Goodwill and Intangible Assets

12 Months Ended

Oct. 03, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

Goodwill is tested for impairment on an annual basis and between annual tests if events or circumstances indicate that an impairment loss may have occurred, and we write down these assets when impaired. We perform our annual impairment tests during the fourth quarter of each fiscal year using the opening balance sheet as of the first day of the fourth quarter, with any resulting impairment recorded in the fourth quarter of the fiscal year.

Coherent has two reporting units: Specialty Laser Systems and Commercial Lasers and Components. In our fiscal 2015 annual testing, we performed a qualitative assessment of the goodwill for our SLS reporting unit during the fourth quarter of fiscal 2015 using the opening balance sheet as of the first day of the fourth quarter and concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying amount. In assessing the qualitative factors, we considered the impact of these key factors: macroeconomic conditions, fluctuations in foreign currency, market and industry conditions, our operating and competitive environment, regulatory and political developments, the overall financial performance of the reporting unit including cost factors and budgeted-to-actual revenue results. We also considered our market capitalization, stock price performance and the significant excess between the estimated fair value and carrying value of the SLS reporting unit. Based on our assessment, goodwill in the SLS reporting unit was not impaired as of the first day of the fourth quarter of fiscal 2015. As such, it was not necessary to perform the two-step goodwill impairment test at that time. For the CLC reporting unit, we elected to bypass the qualitative assessment and proceed directly to performing the first step of the goodwill impairment test. We performed our Step 1 test using the opening balance sheet as of the first day of the fourth quarter and noted no impairment. We determined the fair value of the CLC reporting unit for the Step 1 test using a 50-50% weighting of the Income (discounted cash flow) approach and Market (market comparable) approach. Management completed and reviewed the results of the Step 1 analysis and concluded that a Step 2 analysis was not required as the estimated fair value of the CLC reporting unit was significantly in excess of its carrying value. Between the completion of that testing and the end of the fourth quarter of fiscal 2015, we noted no indications of impairment or triggering events with either reporting unit to cause us to review goodwill for potential impairment.

The changes in the carrying amount of goodwill by segment for fiscal 2015 and 2014 are as follows (in thousands):



	Commercial Lasers and Components (1)			Specialty Laser Systems (2)			Total
Balance as of September 28, 2013	$	6,363		$	107,045		$	113,408
Translation adjustments and other	—			(3,895		)	(3,895		)
Balance as of September 27, 2014	6,363			103,150			109,513
Additions (see Note 3)	—		1,119	1,119			1,119
Translation adjustments and other	—			(8,815		)	(8,815		)
Balance as of October 3, 2015	$	6,363		$	95,454		$	101,817

(1) Gross amount of goodwill for our CLC segment was $25.7 million at both October 3, 2015 and September 27, 2014. At both October 3, 2015 and September 27, 2014, the accumulated impairment loss for the CLC reporting unit was $19.3 million reflecting an impairment charge in fiscal 2009.

(2) Gross amount of goodwill for our SLS segment was $97.8 million and $105.5 million at October 3, 2015 and September 27, 2014. At both October 3, 2015 and September 27, 2014, the accumulated impairment loss for the SLS reporting unit was $2.4 million reflecting an impairment charge in fiscal 2003.

We evaluate long-lived assets and amortizable intangible assets whenever events or changes in business circumstances or our planned use of assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate. Reviews are performed to determine whether the carrying values of assets are impaired based on comparison to the undiscounted expected future cash flows identifiable to such long-lived and amortizable intangible assets. If the comparison indicates that impairment exists, the impaired asset is written down to its fair value.

During fiscal 2015, 2014 and 2013, we did not have any impairment of intangible assets as a result of the impairment analysis.

The components of our amortizable intangible assets are as follows (in thousands):



	Fiscal 2015 Year-ended October 3, 2015							Fiscal 2014 Year-ended September 27, 2014
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Existing technology	$	71,365	$	(55,452	)	$	15,913	$	81,551	$	(57,827	)	$	23,724
Customer lists	16,099		(9,661		)	6,438		16,632		(9,199		)	7,433
Trade name	399		(349		)	50		431		(346		)	85
In-process research and development	375		—			375		424		—			424
Total	$	88,238	$	(65,462	)	$	22,776	$	99,038	$	(67,372	)	$	31,666

For accounting purposes, when an intangible asset is fully amortized, it is removed from the disclosure schedule.

Amortizable intangible assets include intangible assets acquired through business combinations as well as through direct purchases or licenses.

The weighted average remaining amortization period for existing technology is approximately 3 years, and the weighted average remaining amortization period for customer lists and trade name is 4 years. Amortization expense for intangible assets during fiscal years 2015, 2014, and 2013 was $8.2 million, $9.6 million and $9.8 million, respectively, which includes $6.3 million, $7.5 million and $6.6 million, respectively, for amortization of existing technology. The change in accumulated amortization also includes $2.9 million and $1.6 million of foreign exchange impact for fiscal 2015 and fiscal 2014, respectively.

Estimated amortization expense for the next five fiscal years and all years thereafter are as follows (in thousands):



	Estimated Amortization Expense
2016	$	8,157
2017	7,034
2018	4,291
2019	2,273
2020	628
Thereafter	393
Total	$	22,776

- 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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