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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: December 31, 2020

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

(I.R.S. Employer

incorporation or organization)

Identification No.)

15 Elizabeth Drive

Chelmsford, Massachusetts

(Address of principal executive offices)

01824

(Zip Code)

Registrant’s telephone number, including area code: (978262-2400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

BRKS

The Nasdaq Stock Market LLC

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date, January 25, 2021: common stock, $0.01 par value and 74,220,121 shares outstanding.

Table of Contents

BROOKS AUTOMATION, INC.

Table of Contents

PAGE NUMBER

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated Balance Sheets as of December 31, 2020 (unaudited) and September 30, 2020

3

Consolidated Statements of Operations for the three months ended December 31, 2020 and 2019 (unaudited)

4

Consolidated Statements of Comprehensive Income for the three months ended December 31, 2020 and 2019 (unaudited)

5

Consolidated Statements of Cash Flows for the three months ended December 31, 2020 and 2019 (unaudited)

6

Consolidated Statements of Changes in Shareholders Equity for the three months ended December 31, 2020 and 2019 (unaudited)

7

Notes to Consolidated Financial Statements (unaudited)

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3. Quantitative and Qualitative Disclosures About Market Risk

42

Item 4. Controls and Procedures

44

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

45

Item 1A. Risk Factors

45

Item 6. Exhibits

46

Signatures

47

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

BROOKS AUTOMATION, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share and per share data)

    

December 31, 

    

September 30, 

2020

2020

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

308,517

$

295,649

Marketable securities

 

55

 

67

Accounts receivable, net

 

196,679

 

188,291

Inventories

 

123,917

 

114,834

Prepaid expenses and other current assets

 

45,988

 

50,612

Total current assets

 

675,156

 

649,453

Property, plant and equipment, net

 

126,947

 

117,665

Long-term marketable securities

 

3,410

 

3,101

Long-term deferred tax assets

 

4,765

 

4,979

Goodwill

 

512,989

 

501,536

Intangible assets, net

 

219,866

 

218,325

Other assets

 

71,599

 

64,066

Total assets

$

1,614,732

$

1,559,125

Liabilities and Stockholders' Equity

 

 

  

Current liabilities

 

 

  

Current portion of long-term debt

$

414

$

827

Accounts payable

67,811

61,758

Deferred revenue

 

35,661

 

31,357

Accrued warranty and retrofit costs

 

8,228

 

8,201

Accrued compensation and benefits

 

31,693

 

43,267

Accrued restructuring costs

 

106

 

181

Accrued income taxes payable

 

15,972

 

10,094

Accrued expenses and other current liabilities

 

65,885

 

55,433

Total current liabilities

 

225,770

 

211,118

Long-term debt

49,629

49,588

Long-term tax reserves

 

19,458

 

19,168

Long-term deferred tax liabilities

 

15,132

 

17,798

Long-term pension liabilities

 

6,741

 

6,406

Long-term operating lease liabilities

34,173

31,855

Other long-term liabilities

 

11,675

 

9,578

Total liabilities

 

362,578

 

345,511

Commitments and contingencies (Note 17)

 

  

 

  

Stockholders' Equity

 

  

 

  

Preferred stock, $0.01 par value - 1,000,000 shares authorized, no shares issued or outstanding

 

 

Common stock, $0.01 par value - 125,000,000 shares authorized, 87,672,132 shares issued and 74,210,263 shares outstanding at December 31, 2020, 87,293,710 shares issued and 73,831,841 shares outstanding at September 30, 2020

 

877

 

873

Additional paid-in capital

 

1,949,556

 

1,942,850

Accumulated other comprehensive income

 

35,145

 

21,919

Treasury stock, at cost - 13,461,869 shares

 

(200,956)

 

(200,956)

Accumulated deficit

 

(532,468)

 

(551,072)

Total stockholders' equity

1,252,154

1,213,614

Total liabilities and stockholders' equity

$

1,614,732

$

1,559,125

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

3

Table of Contents

BROOKS AUTOMATION, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except per share data)

Three Months Ended

December 31, 

    

2020

    

2019

    

Revenue

 

  

 

  

 

Products

$

159,616

$

131,862

Services

 

89,887

 

78,638

Total revenue

 

249,503

 

210,500

Cost of revenue

 

  

 

  

Products

 

91,503

 

79,971

Services

 

44,872

 

45,543

Total cost of revenue

 

136,375

 

125,514

Gross profit

 

113,128

 

84,986

Operating expenses

 

  

 

  

Research and development

 

16,083

 

14,401

Selling, general and administrative

 

66,030

 

59,343

Restructuring charges

 

87

 

576

Total operating expenses

 

82,200

 

74,320

Operating income

 

30,928

 

10,666

Interest income

 

76

 

699

Interest expense

 

(556)

 

(737)

Other income (expenses), net

 

1,329

 

(417)

Income before income taxes

 

31,777

 

10,211

Income tax provision (benefit)

 

4,770

 

(2,963)

Income from continuing operations

 

27,007

 

13,174

Loss from discontinued operations, net of tax

 

(979)

 

(117)

Net income

$

26,028

$

13,057

Basic net income per share:

 

  

 

  

Income from continuing operations

$

0.36

$

0.18

Loss from discontinued operations, net of tax

 

(0.01)

 

(0.00)

Basic net income per share

$

0.35

$

0.18

Diluted net income per share:

  

  

Income from continuing operations

$

0.36

$

0.18

Loss from discontinued operations, net of tax

 

(0.01)

(0.00)

Diluted net income per share

$

0.35

$

0.18

Weighted average shares used in computing net income per share:

 

  

 

  

Basic

 

74,021

 

72,972

Diluted

 

74,283

 

73,645

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

(unaudited)

(In thousands)

Three Months Ended

December 31, 

    

2020

    

2019

    

Net income

$

26,028

$

13,057

Other comprehensive income, net of tax:

 

  

 

  

Foreign currency translation adjustments

 

13,264

 

9,645

Unrealized gains on marketable securities, net of tax effects of $0 and $0 during the three months ended December 31, 2020 and 2019

 

 

10

Actuarial losses, net of tax effects of $5 and $1 during the three months ended December 31, 2020 and 2019

 

(38)

 

(12)

Total other comprehensive income, net of tax

 

13,226

 

9,643

Comprehensive income

$

39,254

$

22,700

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)

Three Months Ended

 

December 31, 

    

2020

    

2019

    

 

Cash flows from operating activities

 

  

  

 

Net income

$

26,028

$

13,057

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

  

Depreciation and amortization

15,746

16,477

Stock-based compensation

 

6,710

 

4,410

Amortization of premium on marketable securities and deferred financing costs

 

56

 

67

Deferred income taxes

 

(4,960)

 

(8,183)

Other losses on disposals of assets

 

1

 

126

Adjustment to the gain on divestiture, net of tax

948

319

Changes in operating assets and liabilities, net of acquisitions and divestiture:

 

  

 

Accounts receivable

 

(4,504)

 

1,503

Inventories

 

(6,307)

 

(4,335)

Prepaid expenses and other assets

 

28,945

 

6,120

Accounts payable

 

5,727

 

5,255

Deferred revenue

 

3,186

 

(720)

Accrued warranty and retrofit costs

 

(185)

 

221

Accrued compensation and tax withholdings

 

(12,307)

 

(5,755)

Accrued restructuring costs

 

(75)

 

(203)

Accrued expenses and other liabilities

 

(15,279)

 

(2,616)

Net cash provided by operating activities

 

43,730

 

25,743

Cash flows from investing activities

  

 

  

Purchases of property, plant and equipment

 

(15,227)

 

(9,614)

Purchases of marketable securities

 

(4)

 

(10,742)

Maturities of marketable securities

33,584

Acquisitions, net of cash acquired

 

(15,061)

 

Net cash (used in) provided by investing activities

 

(30,292)

 

13,228

Cash flows from financing activities

 

  

 

  

Principal payments on debt

 

(414)

 

(414)

Payments of finance leases

(319)

(319)

Common stock dividends paid

 

(7,424)

 

(7,369)

Net cash used in financing activities

 

(8,157)

 

(8,102)

Effects of exchange rate changes on cash and cash equivalents

 

11,250

 

2,808

Net increase in cash, cash equivalents and restricted cash

 

16,531

 

33,677

Cash, cash equivalents and restricted cash, beginning of period

    

 

302,526

  

 

305,171

    

  

Cash, cash equivalents and restricted cash, end of period

$

319,057

  

$

338,848

  

Supplemental disclosure of non-cash investing and financing activities:

 

  

 

Purchases of property, plant and equipment included in accounts payable

$

2,112

$

2,622

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets

Cash and cash equivalents

$

308,517

$

335,319

Short-term restricted cash included in prepaid expenses and other current assets

3,571

3,529

Long-term restricted cash included in other assets

6,969

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows

$

319,057

$

338,848

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

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BROOKS AUTOMATION, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

(unaudited)

(In thousands, except share data)

    

    

    

    

    

    

    

Common

Accumulated

Common

Stock at 

Additional

Other 

Stock 

Par 

Paid-In 

Comprehensive 

Accumulated

Treasury

Total

Shares

Value

Capital

Income

Deficit

Stock

Equity

Balance September 30, 2019

 

85,759,700

$

857

$

1,921,954

$

3,511

$

(586,412)

$

(200,956)

$

1,138,954

Shares issued under restricted stock and purchase plans, net

 

1,320,317

 

14

 

(14)

 

Stock-based compensation

 

4,410

 

  

 

  

 

  

 

4,410

Common stock dividends declared, at $0.10 per share

 

  

 

  

 

 

  

 

(7,369)

 

  

 

(7,369)

Foreign currency translation adjustments

 

  

 

  

 

  

 

9,645

 

  

 

  

 

9,645

Changes in unrealized gains on marketable securities, net of tax effects of $0

 

  

 

  

 

  

 

10

 

  

 

  

 

10

Actuarial losses, net of tax effects of $1

 

  

 

  

 

  

 

(12)

 

  

 

  

 

(12)

Net income

 

  

 

  

 

  

 

 

13,057

 

  

 

13,057

Balance December 31, 2019

 

87,080,017

$

871

$

1,926,350

$

13,154

$

(580,724)

$

(200,956)

$

1,158,695

Balance September 30, 2020

87,293,710

$

873

$

1,942,850

$

21,919

$

(551,072)

$

(200,956)

$

1,213,614

Shares issued under restricted stock and purchase plans, net

 

378,422

 

4

 

(4)

Stock-based compensation

 

6,710

 

  

 

  

 

  

 

6,710

Common stock dividends declared, at $0.10 per share

 

  

 

  

 

 

  

 

(7,424)

 

  

 

(7,424)

Foreign currency translation adjustments

 

  

 

  

 

  

 

13,264

 

  

 

  

 

13,264

Actuarial losses, net of tax effects of $5

 

  

 

  

 

  

 

(38)

 

  

 

  

 

(38)

Net income

 

  

 

  

 

 

  

 

26,028

 

  

 

26,028

Balance December 31, 2020

 

87,672,132

$

877

$

1,949,556

$

35,145

$

(532,468)

$

(200,956)

$

1,252,154

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 consolidation. In the opinion of management, all material adjustments, which are of a normal and recurring nature and necessary for a fair statement of the financial position and results of operations and cash flows for the periods presented, have been reflected in the accompanying unaudited consolidated financial statements. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full fiscal year.

Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted and, accordingly, the accompanying financial information should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) for the fiscal year ended September 30, 2020 (the “2020 Annual Report on Form 10-K”). The accompanying Consolidated Balance Sheet as of September 30, 2020 was derived from the audited annual consolidated financial statements as of the period then ended.

Discontinued Operations

In the fourth quarter of fiscal year 2018, the Company entered into a definitive agreement to sell its semiconductor cryogenics business (the “Disposition”) to Edwards Vacuum LLC (a member of the Atlas Copco Group) (“Edwards”). The Company determined that the semiconductor cryogenics business met the “held for sale” criteria and the “discontinued operations” criteria in accordance with Financial Accounting Standard Boards (“FASB”) Accounting Standards Codification (“ASC”) 205, Presentation of Financial Statements (“FASB ASC 205”), as of September 30, 2018. On July 1, 2019, the Company completed the sale of the semiconductor cryogenics business. Results related to the semiconductor cryogenics business are included within discontinued operations. Please refer to Note 3, “Discontinued Operations” for further information.

Risks and Uncertainties

The Company is subject to risks common to companies in the markets it serves, including, but not limited to, global economic and financial market conditions, fluctuations in customer demand, acceptance of new products, development by its competitors of new technological innovations, risk of disruption in its supply chain, the implementation of tariffs and export controls, dependence on key personnel, protection of proprietary technology, and compliance with domestic and foreign regulatory authorities and agencies.

During the COVID-19 pandemic, the Company’s facilities have remained operational with only required personnel on site, and the balance of employees working from home.  Our semiconductor and life sciences business segments fall within the classification of an “Essential Critical Infrastructure Sector” as defined by the U.S. Department of Homeland Security and have continued operations during the COVID-19 pandemic. The Company has followed government guidance in each region and country and has implemented U.S. Centers for Disease Control and Prevention social distancing guidelines and other applicable best practices to protect the health and safety of the Company’s employees. The COVID-19 pandemic has not had a substantial negative 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 the Company serves is as yet unknown.  The variables are many, but fundamentally include reduced demand from the Company’s customers, the degree that the supply chain may be constrained which could impact the Company’s delivery of product and the

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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.   

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are associated with recording accounts receivable, inventories, goodwill, intangible assets other than goodwill, long-lived assets, derivative financial instruments, deferred income taxes, warranty obligations, revenue recognized in accordance with the percentage of completion method, and stock-based compensation expense. The Company bases its estimates on historical experience and various other assumptions, including in certain circumstances future projections that management believes to be reasonable under the circumstances. Although the Company regularly assesses these estimates, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they occur and become known.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business - including results of operations and financial condition, sales, expenses, reserves and allowances, manufacturing and employee-related amounts - will depend on future developments that are highly uncertain. This includes results from new information that may emerge concerning COVID-19 and any actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. The Company has made estimates of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods.

Foreign Currency Translation

Certain transactions of the Company and its subsidiaries are denominated in currencies other than their functional currency.

Foreign currency exchange gains and losses generated from the settlement and remeasurement of these transactions are recognized in earnings and presented within “Other expenses, net” in the Company’s unaudited Consolidated Statements of Operations. Net foreign currency transaction and remeasurement gains were $0.8 million and losses were $0.7 million during the three months ended December 31, 2020 and 2019, respectively.

Derivative Financial Instruments

The Company has transactions and balances denominated in currencies other than U.S. dollars. Most of these transactions or balances are denominated in Euros, British Pounds and a variety of Asian currencies. The Company enters into foreign exchange contracts to reduce its exposure to currency fluctuations. The arrangements typically mature in three months or less and they do not qualify for hedge accounting. Net gains and losses related to these contracts are recorded as a component of "Other income (expenses), net" in the accompanying unaudited Consolidated Statements of Operations and are as follows for the three months ended December 31, 2020 and 2019 (in thousands):

Three Months Ended

December 31, 

    

2020

    

2019

    

Realized losses on derivatives not designated as hedging instruments

$

(1,162)

$

(3,668)

The fair values of the forward contracts are recorded in the accompanying unaudited Consolidated Balance Sheets as “Prepaid expenses and other current assets” and “Accrued expenses and other current liabilities”. Foreign exchange

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contract assets and liabilities are measured and reported at fair value based on observable market inputs and classified within Level 2 of the fair value hierarchy described below due to a lack of an active market for these contracts.

Fair Value Measurements

The Company measures certain financial assets and liabilities, including cash equivalents and available for sale securities, at fair value. FASB ASC 820, Fair Value Measurement and Disclosures, establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following levels of inputs may be used to measure fair value:

Level 1 Inputs: 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 Inputs: Observable inputs other than prices included in Level 1, including 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 Inputs: Unobservable inputs that are significant to the fair value of the assets or liabilities and reflect an entity’s own assumptions in pricing assets or liabilities since they are supported by little or no market activity.

As of December 31, 2020, the Company had no assets or liabilities measured and recorded at fair value on a recurring basis using Level 3 inputs.

Accounts Receivable, Allowance for Expected Credit Losses and Sales Returns

Trade accounts receivable do not bear interest and are recorded at the invoiced amount. The Company maintains an allowance for expected credit losses representing its best estimate of expected credit losses related to its existing accounts receivable and their net realizable value. The Company determines the allowance based on a number of factors, including an evaluation of customer credit worthiness, the age of the outstanding receivables, economic trends, historical experience and other information over the payment periods. The Company reviews and adjusts the allowance for expected credit losses on a quarterly basis. Accounts receivable balances are written off against the allowance for expected credit losses when the Company determines that the balances are not recoverable. Provisions for expected credit losses are recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations. The Company determines the allowance for sales returns based on its best estimate of expected customer returns. Provisions for sales returns are recorded in "Revenue" in the Consolidated Statements of Operations. The Company does not have any off-balance-sheet credit exposure related to its customers.

Leases

The Company has operating leases for real estate and non-real estate and finance leases for non-real estate. The classification of a lease as operating or finance and the determination of the right-of-use asset (“ROU asset”) and lease liability are determined at lease inception. The ROU asset represents the Company’s right to use an underlying asset for the lease term and the lease liability represents the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, an incremental borrowing rate is used based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.

The Company’s lease agreements may contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. Fixed payments for non-lease components are combined with lease payments and accounted for as a single lease component which increases the amount of the ROU asset and liability.

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The ROU asset for operating leases is included within “Other assets” and the ROU asset for finance leases is included within “Property, plant, and equipment, net” in the accompanying unaudited Consolidated Balance Sheets. The short-term lease liabilities for both operating leases and finance leases are included within “Accrued expenses and other current liabilities” in the accompanying unaudited Consolidated Balance Sheets. The long-term lease liabilities for operating leases and finance leases are included within “Long-term operating lease liabilities”, and “Other long-term liabilities”, respectively, in the accompanying unaudited Consolidated Balance Sheets.

Recently Issued Accounting Pronouncements

In October 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-10, Codification Improvements. The amendments in this ASU represent changes to clarify the ASCs, correct unintended application of guidance, or make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. ASU 2020-10 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. The amendments in this ASU should be applied retrospectively. This ASU will not affect the Company's consolidated financial statements. The Company will adopt the provisions of this ASU in the first quarter of fiscal 2022 and is currently evaluating the impact this guidance may have on the disclosure to the consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The provisions of this ASU are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 clarifying and amending existing guidance. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted. The Company will adopt the provisions of this ASU in the first quarter of fiscal 2022. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-14, Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans, which amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The amendments require additional disclosure for the weighted-average interest crediting rates, a narrative description of the reasons for significant gains and losses, and an explanation of any other significant changes in the benefit obligation or plan assets. The amendment removes disclosure requirement for accumulated other comprehensive income expected to be recognized over the next year, information about plan assets to be returned to the entity, and the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost, and the benefit obligation for postretirement health care benefits. The ASU is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The ASU does not amend the interim disclosure requirements of ASC 715-20. The Company will adopt the provisions of this ASU in the first quarter of fiscal 2022 and is currently evaluating the impact this guidance may have on the disclosure to the consolidated financial statements.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820 to add and remove disclosure requirements related to fair value measurement. The amendments include new disclosure requirements for changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average used to develop significant

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unobservable inputs for Level 3 fair value measurements. The amendments eliminated disclosure requirements for amount of and reasons for transfers between Level 1 and Level 2, valuation processes for Level 3 fair value measurements, and policy for timing of transfers between levels of the fair value hierarchy. In addition, the amendments modified certain disclosure requirement to provide clarification or to promote appropriate exercise of discretion by entities. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted. The Company adopted the guidance during the first quarter of fiscal year 2021. There is no significant accounting impact on the Company’s consolidated financial statements and related disclosures as a result of the adoption of this ASU.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. The provisions may be adopted prospectively or retrospectively. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company adopted the guidance during the first quarter of fiscal year 2021 on a prospective basis. There is no significant accounting impact on the Company’s consolidated financial statements and related disclosures as a result of the adoption of this ASU.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05 “Financial Instruments-Credit Losses”, ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, and ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) to clarify and address certain items related to the amendments in ASU 2016-13. Topic 326 provides guidance for recognizing credit losses on financial instruments based on an estimate of current expected credit losses model. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. The Company adopted the guidance during the first quarter of fiscal year 2021.There is no significant accounting impact on the Company’s consolidated financial statements and related disclosures as a result of the adoption of this ASU.

Other

For further information with regard to the Company’s significant accounting policies, please refer to Note 2 “Summary of Significant Accounting Policies” to the Company’s consolidated financial statements included in the 2020 Annual Report on Form 10-K.

3. Discontinued Operations

On August 27, 2018, the Company entered into a definitive agreement to sell its semiconductor cryogenics business to Edwards for $675.0 million in cash, subject to adjustments. The sale was closed on July 1, 2019. The Company completed the sale for $659.8 million. Net proceeds from the sale were approximately $551.7 million, net of taxes and closing costs paid and remaining estimated taxes payable. During the first quarter of fiscal year 2021, the Company reached a final settlement with Edwards. The final net working capital was determined and resulted in a negative adjustment in the amount of $1.8 million payable to Edwards. As a result, the Company recorded a negative adjustment to gain on divestiture of $1.3 million for the three months ended December 31, 2020 after previously recorded adjustment. The adjustment was paid in January 2021. 

In the third quarter of fiscal year 2020, Edwards asserted claims for indemnification under the definitive agreement relating to alleged breaches of representations and warranties relating to customer warranty claims and inventory. The Company cannot determine the probability of any losses or outcome of these claims including the amount of any

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indemnifiable losses, if any, resulting from these claims at this time, however, the Company believes that none of these claims will have a material adverse effect on its consolidated financial position or results of operations. If the resolution of these claims results in indemnifiable losses in excess of the applicable indemnification deductibles and indemnification escrow established under the definitive agreement, Edwards would be required to seek recovery under the representation and warranty insurance Edwards obtained in connection with the closing of the transaction. The Company believes that any indemnifiable losses in excess of the applicable deductibles and indemnification escrow established in the definitive agreement would be covered by such insurance. If Edwards is unable to obtain recovery under its insurance, however, it could seek recovery of such indemnifiable losses, if any, directly from the Company.

The semiconductor cryogenics business consisted of the CTI pump business, Polycold chiller business, the related services business and a 50% share in Ulvac Cryogenics, Inc., a joint venture based in Japan. The semiconductor cryogenics business was originally acquired by the Company in its 2005 merger with Helix Technology Corporation. The operating results of the semiconductor cryogenics business had been included in the Brooks Semiconductor Solutions Group segment before the plan of disposition.

In connection with the closing of the Disposition on July 1, 2019, the Company and Edwards entered into a transition service agreement, a supply agreement, and lease agreements. The transition service agreement outlined the information technology, people, and facility support the parties provided to each other for the period ending 9 months after transaction closing date. The supply agreement allowed the Company to purchase CTI and Polycold goods at cost from Edwards up to an aggregate amount equal to $1.0 million until one-year anniversary of closing the Disposition. The lease agreements provide facility space in Chelmsford, Massachusetts to Edwards free of charge for three years after the transaction closing date. Edwards has the option to renew each lease at the then current market rates after the initial three-year lease term has ended. This Disposition was consistent with the Company’s long-standing strategy to increase shareholder value by accelerating the growth of its Life Sciences businesses with further acquisitions and strengthening its semiconductor automation business with opportunistic acquisitions.

The Disposition met the "held for sale" criteria and the “discontinued operation” criteria in accordance with FASB ASC 205 as of September 30, 2018. As such, its operating results have been reported as a discontinued operation for all periods presented. 

The following table presents the financial results of discontinued operations (in thousands):

Three Months Ended December 31, 

    

    

2020

2019

Loss on discontinued operations before income taxes

$

(1,288)

$

(153)

Net loss from discontinued operations

(979)

(117)

4. Marketable Securities

The Company invests in marketable securities that are classified as available-for-sale and records them at fair value in the accompanying unaudited Consolidated Balance Sheets. Marketable securities reported as current assets represent investments that mature within one year from the balance sheet date. Long-term marketable securities represent investments with maturity dates greater than one year from the balance sheet date. The securities are valued using matrix pricing and benchmarking and classified within Level 2 of the fair value hierarchy because they are not actively traded. Matrix pricing is a mathematical technique used to value securities by relying on the securities’ relationship to other benchmark quoted prices.

Unrealized gains and losses are excluded from earnings and reported as a separate component of “Total other comprehensive income, net of tax” in the accompanying unaudited Consolidated Statement of Comprehensive Income until the security is sold or matures. Gains or losses realized from sales of marketable securities are computed based on the specific identification method and recognized as a component of "Other income (expenses), net" in the

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accompanying unaudited Consolidated Statements of Operations. There were no sales of marketable securities during either of the three months ended December 31, 2020 and 2019.

The following is a summary of the amortized cost and the fair value, including accrued interest receivable and unrealized holding gains (losses) on the short-term and long-term marketable securities as of December 31, 2020 and September 30, 2020 (in thousands):

    

    

Gross

    

Gross

    

Amortized

Unrealized 

Unrealized 

Cost

Losses

Gains

Fair Value

December 31, 2020:

 

  

 

  

 

  

 

  

Bank certificates of deposits

$

55

$

$

$

55

Corporate securities

3,410

3,410

Other debt securities

 

 

$

3,465

$

$

$

3,465

September 30, 2020:

 

  

 

  

 

  

 

  

Bank certificates of deposits

$

51

$

$

$

51

Corporate securities

3,101

3,101

Other debt securities

 

16

 

16

$

3,168

$

$

$

3,168

The fair values of the marketable securities by contractual maturities at December 31, 2020 are presented below (in thousands):

    

Fair Value

Due in one year or less

$

55

Due after one year through five years

 

Due after five years through ten years

Due after ten years

 

3,410

Total marketable securities

$

3,465

Expected maturities could differ from contractual maturities because the security issuers may have the right to prepay obligations without prepayment penalties.

The Company reviews the marketable securities for impairment at each reporting period to determine if any of the securities have experienced an other-than-temporary decline in fair value. The Company considers factors, such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer, the Company’s intent to sell, or whether it is more likely than not it will be required to sell the investment before recovery of its amortized cost basis. If the Company believes that an other-than-temporary decline in fair value has occurred, it writes down the investment to its fair value and recognizes the credit loss in earnings and the non-credit loss in accumulated other comprehensive income or loss. There were no securities in an unrealized loss position as of either of December 31, 2020 and September 30, 2020.

Cash equivalents of less than $0.1 million at December 31, 2020 consist of money market funds and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. There were no cash equivalents classified within Level 1 of the fair value hierarchy as of September 30, 2020. Cash equivalents of $0.1 million as of September 30, 2020, consist primarily of treasury bills and agency bonds and are classified within Level 2 of the fair value hierarchy because they are not actively traded. Cash equivalents from level 1 and level 2 are recorded in “Cash and cash equivalents” within the accompanying unaudited Consolidated Balance Sheet.

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5. Acquisitions

Acquisition Completed in Fiscal Year 2021

On December 3, 2020, the Company acquired Trans-Hit Biomarkers (“THB”),  a worldwide biospecimen procurement service provider based in Montreal Canada. THB has an extensive collection capability for biospecimens and clinical samples through a worldwide partner network of clinical sites and biobanks. The total cash purchase price of the acquisition was approximately $15.2 million, net of cash acquired.

The allocation of consideration primarily included $7.5 million of customer relationships, $8.9 million of goodwill and $2.3 million of deferred tax liabilities. The Company applied the excess earnings method to determine the fair value of the customer relationships intangible asset. The weighted useful life of all intangibles acquired is 11 years. The purchase price allocation was based on a preliminary valuation which is subject to further adjustments within the measurement period when additional information becomes available. The goodwill from this acquisition is reported within the Brooks Life Sciences Services segment and is not tax deductible. The acquisition enhances the breadth and depth of our offerings and expands our expertise in the Brooks Life Sciences Services segment.

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 2020

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 allocation of the consideration primarily included $1.2 million of accounts receivable, $2.9 million of customer relationships, $2.9 million of technology, $11.1 million of goodwill, and $3.0 million of liabilities. The Company applied the excess earnings method to determine the fair value of the customer relationships intangible asset. The purchase price allocation was based on a preliminary valuation which is subject to further adjustments within the measurement period when additional information becomes available. The goodwill from this acquisition is reported within the Brooks Life Sciences Services segment and is not tax deductible.

6. Goodwill and Intangible Assets

Goodwill represents the excess of net book value over the estimated fair value of net tangible and identifiable intangible assets of a reporting unit. Goodwill is tested for impairment annually or more often if impairment indicators are present at the reporting unit level. If events occur or circumstances change that would more likely than not reduce fair values of the reporting units below their carrying values, goodwill will be evaluated for impairment between annual tests. No triggering events indicating goodwill impairment occurred during the three months ended December 31, 2020. Please refer to Note 8, "Goodwill and Intangible Assets" to the Company's consolidated financial statements included in

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the 2020 Annual Report on Form 10-K for further information on the goodwill impairment testing performed during fiscal year 2020.

The changes in the Company’s goodwill by reportable segment since September 30, 2020 are as follows (in thousands):

    

Brooks

    

    

    

Semiconductor

Brooks

Brooks

Solutions

Life Sciences

Life Sciences

Group

Products

Services

Other

Total

Gross goodwill, at September 30, 2020

$

637,303

$

103,278

$

349,899

$

26,014

$

1,116,494

Accumulated goodwill impairments

 

(588,944)

 

 

 

(26,014)

 

(614,958)

Goodwill, net of accumulated impairments, at September 30, 2020

 

48,359

 

103,278

 

349,899

 

 

501,536

Acquisitions and adjustments

 

354

 

2,059

 

9,040

 

 

11,453

Gross goodwill, at December 31, 2020

637,657

105,337

358,939

26,014

1,127,947

Accumulated goodwill impairments

 

(588,944)

 

 

 

(26,014)

 

(614,958)

Goodwill, net of accumulated impairments, at December 31, 2020

$

48,713

$

105,337

$

358,939

$

$

512,989

During the three months ended December 31, 2020, the Company recorded a goodwill increase of $11.5 million primarily related to the acquisition of THB and the impact of foreign currency translation adjustments.

The components of the Company’s identifiable intangible assets as of December 31, 2020 and September 30, 2020 are as follows (in thousands):

December 31, 2020

September 30, 2020

Accumulated

Net Book

Accumulated

Net Book

    

Cost

    

Amortization

    

Value

    

Cost

    

Amortization

    

Value

Patents

$

5,302

$

4,914

$

388

$

5,302

$

4,865

$

437

Completed technology

 

93,644

 

52,847

 

40,797

 

92,477

 

49,875

 

42,602

Trademarks and trade names

 

26,253

 

10,222

 

16,031

 

25,769

 

9,322

 

16,447

Non-competition agreements

703

61

642

Customer relationships

 

281,852

 

119,847

 

162,005

 

271,113

 

112,277

 

158,836

Other intangibles

257

254

3

245

242

3

$

408,011

$

188,145

$

219,866

$

394,906

$

176,581

$

218,325

Amortization expense for intangible assets was $9.7 million and $10.6 million, respectively, during the three months ended December 31, 2020 and 2019.

Estimated future amortization expense for the intangible assets for the remainder of fiscal year 2021, the subsequent four fiscal years and thereafter is as follows (in thousands):

Fiscal year ended September 30, 

    

  

2021

$

29,020

2022

 

35,792

2023

 

32,503

2024

 

27,777

2025

 

22,252

Thereafter

 

72,522

$

219,866

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7. Line of Credit

The Company maintains 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 and expires no less than 90 days prior to the term loan expiration discussed below. The proceeds from the line of credit are available for permitted acquisitions and general corporate purposes.

On October 4, 2017, the Company entered into a $200.0 million Senior Secured Term Loan Facility (the “term loan”) with Morgan Stanley Senior Funding, Inc., JPMorgan Chase Bank, N.A. and Wells Fargo Securities, LLC (collectively, the “lenders”). Coincident with the entry into the credit agreement for the term loan discussed in Note 8, “Debt” below, the Company amended certain terms and conditions of the credit agreement for the line of credit. Based on the amended terms of the credit agreement, the line of credit continues to provide for a revolving credit facility of up to $75.0 million, subject to borrowing base availability. Borrowing base availability under the amended credit agreement excludes collateral related to fixed assets and is redetermined periodically based on certain percentage of certain eligible U.S. assets, including accounts receivable and inventory. The sub-limits for letters of credit were reduced to $7.5 million under the amended terms of the credit agreement. All outstanding borrowings under the credit agreement are guaranteed by the Company and Brooks Life Sciences, Inc. (fka BioStorage Technologies, Inc.), the Company’s wholly-owned subsidiary (“guarantor”), and subordinated to the obligations under the term loan which are secured by a first priority lien on substantially all of the assets of the Company and the guarantor, other than accounts receivable and inventory. Please refer to Note 8, “Debt”, for further information on the term loan transaction.

As of December 31, 2020, the Company had approximately $47.3 million available for borrowing under the line of credit. There were no amounts outstanding under the line of credit as of December 31, 2020 and September 30, 2020. The Company records commitment fees and other costs directly associated with obtaining the line of credit facility as deferred financing costs which are amortized over the term of the related financing arrangement. Deferred financing costs were $0.2 million and $0.4 million, respectively, at December 31, 2020 and September 30, 2020. The line of credit contains certain customary representations and warranties, a financial covenant and affirmative and negative covenants as well as events of default. The Company was in compliance with the line of credit covenants as of December 31, 2020.

8. Debt

Term Loans

On October 4, 2017, the Company entered into a $200.0 million term loan with the lenders pursuant to the terms of a credit agreement. 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.

On November 15, 2018, the Company entered into an incremental amendment (the “First Amendment”) to the existing credit agreement. Under the First Amendment, the Company obtained an incremental term loan in an aggregate principal amount of $350.0 million. The proceeds of the incremental term loan were used to finance a portion of the purchase price for the Company’s acquisition of GENEWIZ Group. The incremental term loan was issued at $340.5 million, or 97.3% of its par value, resulting in a discount of $9.5 million, or 2.7%, which represented financing cost of the incremental term loan. Except as provided in the First Amendment, the incremental term loan was subject to the same terms and conditions as set forth in the existing credit agreement.

On February 15, 2019, the Company entered into the second amendment to the credit agreement (the “Second Amendment”) and syndicated the incremental term loan to a group of new lenders which met the criteria of a debt extinguishment. The Company wrote off the carrying value of the incremental term loan of $340.1 million as of February 15, 2019 and recorded the syndicated incremental term loan at its present value for $349.1 million and a loss on debt extinguishment for $9.1 million. The syndicated incremental term loan was issued at $345.2 million, or 98.9% of its par value, resulting in a discount of $4.0 million which represented financing costs which are presented as a reduction of the incremental term loan principal balance in the accompanying unaudited Consolidated Balance Sheets and was accreted over the life of the incremental term loan. Except as provided in the Second Amendment with respect to an

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increase of the applicable interest rates, the syndicated incremental term loan was subject to the same terms and conditions as the initial incremental term loan.

On July 1, 2019, the Company completed the sale of its semiconductor cryogenics business and used $348.3 million of the proceeds from the Disposition to extinguish the outstanding balance of the incremental term loan. In addition, the Company used $147.0 million of the proceeds from the Disposition to extinguish a portion of the outstanding balance of the term loan. The Company recorded a loss on debt extinguishment of $5.2 million for the two term loans.

The Company’s obligations under the term loan are also guaranteed by Brooks Life Sciences, Inc. (fka BioStorage Technologies, Inc.) as the guarantor, subject to the terms and conditions of the credit agreement. The Company and the guarantor granted the lenders a perfected first priority security interest in substantially all of the assets of the Company and the guarantor to secure the repayment of the term loan.

The loan principal amount under the credit agreement 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 the secured leverage ratio of the Company is less than 3.00 to 1.00.

Subject to certain conditions stated in the credit agreement, the Company may redeem the term loan at any time at its option without a significant premium or penalty, except for a repricing transaction, as defined in the credit agreement. The Company is required to redeem the term loan at the principal amount then outstanding upon occurrence of certain events, including (i) net proceeds received from the sale or other disposition of the Company’s or the guarantor’s assets, subject to certain limitations, (ii) casualty and condemnation proceeds received by the Company or the guarantor, subject to certain exceptions, or (iii) net proceeds received by the Company or the guarantor from the issuance of debt or disqualified capital stock after October 4, 2017. Commencing on December 31, 2018, the Company was required to make principal payments equal to the excess cash flow amount, as defined in the credit agreement. Such prepayments are equal to 50% of the preceding year excess cash flow amount reduced by voluntary prepayments of the term loan, subject to certain limitations.

The deferred financing costs are accreted over the term of the loan using the effective interest rate method and are included in “Interest expense” in the accompanying unaudited Consolidated Statements of Operations. At December 31, 2020, deferred financing costs were $0.4 million.

The credit agreement contains certain customary representations and warranties, covenants and events of default. If any of the events of default occur and are not waived or cured within applicable grace periods, any unpaid amounts under the credit agreement will bear an annual interest rate at 2.00% above the rate otherwise applicable under the terms and conditions of such agreement. The credit agreement does not contain financial maintenance covenants. As of December 31, 2020, the Company was in compliance with all covenants and conditions under the credit agreement.

In connection with the GENEWIZ acquisition, the Company assumed three five-year term loans for a total of $3.3 million and two one-year short term loans for a total of $3.2 million. The three five-year term loans were initiated during 2016 and mature in 2021. The principal payments are payable in eight installments equal to 12.5% of the initial principal amount of the term loans on December 14th and June 14th of each year. The three five-year term loans were secured by GENEWIZ to fund equipment procurement and new building related payments and the interest rates are equal to the LIBOR plus 3.1%. The two one-year term loans were secured by GENEWIZ to fund operations. Both of the one-year term loans were initiated in 2018 and matured in 2019. The interest rates of these two loans were 4.56% and 4.35%. There are no deferred financing costs related to either the five-year term loans or the one-year term loans. At December 31, 2020, the Company had an aggregate outstanding principal balance of $0.4 million for the three five-year term loans. Both of the two one-year short term loans matured and were repaid in full during fiscal year 2019.

During the three months ended December 31, 2020, the weighted average stated interest rate paid on all outstanding debt was 2.8%. During the three months ended December 31, 2020, the Company incurred aggregate interest expense of $0.4 million in connection with the borrowings, including $0.1 million of deferred financing costs amortization.

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The following are the future minimum principal payment obligations under all of the Company’s outstanding debt as of December 31, 2020 (in thousands):

    

Amount

Fiscal year ended September 30, 

2021

$

414

2022

2023

2024

2025

50,000

Total outstanding principal balance

50,414

Unamortized deferred financing costs

(371)

50,043

Current portion of long-term debt

414

Non-current portion of long-term debt

$

49,629

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9. Leases

The Company has operating leases for real estate and non-real estate and finance leases for non-real estate in North America, Europe, and Asia. Non-real estate leases are primarily related to vehicles and office equipment. Lease expiration dates range between 2021 and 2039.

The components of operating lease expense were as follows (in thousands):