Note 6 - Goodwill and Intangible Assets

6 Months Ended

Sep. 28, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 6.         GOODWILL AND INTANGIBLE ASSETS

Goodwill

       Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. We evaluate goodwill for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting units, future performances, results of our operations and comparability of our market capitalization and net book value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss. Because we have one single operating segment and one chief operating decision maker, our President and Chief Executive Officer (“CEO”), we utilize an entity-wide approach to assess goodwill for impairment. As of September 28, 2014, no events or changes in circumstances suggest that the carrying amount for goodwill may not be recoverable and therefore we did not perform an interim goodwill impairment analysis.

The changes in the carrying amount of goodwill for the dates indicated below were as follows (in thousands):

	September 28, 2014		March 30, 2014
Beginning balance	$	30,410	$	10,356
Goodwill additions		14,696		20,054
Ending balance	$	45,106	$	30,410

Goodwill additions during the six months ended September 28, 2014 consisted of $14.7 million residual allocation from the iML acquisition purchase price accounting. The goodwill additions during fiscal 2014 consist of $19.4 million and $0.7 million residual allocation from the Cadeka and Stretch acquisition purchase price accounting, respectively.

Intangible Assets

Our purchased intangible assets as of the dates indicated below were as follows (in thousands):

	September 28, 2014										March 30, 2014
	Carrying Amount		Accumulated Amortization			Impairment charge			Net Carrying Amount		Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortized intangible assets:
Existing technology	$	118,794	$	(42,268	)	$	(9,134	)	$	67,392	$	63,043	$	(37,510	)	$	25,533
Customer relationships		15,165		(3,600	)		(870	)		10,695		6,095		(2,762	)		3,333
Distributor relationships		7,254		(1,536	)		—			5,718		1,264		(1,260	)		4
Patents/Core technology		3,459		(3,412	)		—			47		3,459		(3,378	)		81
Trade names		1,330		(146	)		—			1,184		210		(51	)		159
Total intangible assets subject to amortization		146,002		(50,962	)		(10,004	)		85,036		74,071		(44,961	)		29,110
In-process research and development		10,380		—			(2,280	)		8,100		2,280		—			2,280
Total	$	156,382		(50,962	)		(12,284	)		93,136		76,351		(44,961	)		31,390

Long-lived assets are amortized on a straight-line basis over their respective estimated useful lives. Existing technology is amortized over two to nine years. Customer relationships are amortized over five to seven years on an accelerated basis. Distributor relationships are amortized over six to seven years. Patents/core technology is amortized over five to six years. Trade names are amortized over three to six years. We expect the amortization of IPR&D to start in late fiscal 2015. We evaluate the remaining useful life of our long-lived assets that are being amortized each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the long-lived asset is amortized prospectively over the remaining useful life.

Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets (or asset group) may not be fully recoverable. Whenever events or changes in circumstances suggest that the carrying amount of long-lived assets may not be recoverable, we estimate the future cash flows expected to be generated by the assets (or asset group) from its use or eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Significant management judgment is required in the grouping of long-lived assets and forecasts of future operating results that are used in the discounted cash flow method of valuation. If our actual results, or the plans and estimates used in future impairment analyses are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

Exar completed a significant strategic restructuring process that began in the quarter ended September 28, 2014 and ended in October 2014.  This restructuring was prompted by the recent acquisition of iML, and an associated significant reduction in force, including reductions at our Hangzhou, China and Loveland, Colorado units.  We believe this restructuring allows us to achieve meaningful synergies and operating efficiencies and focus our resources on strategic priorities that we expect will yield the highest incremental return for Exar’s stockholders. For additional details, see “Note 11 – Restructuring Charges and Exit Costs.”   As a result of this restructuring and the resultant re-prioritization of resources, we anticipate a decline in forecasted revenue related to certain intangible assets that were acquired in prior business combinations.  Consequently, we performed an intangible assets impairment review during the second quarter of fiscal year 2015. Upon completion of this review, we recorded $12.3 million of impairment charges to acquired intangibles for the three and six months ended September 28, 2014.  Of these impairment charges, $7.5 million and $4.8 million are related to High-Performance Analog and Data Compression products, respectively. As of September 29, 2013, there were no indicators or events that required us to perform an intangible assets impairment review.

The aggregate amortization expenses for our purchased intangible assets for the periods indicated below were as follows (in thousands):

	Three Months Ended				Six Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Amortization expense	$	3,724	$	2,130	$	6,001	$	3,674

The total future amortization expenses for our purchased intangible assets excluding IPR&D are summarized below (in thousands):

Amortization Expense (by fiscal year)
2015 (6 months remaining)	$	6,406
2016		12,696
2017		12,609
2018		12,572
2019		12,248
2020 and thereafter		28,505
Total future amortization	$	85,036