020, as compared to $6.2 million for the
corresponding period of the prior fiscal year. During the nine months ended June
30, 2020, operating income for our Brooks Life Sciences segment was $14.4
million, as compared to $8.9 million for the
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corresponding period of the prior fiscal year. Operating income for our Brooks
Life Sciences segment includes charges for amortization related to completed
technology of $6.3 million and $4.9 million for the nine months ended June 30,
2020 and 2019, respectively. Adjusted operating income for our Brooks Life
Sciences segment, which excludes the charges mentioned above, was $20.7 million
for the nine months ended June 30, 2020, as compared to $13.9 million the
corresponding period of the prior fiscal year. Please refer to Note 15, "Segment
Information". We estimate that the impact of the COVID-19 pandemic on the Brooks
Life Sciences operating income was a net reduction of approximately $6 million
and $8 million, respectively, during the three and nine months ended June 30,
2020. The reduction was primarily driven by the net revenue impacts to the Life
Sciences segment noted above and temporary premiums we elected to pay our
labor-force that worked at our sites around the world. Offsetting these impacts
were government subsidies that we received in China related to rent and payroll
benefits, as well as, lower expenses related to travel and trade shows.
Gross Margin
We reported gross margins of 42.1% for the three months ended June 30, 2020, as
compared to 41.0% for the corresponding period of the prior fiscal year. Gross
margin increased in the Brooks Life Sciences segment by 1.1 percentage points
and in the Brooks Semiconductor Solutions Group segment by 1.2 percentage points
for the third quarter of fiscal year 2020, as compared to the corresponding
period of the prior fiscal year. Cost of revenue for the three months ended June
30, 2020, included $2.8 million of charges related to amortization of completed
technology, as compared to $2.9 million during the corresponding period of the
prior fiscal year, and $0.3 million of restructuring related charges for the
impairment of software assets. Excluding these charges, margins expanded 1.1
percentage point during the three months ended June 30, 2020, as compared to the
corresponding period of the prior fiscal year. During the nine months ended June
30, 2020, we reported gross margins of 41.2%, as compared to 40.6% for the
corresponding period of the prior fiscal year. Gross margin increased in the
Brooks Life Sciences segment by 2.4 percentage points and decreased in the
Brooks Semiconductor Solutions Group segment by 0.8 percentage points in the
nine months ended June 30, 2020, as compared to the corresponding period of the
prior fiscal year. Cost of revenue for the nine months ended June 30, 2020,
included $8.2 million of charges related to amortization of completed
technology, as compared to $7.7 million during the corresponding period of the
prior fiscal year, and $0.3 million of restructuring related charges for the
impairment of software assets. The results for the nine months ended June 30,
2019 included $0.2 million of charges related to the inventory step-up in
purchase accounting. Excluding the amortization of completed technology, the
restructuring related charges and inventory step-up charges, margins expanded
0.5 percentage points during the nine months ended June 30, 2020, as compared to
the corresponding period of the prior fiscal year.
Our Brooks Semiconductor Solutions Group segment reported gross margins of 42.1%
for the three months ended June 30, 2020, as compared to 40.9% for the
corresponding period of the prior fiscal year. The increase of 1.2 percentage
points was driven by volume leverage and lower warranty costs, partially offset
by unfavorable product mix. Cost of revenue for the three months ended June 30,
2020 included $0.7 million of charges for amortization related to completed
technology, as compared to $0.9 million incurred during the corresponding period
of the prior fiscal year. Excluding the impact of the amortization of completed
technology, gross margins declined 1.0 percentage points during the three months
ended June 30, 2020, as compared to the corresponding period of the prior fiscal
year. During the nine months ended June 30, 2020, our Brooks Semiconductor
Solutions Group segment reported gross margins of 40.0%, as compared to 40.8%
for the corresponding period of the prior fiscal year. The decrease in gross
margin percentage of 0.8 percentage points was primarily driven by product mix.
Cost of revenue for the nine months ended June 30, 2020 included $2.2 million of
charges for amortization related to completed technology, as compared to $2.7
million incurred during the corresponding period of the prior fiscal year. The
results for the nine months ended June 30, 2019 also included $0.2 million of
charges related to the inventory step-up in purchase accounting. There were no
such charges in the corresponding fiscal 2020 period. Excluding the impact of
the amortization of completed technology and the charges related to the
inventory step-up, gross margins declined 1.0 percentage points during the nine
months ended June 30, 2020, as compared to the corresponding period of the prior
fiscal year.
Our Brooks Life Sciences segment reported gross margins of 42.1% for the
three months ended June 30, 2020, as compared to 41.0% for the corresponding
period of the prior fiscal year. Cost of revenue for the three months ended June
30, 2020 included $2.1 million of charges for amortization related to completed
technology, as compared to $2.0 million incurred during the corresponding period
of the prior fiscal year, and $0.3 million of restructuring related charges
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for the impairment of software assets. Excluding the impact of the amortization
of completed technology and the restructuring related charges, margins expanded
1.4 percentage points during the three months ended June 30, 2020, as compared
to the corresponding period of the prior fiscal year. During the nine months
ended June 30, 2020, our Brooks Life Sciences segment reported gross margins of
42.7%, as compared to 40.3% for the corresponding period of the prior
fiscal year. The improvement in gross margin for the three and nine months ended
June 30, 2020, compared to the same period in the prior year, was primarily
driven by the Life Science Products reporting unit, as a result of improved cost
performance and volume leverage. Cost of revenue for the nine months ended June
30, 2020 included $6.0 million of charges for amortization related to completed
technology, as compared to $4.9 million incurred during the corresponding period
of the prior fiscal year, and $0.3 million of restructuring related charges for
the impairment of software. Excluding the impact of the amortization of
completed technology, and the restructuring related charges, margins expanded
2.6 percentage points during the nine months ended June 30, 2020, as compared to
the corresponding period of the prior fiscal year.
Research and Development
Research and development expenses were $14.0 million and $43.7 million,
respectively, during the three and nine months ended June 30, 2020, as compared
to $14.2 million and $41.5 million, respectively, during the corresponding
periods of the prior fiscal year. The decrease of $0.2 million during the third
quarter of fiscal year 2020 as compared to the corresponding period of fiscal
year 2019 reflects lower expense of $0.3 million within the Brooks Semiconductor
Solutions Group segment, partially offset by a $0.1 million increase within the
Brooks Life Sciences segment. The increase of $2.2 million during the nine
months ended June 30, 2020 as compared to the corresponding period of fiscal
year 2019 reflects higher expense of $1.9 million within the Brooks
Semiconductor Solutions Group segment and a $0.3 million increase within the
Brooks Life Sciences segment.
Research and development expenses in our Brooks Semiconductor Solutions Group
segment were $9.6 million and $30.6 million, respectively, during the three and
nine months ended June 30, 2020, as compared to $9.9 million and $28.6 million,
respectively, during the corresponding periods of the prior fiscal year. The
decrease in research and development expenses for the three months ended June
30, 2020 compared to the corresponding period of the prior year was driven by
lower travel costs, partially offset by higher payroll costs. The increase in
research and development expenses during the nine months ended June 30, 2020
over the corresponding prior period were primarily attributable to increased
employee related costs and outside services.
Research and development expenses in our Brooks Life Sciences segment were $4.4
million and $13.2 million, respectively, during the three and nine months ended
June 30, 2020, as compared to $4.3 million and $12.9 million, respectively,
during the corresponding periods of the prior fiscal year. The increase in
research and development costs for the three months ended June 30, 2020 compared
to the prior year period was due to expense structure added in connection with
the acquisition of RURO of $0.3 million, partially offset by lower employee
related costs. The nine months ended June 30, 2020 included an incremental $1.1
million of costs related to GENEWIZ which was acquired in November of 2018 and
an additional $0.4 million of costs related to RURO. These increases were
partially offset by lower project spending, outside services and travel
expenses.
Selling, General and Administrative
Selling, general and administrative expenses were $59.7 million and $178.9
million, respectively, during the three and nine months ended June 30, 2020, as
compared to $52.6 million and $158.5 million, respectively, during the
corresponding periods of the prior fiscal year. During the three months ended
June 30, 2020, the increase of $7.1 million was due to increased expenses of
$3.1 million within the Brooks Life Sciences segment and increased expenses of
$3.0 million within the Brooks Semiconductor Solutions Group segment and $1.0
million of unallocated corporate related expenses. During the nine months ended
June 30, 2020, the increase of $20.4 million was due to increased expenses of
$17.2 million within the Brooks Life Sciences segment and increased expenses of
$7.6 million within the Brooks Semiconductor Solutions Group segment, partially
offset by a reduction in corporate related expenses of $4.4 million. The
reduction in unallocated corporate related expenses was primarily attributed to
a decrease in net merger and acquisition costs, partially offset by increased
amortization expense.
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Selling, general, and administrative expenses in our Brooks Semiconductor
Solutions Group segment were $21.2 million and $65.0 million, respectively, for
the three and nine months ended June 30, 2020, as compared to $18.2 million and
$57.3 million, respectively, for the corresponding periods of the prior fiscal
year. The increase of $3.0 million and $7.6 million for the three and nine
months ended June 30, 2020 is primarily related to higher corporate allocated
costs, driven by higher audit, legal, and IT costs.
Selling, general, and administrative expenses in our Brooks Life Sciences
segment were $30.6 million and $92.1 million, respectively, for the three and
nine months ended June 30, 2020, compared to $27.5 million and $74.9 million,
respectively, for the corresponding periods of the prior fiscal year. The
increase for the three months ended June 30, 2020 was driven by increased bad
debt expense, payroll primarily related to our investment in GENEWIZ, and $0.3
million of expense structure added with the acquisition of RURO. These
increases were partially offset by lower travel expenses and expense structure
reductions realized from the restructuring actions taken in Sample Management
during 2019 and 2020. The increase for the nine months ended June 30, 2020, was
primarily related to increases from GENEWIZ which consisted of $5.1 million due
to the additional time under ownership during the nine months ended June 30,
2020 compared to the corresponding period of the prior fiscal year, and $1.6
million driven by the investment in selling, general, and administrative
structure to support its growth. The increase was also driven by higher
corporate allocated costs due to higher audit, legal, and IT costs, and $0.4
million of expense from RURO, acquired in February of 2020. These increases were
partially offset by expense structure reductions realized from the restructuring
actions taken in Sample Management during 2019 and 2020.
Restructuring Charges
We recorded restructuring charges of $0 and $1.1 million, respectively, during
the three and nine months ended June 30, 2020, as compared to $0.3 million and
$0.7 million, respectively, during the corresponding periods in the prior year.
Cost savings realized during the three months ended June 30, 2020 included $1.1
million related to actions to reduce costs within the Brooks Life Sciences
segment. Restructuring charges for the nine months ended June 30, 2020 consisted
of $0.6 million related to corporate restructuring actions and $0.6 million in
the Brooks Life Sciences segment related to the action initiated in the fourth
quarter of fiscal year 2019 to eliminate costs within the segment's Sample
Management business. Cost savings realized during the nine months ended June 30,
2020 related to these actions were $2.6 million in Brooks Life Sciences segment.
Non-Operating Income (Expenses)
Interest income - During the three and nine months ended June 30, 2020, we
recorded interest income of less than $0.1 million and $0.9 million,
respectively, as compared to $0.1 million and $0.8 million, respectively, during
the corresponding periods of the prior fiscal year.
Interest expense - During the three and nine months ended June 30, 2020, we
recorded interest expense of $0.8 million and $2.2 million, respectively, as
compared to $8.0 million and $21.3 million, respectively, during corresponding
periods of the prior fiscal year. The decrease in interest expense in the
current periods compared to the three and nine months ended June 30, 2019 is due
to carrying less debt in the current period. We extinguished $495.3 million of
debt during the fourth quarter of fiscal year 2019.
Loss on extinguishment of debt - During the nine months ended June 30, 2019, we
recorded a loss on extinguishment of debt of $9.1 million in connection with the
syndication of the $350.0 million term loan secured during the first quarter of
fiscal 2019. The syndication to a new group of lenders during the second quarter
of fiscal 2019 met the criteria of a debt extinguishment and therefore the
amortization of the deferred financing costs associated with the origination of
the loan was accelerated and recorded as a loss on extinguishment of debt on our
statement of operations.
Other income (expenses), net - During the three months ended June 30, 2020, we
recorded other income, net of $0.5 million compared to other expense, net of
$0.3 million in the corresponding period of the prior year. The current period
included a reduction in foreign currency exchange losses as compared to the
prior year period. During the nine months ended June 30, 2020 and 2019, we
recorded other expense, net of $1.3 million and $1.1 million, respectively. The
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increase in other expense, net for the nine months ended June 30, 2020 as
compared to the corresponding prior year period was related to an increase in
foreign currency exchange losses.
Income Tax Provision
We recorded an income tax provision of $5.1 million and $5.6 million,
respectively, during the three and nine months ended June 30, 2020. The tax
expense for the three months ended June 30, 2020 was primarily driven by the
provision on earnings from operations during the period. The tax provision for
the nine months ended June 30, 2020 was primarily driven by the provision on
earnings from operations during the period, which was offset by a $6.1 million
discrete stock compensation windfall benefit for tax deductions that exceeded
the associated compensation expense in prior quarters and a discrete benefit of
$0.5 million from a reduction of deferred tax liabilities related to the
extension of a tax rate incentive in China.
We recorded an income tax expense of $7.3 million and $0.4 million,
respectively, during the three and nine months ended June 30, 2019. The tax
expense for the three months ended June 30, 2019 was primarily driven by a $4.3
million discrete expense resulting from a change to the U.S. tax regulations
issued during the quarter related to the transition tax and the provision on
current earnings. This expense was partially offset by a discrete benefit for
stock compensation windfalls of $0.4 million for tax deductions that exceeded
the associated compensation expense and a $0.3 million reversal of an
unrecognized tax benefit upon the closing of an audit. The tax expense for the
nine months ended June 30, 2019 was primarily driven by a $3.2 million expense
upon completion of the accounting for the U.S. transition tax and the provision
on current earnings. These items were partially offset by discrete benefits
related to stock compensation windfalls of $4.5 million for tax deductions that
exceeded the associated compensation expense and $1.4 million of tax benefits
related to the remeasurement of net U.S. deferred tax assets due to state tax
rate changes.
Discontinued Operations
On July 1, 2019, we completed the sale of the semiconductor cryogenics business
which we include as a discontinued operation. We generated a net loss from
discontinued operations of $0.2 million for the nine months ended June 30, 2020
related to our semiconductor cryogenics business. We did not record income or
loss related to our semiconductor cryogenics business for the three months ended
June 30, 2020. We generated revenue and net income from discontinued operations
of $34.5 million and $6.3 million, respectively, for the three months ended June
30, 2019 related to our semiconductor cryogenics business. We generated revenue
and net income from discontinued operations of $109.5 million and $20.7 million,
respectively, for the nine months ended June 30, 2019 related to our
semiconductor cryogenics business. The net income includes income from the Ulvac
Cryogenics, Inc. joint venture during the fiscal 2019 periods. The income from
discontinued operations only includes direct operating expenses incurred that
(1) are clearly identifiable as costs being disposed of upon completion of the
sale and (2) will not be continued by the Company on an ongoing basis. Indirect
expenses which supported the semiconductor cryogenics business, and which will
remain as part of the continuing operations, are not reflected in income from
discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
A considerable portion of our revenue is dependent on the demand for
semiconductor capital equipment which historically has experienced periodic
downturns. We believe that we have adequate resources to satisfy our working
capital, financing activities, debt service and capital expenditure requirements
for the next twelve months. The cyclical nature of our served markets and
uncertainty in the current global economic environment, including the
uncertainty related to the COVID-19 pandemic, make it difficult for us to
predict longer-term liquidity requirements with sufficient certainty. We may be
unable to obtain any required additional financing on terms favorable to us, if
at all. If adequate funds are not available to us on acceptable terms or
otherwise, we may be unable to successfully develop or enhance products and
services, respond to competitive pressure or take advantage of acquisition
opportunities, any of which could have a material adverse effect on our
business, financial condition and operating results.
The discussion of our cash flows and liquidity that follows does not include the
impact of the disposition of the semiconductor cryogenics business and is stated
on a total company consolidated basis.
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Overview of Cash Flows and Liquidity
Our cash, cash equivalents and marketable securities as of June 30, 2020 and
September 30, 2019 consist of the following (in thousands):
June 30, 2020 September 30, 2019
Cash and cash equivalents $ 256,633 $ 301,642
Restricted cash 3,567 3,529
Short-term marketable securities 136 34,124
Long-term marketable securities 2,939 2,845
$ 263,275 $ 342,140
Our cash is held in numerous locations throughout the world. As of June 30,
2020, we had cash and cash equivalents of $263.3 million, of which $217.1
million was held outside of the United States. If these funds are needed for our
U.S. operations, we would need to repatriate these funds. As a result of recent
changes in U.S. tax legislation, any repatriation in the future would likely not
result in further U.S. federal income tax. Our intent is to reinvest these funds
outside of the United States and our current operating plans do not demonstrate
a need to repatriate these funds for our U.S. operations. As of June 30, 2020,
and September 30, 2019, we had marketable securities of $3.1 million and $37.0
million, respectively. Our marketable securities are generally readily
convertible to cash without an adverse impact.
Nine Months Ended June 30, 2020 Compared to Nine Months Ended June 30, 2019
Overview
Cash, cash equivalents, restricted cash and marketable securities were $263.3
million at June 30, 2020, as compared to $342.1 million at September 30, 2019.
The decrease of $78.9 million from September 30, 2019 was comprised of cash
outflows of $13.9 million from operating activities, $29.7 million for capital
expenditures, $15.7 million for acquisitions, and $22.1 million for dividends.
Cash outflows from operating activities was comprised of $91.5 million of cash
taxes paid for the gain on the sale of the semiconductor cryogenics business and
$12.1 million uses of cash from the changes in operating assets and liabilities,
partially offset by $89.6 million of earnings, comprised of $35.9 million of net
income and $53.7 million of adjustments to net income for non-cash items.
Operating Activities
Cash flows from operating activities can fluctuate significantly from period to
period as earnings, working capital needs and the timing of payments for income
taxes, restructuring activities and other operating charges impact reported cash
flows.
Cash used in operating activities was $13.9 million during the nine months ended
June 30, 2020, comprised primarily of $91.5 million of cash taxes paid for the
gain on the sale of the semiconductor cryogenics business and a use of cash of
$12.1 million related to changes in our operating assets and liabilities
partially offset by $89.6 million of earnings, comprised of $35.9 million of net
income and $53.7 million of adjustments to net income for non-cash items. The
changes in operating assets and liabilities that resulted in a use of cash
consisted primarily of an increase in inventory levels. These uses of cash were
partially offset by an increase in accounts payable and decreased prepaid
expenses and other assets. Cash provided by operating activities was $58.2
million during the nine months ended June 30, 2019, comprised primarily of
earnings of $76.6 million, including net income of $25.1 million and the impact
of non-cash related charges of $51.5 million. Partially offsetting these items
were the uses of cash of $18.4 million related to the changes in our operating
assets and liabilities.
Investing Activities
Cash flows used in investing activities consist primarily of cash used for
acquisitions, capital expenditures and purchases of marketable securities as
well as cash proceeds generated from sales and maturities of marketable
securities.
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Cash used in investing activities was $12.6 million during the nine months ended
June 30, 2020. Cash used in investing activities during the nine months ended
June 30, 2020 included cash outflows for capital expenditures of $29.7 million,
$15.7 million for the acquisition of RURO, and $10.8 million for the purchases
of marketable securities. These outflows were partially offset by cash inflows
from the maturities and sales of marketable securities of $44.7 million. Cash
used in investing activities of $408.1 million during the nine months ended June
30, 2019 included cash outflow of $442.7 million for the acquisition of GENEWIZ,
$15.5 million of capital expenditures and $1.3 million for the purchases of
marketable securities, partially offset by cash inflows from the proceeds of
sales and maturities of marketable securities of $51.5 million.
Financing Activities
Cash outflows for financing activities was $21.6 million during the nine months
ended June 30, 2020. Cash outflows for financing activities during the nine
months ended June 30, 2020 included cash outflows for cash dividend payments of
$22.1 million. Cash provided by financing activities was $309.8 million during
the nine months ended June 30, 2019. Cash provided by financing activities
during the nine months ended June 30, 2019 included net cash inflows of $331.4
million primarily related to net proceeds from the incremental term loan secured
in November 2018 and the syndication of the incremental term loan in February
2019, partially offset by cash dividend payments of $21.7 million.
China Facility
In April 2019, we committed to construct a facility in Suzhou China, to
consolidate the Suzhou operations of the GENEWIZ business and provide an
infrastructure to support future growth. The facility will be constructed in
two phases. We expect to incur $50.0 to $55.0 million of capital expenditures
related to this facility over the next five years, of which up to $10.0 million
is expected to be incurred during 2020. We have incurred $6.2 million of capital
expenditures to date related to the construction of the facility, which includes
$3.2 million and $5.5 million for the three and nine months ended June 30,
2020.
Capital Resources
Term Loans
On October 4, 2017, we entered into a $200.0 million term loan with Morgan
Stanley Senior Funding, Inc., JPMorgan Chase Bank, N.A. and Wells Fargo
Securities, LLC pursuant to the terms of a credit agreement with the lenders.
The term loan was issued at $197.6 million, or 98.8% of its par value, resulting
in a discount of $2.4 million, or 1.2%, which represented loan origination fees
paid at the closing. The loan principal amount may be increased by an aggregate
amount equal to $75.0 million plus any voluntary repayments of the term loan
plus any additional amount such that our secured leverage ratio is less than
3.00 to 1.00.
The term loan matures and becomes fully payable on October 4, 2024. Installment
principal payments equal to 0.25% of the initial principal amount of the term
loan are payable on the last day of each quarter, with any remaining principal
amount becoming due and payable on the maturity date. Subject to certain
conditions stated in the credit agreement, we may redeem the term loan at any
time at our option without a significant premium or penalty, except for a
repricing transaction, as defined in the credit agreement. We are required to
redeem the term loan at the principal amount then outstanding upon the
occurrence of certain events, as set forth in the credit agreement.
On November 15, 2018, we entered into an incremental amendment to the credit
agreement under which we obtained an incremental term loan in an aggregate
principal amount of $350.0 million, issued at $340.5 million. The proceeds of
the incremental term loan were used to pay a portion of the purchase price for
our acquisition of GENEWIZ. On February 15, 2019, we entered into the second
amendment to the credit agreement and syndicated the incremental term loan to a
group of new lenders. The syndicated incremental term loan was issued at $345.2
million. Except as provided for in the amendments, the incremental term loan was
subject to the same terms and conditions of the initial term loan.
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On July 1, 2019, in connection with the completion of the sale of our
semiconductor cryogenics business, we used $348.3 million of the cash proceeds
from the transaction to extinguish the outstanding balance at July 1, 2019 of
the incremental term loan and $147.0 million of the cash proceeds from the
transaction to extinguish a portion of the outstanding balance at July 1, 2019
of the term loan. The total amount of debt extinguished on July 1, 2019 was
$495.3 million.
The credit agreement, as amended, contains certain customary representations and
warranties, covenants and events of default. As of June 30, 2020, we were in
compliance with all covenants and conditions under the credit agreement, as
amended.
In connection with our acquisition of GENEWIZ in November 2018, we assumed three
five-year term loans and two one-year term loans. At June 30, 2020, we had an
aggregate outstanding principal balance of $0.8 million under the three
five-year term loans. The two one-year short term loans matured and were repaid
in full as of September 30, 2019.
At June 30, 2020, the aggregate outstanding principal balance of all of the
outstanding term loans was $50.4 million, excluding unamortized deferred
financing costs of $0.4 million. Borrowings under the term loans bear variable
interest rates. As a result, we may experience exposure to interest rate risk
due to the potential volatility associated with the variable interest rates on
the term loans. If rates increase, we may be subject to higher costs of
servicing the loans which could reduce our profitability and cash flows. During
the nine months ended June 30, 2020, the weighted average stated interest rate
on the term loans was 4.3%. During the nine months ended June 30, 2020, we
incurred aggregate interest expense of $1.8 million on the term loans, including
$0.2 million of deferred financing costs amortization. Our debt service
requirements are expected to be funded through our existing sources of liquidity
and operating cash flows.
Line of Credit
Facility
We maintain a revolving line of credit under a credit agreement with Wells Fargo
Bank, N.A. and JPMorgan Chase Bank, N.A. that provides for a revolving credit
facility of up to $75.0 million, subject to borrowing base availability, as
defined in the credit agreement. The line of credit matures on October 4, 2022.
The proceeds from the line of credit are available for permitted acquisitions
and general corporate purposes.
As of June 30, 2020, we had approximately $39.6 million available for borrowing
under the line of credit. There were no amounts outstanding pursuant to the line
of credit as of June 30, 2020. The amount of funds available for borrowing under
the credit agreement may fluctuate each period based on our borrowing base
availability. The credit agreement contains certain customary representations
and warranties, a financial covenant, affirmative and negative covenants, as
well as events of default. We were in compliance with the credit agreement as of
June 30, 2020. Although we believe we will be able to generate sufficient cash
in the United States and foreign jurisdictions to fund future operating costs,
we secured the revolving line of credit as an additional assurance for
maintaining liquidity in the United States during potentially severe downturns
of the cyclical semiconductor market, and for strategic investments or
acquisitions.
Dividends
On July 29, 2020, the Company's Board of Directors declared a cash dividend of
$0.10 per share payable on September 25, 2020 to common stockholders of record
as of September 4, 2020. Dividends are declared at the discretion of our Board
of Directors and depend on actual cash flow from operations, our financial
condition, debt service and capital requirements, and any other factors our
Board of Directors may consider relevant. We intend to pay quarterly cash
dividends in the future; however, the amount and timing of these dividends may
be impacted by the cyclical nature of certain markets we serve or the impact of
the COVID-19 pandemic. We may reduce, delay or cancel a quarterly cash dividend
based on the severity of a cyclical downturn or if the effects of the COVID-19
pandemic are prolonged.
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Share Repurchase Program
On September 29, 2015, our Board of Directors approved a share repurchase
program for up to $50.0 million worth of our common stock. The timing and amount
of any shares repurchased will be based on market and business conditions, legal
requirements and other factors and repurchases may be commenced or suspended at
any time at our discretion. There were no shares repurchased under this program
during the nine months ended June 30, 2020 and there have been no shares
repurchased under this program since its inception.
Contractual Obligations and Requirements
At June 30, 2020, the Company had non-cancellable commitments of $151.3 million,
including purchase orders for inventory of $111.3 million, information
technology related commitments of $24.1 million, and China facility commitments
of $16.0 million.
At June 30, 2020, we had approximately $1.2 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 our customers in the event that the product is not delivered, or
warranty obligations are not fulfilled in accordance with the contract terms.
These obligations could be called by the beneficiaries at any time before the
expiration date of the particular letter of credit if we fail to meet certain
contractual requirements. None of these obligations were called during the nine
months ended June 30, 2020, and we currently do not anticipate any of these
obligations to be called in the near future.
Off-Balance Sheet Arrangements
As of June 30, 2020, we did not have any off-balance sheet arrangements, as
defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
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