Goodwill and Intangible Assets

6 Months Ended

Dec. 27, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets [Text Block]

GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company monitors the recoverability of goodwill recorded in connection with acquisitions, by reporting unit, annually, or more often if events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company performed the annual goodwill impairment analysis during the first quarter of fiscal year 2015 and concluded that goodwill was not impaired, as the fair value of each reporting unit exceeded its carrying value.

During the quarter ended December 27, 2014, goodwill for the Sensing Solutions reporting unit was determined to be impaired and the Company recorded a charge of $84.1 million. The Sensing Solutions reporting unit develops integrated circuits which are primarily sold in the consumer and automotive end customer markets. The impairment was the result of the Company's decision within the quarter ended December 27, 2014 to exit certain market offerings that have competitive dynamics which are no longer consistent with the Company’s business objectives.

The Company determined that sufficient indicators of potential impairment existed to require an interim goodwill impairment analysis for the Sensing Solutions reporting unit. The reporting unit's carrying value exceeded its estimated fair value, accordingly a second phase of the goodwill impairment test (“Step 2”) was performed. Under Step 2, the fair value of all Sensing Solution’s assets and liabilities were estimated, including tangible assets and intangible assets (including existing and in-process technology) for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of the goodwill was then compared to the carrying value of the goodwill to determine the amount of the impairment.

The Company estimated the fair value of the Sensing Solutions reporting unit using a weighting of fair values derived equally from the income and market approach. Under the income approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the business's ability to execute on the projected cash flows. The market approach estimates fair value based on market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating and investment characteristics as the reporting unit.

Prior to completing the goodwill impairment test, the Company tested the recoverability of the Sensing Solutions long-lived assets (other than goodwill) and concluded that existing Property, plant and equipment, net was impaired by $45.2 million and IPR&D was impaired by $8.9 million.

No other indicators or instances of impairment were identified in the quarter ended December 27, 2014.

Activity and goodwill balances for the six months ended December 27, 2014 were as follows:



	Goodwill
	(in thousands)
Balance at June 28, 2014	$	596,637
Adjustments	(689		)
Impairment	(84,110		)
Balance at December 27, 2014	$	511,838

Intangible Assets

The useful lives of amortizable intangible assets are as follows:



Asset		Life
Intellectual property		1-10 years
Customer relationships		4-10 years
Trade name		3-4 years
Backlog		3-6 months
Patents		5 years

Intangible assets consisted of the following:



	December 27, 2014						June 28, 2014
	Original Cost		Accumulated Amortization		Net		Original Cost		Accumulated Amortization		Net
	(in thousands)
Intellectual property	$	435,962	$	239,196	$	196,766	$	435,962	$	201,581	$	234,381
Customer relationships	120,230		76,355		43,875		120,230		69,064		51,166
Tradename	8,500		4,086		4,414		8,500		3,269		5,231
Backlog	—		—		—		1,000		1,000		—
Patent	2,500		646		1,854		2,500		386		2,114
Total amortizable purchased intangible assets	567,192		320,283		246,909		568,192		275,300		292,892
IPR&D	59,202		—		59,202		68,102		—		68,102
Total purchased intangible assets	$	626,394	$	320,283	$	306,111	$	636,294	$	275,300	$	360,994

The following table presents the amortization expense of intangible assets and its presentation in the Condensed Consolidated Statements of Income:



	Three Months Ended				Six Months Ended
	December 27, 2014		December 28, 2013		December 27, 2014		December 28, 2013
	(in thousands)
Cost of goods sold	$	18,750	$	19,098	$	37,500	$	27,190
Intangible asset amortization	4,155		4,968		8,482		8,404
Total intangible asset amortization expenses	$	22,905	$	24,066	$	45,982	$	35,594

The following table represents the estimated future amortization expense of intangible assets as of December 27, 2014:



Fiscal Year	Amount
	(in thousands)
Remaining six months of 2015	$	44,460
2016	74,454
2017	61,782
2018	41,927
2019	13,278
2020	3,358
Thereafter	7,650
Total intangible assets	$	246,909

- 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