Goodwill and Purchased Intangible Assets

9 Months Ended

Sep. 25, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Purchased Intangible Assets

5. Goodwill and Purchased Intangible Assets

The Company’s methodology for allocating the purchase price relating to acquisitions is determined through established and generally accepted valuation techniques. Goodwill is measured as the excess of the cost of the acquisition over the sum of the amounts assigned to tangible and identifiable intangible assets acquired less liabilities assumed. The Company assigns assets acquired (including goodwill) and liabilities assumed to one or more reporting units as of the date of acquisition. Typically, acquisitions relate to a single reporting unit and thus do not require the allocation of goodwill to multiple reporting units. If the products obtained in an acquisition are assigned to multiple reporting units, the goodwill is distributed to the respective reporting units as part of the purchase price allocation process. Goodwill and purchased intangible assets with indefinite useful lives are not amortized, but are reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The Company regularly monitors current business conditions and other factors including, but not limited to, adverse industry or economic trends and lower projections of profitability that may impact future operating results.

To test goodwill for impairment, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, the Company then performs the two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. Under the two-step goodwill impairment test, the Company would in the first step compare the estimated fair value of each reporting unit to its carrying value. The Company determines the fair value of each of its reporting units based on a weighting of income and market approaches. If the carrying value of a reporting unit exceeds its fair value, the Company would then perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If the Company determines that the carrying value of a reporting unit’s goodwill exceeds its implied fair value, the Company would record an impairment charge equal to the difference.

The evaluation of goodwill and intangible assets for impairment requires the exercise of significant judgment. In the event of future changes in business conditions, the Company will be required to reassess and update its forecasts and estimates used in future impairment analyses. If the results of these future analyses are lower than current estimates, a material impairment charge may result at that time.

Details of goodwill and other intangible assets were as follows (in thousands):


	September 25, 2015						December 26, 2014
	Goodwill		Intangible Assets		Total		Goodwill		Intangible Assets		Total
	Goodwill		Intangible Assets		Total		Goodwill		Intangible Assets		Total
Carrying amount	$	84,495	$	44,952	$	129,447	$	55,918	$	16,824	$	72,742

Purchased Intangible Assets

Intangible assets are generally recorded in connection with a business acquisition. The Company evaluates the useful lives of its intangible assets each reporting period to determine whether events and circumstances require revising the remaining period of amortization. In addition, the Company reviews indefinite lived intangible assets for impairment when events or changes in circumstances indicate their carrying value may not be recoverable and tests definite lives intangible assets at least annually for impairment. Management considers such indicators as significant differences in product demand from the estimates, changes in the competitive and economic environment, technological advances, and changes in cost structure.

Details of purchased intangible assets were as follows (in thousands):


	As of September 25, 2015							As of December 26, 2014
	Gross							Gross
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying		Useful Life
	Amount		Amortization			Value		Amount		Amortization			Value		(in years)
AIT
Customer relationships	$	19,000	$	(14,726	)	$	4,274	$	19,000	$	(13,011	)	$	5,989		7
Tradename		1,900		(1,304	)		596		1,900		(1,081	)		819		6
Intellectual property/know-how		1,600		(743	)		857		1,600		(571	)		1,029		7
Marchi
Customer relationships		9,900		(660	)		9,240		—		—			—		10
Tradename		1,170		(158	)		1,012		—		—			—		6
Intellectual property/know-how		12,300		(919	)		11,381		—		—			—		8-12
Miconex
Customer relationships		8,800		(195	)		8,605		—		—			—		7.5
UCT
Tradename		8,987		—			8,987		8,987		—			8,987		*

Total	$	63,657	$	(18,705	)	$	44,952	$	31,487	$	(14,663	)	$	16,824

*	The Company concluded that the UCT tradename intangible asset life is indefinite and is therefore not amortized but is reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

The Company amortizes its tradenames for AIT and Marchi and customer relationships intangible asset for AIT using an accelerated method over the estimated economic life of the assets, ranging from 6 to 7 years. The Company amortizes its intellectual property/know-how and customer relationships intangible assets for Marchi and Miconex on a straight-line basis with an estimated economic life of the assets ranging from 7 to 12 years. Amortization expense was approximately $1.6 million and $1.2 million for the three months ended September 25, 2015 and September 26, 2014, respectively and $4.0 million and $3.7 million for the nine months ended September 25, 2015 and September 26, 2014, respectively. Amortization expense is charged to general and administrative. As of September 25, 2015, future estimated amortization expense is expected to be as follows (in thousands):


	Amortization
	Expense
2015 (remaining in year)	$	1,648
2016		6,062
2017		5,142
2018		4,582
2019		4,210
Thereafter		14,321

Total	$	35,965

- 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.

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