Goodwill and Intangible Assets

12 Months Ended

Jun. 25, 2016

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.

Fiscal Year 2016

The Company performed the annual goodwill impairment analysis during the fourth quarter of fiscal year 2016 and concluded that goodwill was not impaired, as the fair value of each reporting unit exceeded its carrying value. No indicators or instances of impairment were identified during fiscal year 2016.

During the fiscal year ended June 25, 2016, $20.4 million of goodwill from the Micros and Security reporting unit was included in the sale of the energy metering business to Silergy Corp.

Fiscal Year 2015

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 consumer 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 and, 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 during the fiscal year ended June 27, 2015.

Activity and goodwill balances for the fiscal years ended June 25, 2016 and June 27, 2015 were as follows:



	Goodwill
	(in thousands)
Balance at June 28, 2014	$	596,637
Adjustments	(866		)
Impairments	(84,124		)
Balance at June 27, 2015	511,647
Divestitures	(20,999		)
Balance at June 25, 2016	$	490,648

Intangible Assets

The useful lives of amortizing intangible assets are as follows:



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

Intangible assets consisted of the following:



	June 25, 2016						June 27, 2015
	Original Cost		Accumulated Amortization		Net		Original Cost		Accumulated Amortization		Net
	(in thousands)
Intellectual property	$	420,285	$	331,321	$	88,964	$	435,962	$	276,175	$	159,787
Customer relationships	115,634		92,744		22,890		120,230		82,774		37,456
Trade name	8,500		6,486		2,014		8,500		4,886		3,614
Patent	2,500		1,428		1,072		2,500		907		1,593
Total amortizable purchased intangible assets	546,919		431,979		114,940		567,192		364,742		202,450
IPR&D	31,600		—		31,600		59,202		—		59,202
Total purchased intangible assets	$	578,519	$	431,979	$	146,540	$	626,394	$	364,742	$	261,652

During the fiscal year ended June 25, 2016, $20.3 million of purchased intangible assets, net, was included in the sale of the energy metering business line. For details, please refer Note 10: “Impairment of long-lived assets”.

During fiscal years 2016, 2015 and 2014, the Company recorded impairment of intangible assets of $27.6 million, $8.9 million and $2.6 million, respectively, related to write-offs of acquired IPR&D resulting from the Company’s decision to abandon previously acquired technologies. Intangible asset reviews are performed when indicators exist that could indicate the carrying value may not be recoverable based on comparisons to undiscounted expected future cash flows. If this comparison indicates that there is impairment, the impaired asset is written down to fair value, which is typically calculated using: (i) quoted market prices or (ii) discounted expected future cash flows utilizing a discount rate.

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



	For the Year Ended
	June 25, 2016		June 27, 2015		June 28, 2014
	(in thousands)
Cost of goods sold	$	55,031	$	74,366	$	64,483
Intangible asset amortization	12,205		16,077		17,690
Total intangible asset amortization expenses	$	67,236	$	90,443	$	82,173

The following table represents the estimated future amortization expense of intangible assets as of June 25, 2016:



Fiscal Year	Amount
	(in thousands)
2017	$	49,090
2018	41,564
2019	13,278
2020	3,358
2021	2,888
Thereafter	4,762
Total intangible assets	$	114,940

- 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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