GOODWILL AND INTANGIBLE ASSETS

6 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The Company has five operating segments: (1) legacy NetScout, (2) Arbor Networks, (3) Tektronix Communications, (4) VSS and (5) FNET. At September 30, 2015 and March 31, 2015, goodwill attributable to the legacy NetScout reporting unit was $198.0 million and $197.4 million, respectively. Goodwill attributable to the newly acquired Arbor Networks, Tektronix Communications, VSS and FNET operating segments were $534.7 million, $793.3 million, $57.0 million, and $119.7 million, respectively. Goodwill is tested for impairment at a reporting unit level at least annually, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value.

The change in the carrying amount of goodwill for the six months ended September 30, 2015 is due to the acquisition of the Communications Business of Danaher, and the impact of foreign currency translation adjustments related to asset balances that are recorded in currencies other than the U.S. Dollar.

The changes in the carrying amount of goodwill for the six months ended September 30, 2015 are as follows (in thousands):



Balance at March 31, 2015	$	197,445
Goodwill acquired during period	1,504,261
Foreign currency translation impact for the six months ended September 30, 2015	999
Balance at September 30, 2015	$	1,702,705

Intangible Assets

The net carrying amounts of intangible assets were $1.1 billion and $50.2 million at September 30, 2015 and March 31, 2015, respectively. Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The Company amortizes intangible assets over their estimated useful lives, except for the acquired trade name which resulted from the Network General Central Corporation (Network General) acquisition, which has an indefinite life and thus is not amortized. The carrying value of the indefinite lived trade name is evaluated for potential impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Intangible assets include the indefinite lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at September 30, 2015 (in thousands):



	Cost		Accumulated Amortization			Net
Developed technology	$	252,869	$	(40,682	)	$	212,187
Customer relationships	832,628		(25,034		)	807,594
Distributor relationships	1,626		(1,626		)	—
Definite lived trademark and trade name	43,900		(1,655		)	42,245
Core technology	7,162		(4,167		)	2,995
Net beneficial leases	336		(336		)	—
Non-compete agreements	287		(287		)	—
Leasehold interest	2,600		(125		)	2,475
Backlog	18,200		(2,028		)	16,172
Other	1,095		(646		)	449
	$	1,160,703	$	(76,586	)	$	1,084,117

Intangible assets include the indefinite lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at March 31, 2015 (in thousands):



	Cost		Accumulated Amortization			Net
Developed technology	$	30,865	$	(25,561	)	$	5,304
Customer relationships	38,498		(16,935		)	21,563
Distributor relationships	1,585		(711		)	874
Core technology	7,118		(3,660		)	3,458
Non-compete agreements	280		(280		)	—
Other	943		(562		)	381
	$	79,289	$	(47,709	)	$	31,580

Amortization of software and core technology included as cost of product revenue was $14.8 million and $15.6 million for the three and six months ended September 30, 2015, respectively. Amortization of other intangible assets included as operating expense was $9.8 million and $10.7 million for the three and six months ended September 30, 2015, respectively.

Amortization of software and core technology included as cost of product revenue was $923 thousand and $1.9 million for the three and six months ended September 30, 2014, respectively. Amortization of other intangible assets included as operating expense was $856 thousand and $1.7 million for the three and six months ended September 30, 2014, respectively.

The following is the expected future amortization expense at September 30, 2015 for the years ending March 31 (in thousands):



2016 (remaining six months)	$	55,306
2017	123,195
2018	109,157
2019	103,629
2020	96,114
Thereafter	596,716
	$	1,084,117

The weighted average amortization period of developed technology and core technology is 11.5 years. The weighted average amortization period for customer and distributor relationships is 16.1 years. The weighted average amortization period for trademarks and tradenames is 8.5 years. The weighted average amortization period for leasehold interests is 5.6 years. The weighted average amortization period for backlog is 2.0 years.

The weighted average amortization period for amortizing all intangible assets is 14.6 years.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details