GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Jul. 01, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Intangible assets classified as goodwill are not amortized. The goodwill established in connection with our acquisitions of Assembléon and Orthodyne represents the estimated future economic benefits arising from the assets we acquired that did not qualify to be identified and recognized individually. The goodwill also includes the value of expected future cash flows of Assembléon and Orthodyne, expected synergies with our other affiliates and other unidentifiable intangible assets. The Company performs an annual impairment test of its goodwill during the fourth quarter of each fiscal year, which coincides with the completion of its annual forecasting and refreshing of business outlook process.

The Company performed its annual impairment test in the fourth quarter of fiscal 2016 and concluded that no impairment charge was required. In each interim period, the Company reviewed qualitative factors to ascertain if a "triggering" event may have taken place that may have the effect of reducing the fair value of the reporting unit below its carrying value. During the three months ended July 1, 2017, the Company concluded that a triggering event had occurred in connection with the Electronics Assembly/Hybrid reporting unit (the former Assembléon) based on the results of an updated long-term financial outlook for the Electronics Assembly/Hybrid business that was conducted as part of the Company’s strategic review during the third quarter due to the lower demand as compared to forecast. The projection used in the fiscal 2016 annual impairment test had been developed based on the fiscal 2016 actual results, where the actual revenue had exceeded the forecast. This updated outlook projected that the near-term projected cash flows are expected to be lower than previously forecasted due to softer near-term demand in the System-in-package market. Under ASC 350, the Company is required to test its goodwill and other intangible assets for impairment annually or when a triggering event has occurred that would indicate it is more likely than not that the fair value of the reporting unit is less than the carrying value including goodwill and other intangible assets. Accordingly, the Company has performed the first step of the goodwill impairment test for the Electronics Assembly/Hybrid reporting unit.

The Company used a discounted cash flow model to determine the fair value of the Electronics Assembly/Hybrid reporting unit. The cash flow projections used within the discounted cash flow model were prepared using the forecasted financial results of the reporting unit, which was based upon underlying estimates of the total market size using independent third party industry reports, and market share data developed using the combination of independent third party data and our internal data. Significant assumptions used to determine fair value of the Electronics Assembly/Hybrid reporting unit include terminal growth rate of 2.5%, cost reduction initiatives including restructuring, working capital, tax rate and a weighted average cost of capital (discount rate) of 10.45%.

Following the Company's early adoption of ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment in the third quarter of fiscal 2017, the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment (i.e. Step 2 of the goodwill impairment test) was eliminated. Accordingly, the Company's impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value. Based on the calculation, the Company determined that the carrying amount of the Electronics Assembly/Hybrid reporting unit exceeded its fair value by $35.2 million as of July 1, 2017, requiring an impairment charge of this amount. The goodwill impairment charge, which is a non-cash charge, has been reflected in the Company’s Consolidated Condensed Statements of Operations for the three and nine months ended July 1, 2017.

In connection with the evaluation of the goodwill impairment in the Electronics Assembly/Hybrid reporting unit, the Company assessed tangible and intangible assets for impairment prior to performing the first step of the goodwill impairment test. As a result of this analysis, it was determined that there were no impairment charges to record related to these assets for the three months ended July 1, 2017. No triggering event had occurred for the wedge bonder reporting unit (the former Orthodyne).

The following table summarizes the Company's recorded goodwill as of July 1, 2017 and October 1, 2016:



(in thousands)	Wedge Bonder		Electronics Assembly/Hybrid			Total
Balance at October 3, 2015	$	41,546	$	—		$	41,546
Acquired in business combination	—		39,726			39,726
Balance at October 1, 2016	$	41,546	$	39,726		$	81,272
Goodwill impairment	—		(35,207		)	(35,207		)
Balance at July 1, 2017	$	41,546	$	4,519		$	46,065

Intangible Assets

Intangible assets with determinable lives are amortized over their estimated useful lives. The Company's intangible assets consist primarily of developed technology, customer relationships and trade and brand names.

The following table reflects net intangible assets as of July 1, 2017 and October 1, 2016:



	As of						Average estimated
(dollar amounts in thousands)	July 1, 2017			October 1, 2016			useful lives (in years)
Technology	$	74,080		$	74,080		7.0 to 15.0
Accumulated amortization	(40,013		)	(37,969		)
Net technology	$	34,067		$	36,111

Customer relationships	$	36,968		$	36,968		5.0 to 6.0
Accumulated amortization	(26,662		)	(24,455		)
Net customer relationships	$	10,306		$	12,513

Trade and brand names	$	7,515		$	7,515		7.0 to 8.0
Accumulated amortization	(5,644		)	(5,329		)
Net trade and brand name	$	1,871		$	2,186

Other intangible assets	$	2,500		$	2,500		1.9
Accumulated amortization	(2,500		)	(2,500		)
Net other intangible assets	$	—		$	—

Net intangible assets	$	46,244		$	50,810

The following table reflects estimated annual amortization expense related to intangible assets as of July 1, 2017:



	As of
(in thousands)	July 1, 2017
Remaining fiscal 2017	$	1,522
Fiscal 2018	6,086
Fiscal 2019	6,086
Fiscal 2020	6,086
Fiscal 2021 and onwards	26,464
Total amortization expense	$	46,244

- 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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