Note 9 - Goodwill and Intangible Assets

12 Months Ended

Mar. 29, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 9.    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 with highly integrated business, we assess goodwill for impairment at the enterprise level.

In the fourth quarter of fiscal year 2015, we conducted our annual impairment review comparing the fair value of our single reporting unit with its carrying value. As of the test date and as of fiscal year-end, and before consideration of a control premium, the fair value, which was estimated as our market capitalization, exceeded the carrying value of our net assets. As a result, no goodwill impairment was recorded for fiscal year 2015.

In the fourth quarter of fiscal years 2014 and 2013, we conducted our annual impairment review. As of the test date and as of year-end, and before consideration of a control premium, the fair value, which was estimated as our market capitalization, exceeded the carrying value of our net assets. As a result, no impairment was recorded for fiscal years 2014 or 2013.

The changes in the carrying amount of goodwill for fiscal years 2015 and 2014 were as follows (in thousands):

	March 29, 2015		March 30, 2014
Beginning balance	$	30,410	$	10,356
Goodwill additions		14,461		20,054
Ending balance	$	44,871	$	30,410

Goodwill additions during fiscal year 2015 consisted of $14.5 million residual allocation from the iML acquisition purchase price accounting. The goodwill additions during fiscal year 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):

	March 29, 2015										March 30, 2014
	Carrying Amount		Accumulated Amortization			Impairment charge			Net Carrying Amount		Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortized intangible assets:
Existing technology	$	120,041	$	(47,259	)	$	(9,134	)	$	63,648	$	63,043	$	(37,510	)	$	25,533
Customer relationships		15,165		(4,520	)		(870	)		9,775		6,095		(2,762	)		3,333
Distributor relationships		7,254		(1,973	)		—			5,281		1,264		(1,260	)		4
Patents/Core technology		3,459		(3,446	)		—			13		3,459		(3,378	)		81
Trade names		1,330		(274	)		—			1,056		210		(51	)		159
Total intangible assets subject to amortization		147,249		(57,472	)		(10,004	)		79,773		74,071		(44,961	)		29,110
In-process research and development		9,148		—			(2,819	)		6,329		2,280		—			2,280
Total	$	156,397	$	(57,472	)	$	(12,823	)	$	86,102	$	76,351	$	(44,961	)	$	31,390

     Long-lived assets are amortized on a straight-line basis over their respective estimated useful lives except for customer and distributor relationships that are amortized on an accelerated basis. Existing technology is amortized over two to nine years. Customer relationships are amortized over five to seven years. 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. In-process Research & Development (“IPR&D”) is reclassified as existing technology upon completion or written off upon abandonment. During the third fiscal quarter, $1.2 million of IPR&D was reclassified as existing technology upon completion and started amortization. During the fourth fiscal quarter, as a result of not meeting critical specifications, we abandoned one IPR&D project and recorded a $0.5 million charges in the impairment of intangible assets line on the consolidated statement of operations. We expect the amortization of the remaining IPR&D projects to start in fiscal year 2016. 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 which is derived using a discounted cash flow model. 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.

During fiscal year 2015, Exar completed a significant strategic restructuring process that began in the quarter ended September 28, 2014. This restructuring was prompted by the acquisition of iML, and an associated significant reduction in force, including reductions at our Hangzhou, China; Loveland, Colorado; and Ipoh, Malaysia locations. 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 7 – “Restructuring Charges and Exit Costs.” As a result of this restructuring and the resultant re-prioritization of resources, we anticipated 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 in the second quarter of fiscal year 2015 for the excess of carrying amount over estimated fair value based on projected cash flows discounted at 21%. Of these impairment charges, $7.5 million and $4.8 million are related to High-Performance Analog and Data Compression products, respectively.

Due to the decline in forecasted revenue related to certain acquired intangible assets, we recorded $1.6 million impairment charges for fiscal year 2014. No impairment charges were recorded for fiscal year 2013.

During the second quarter of fiscal year 2013, we sold certain patents for $500,000 and recorded a gain of approximately $223,000.

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

	March 29, 2015		March 30, 2014		March 31, 2013
Amortization expense	$	12,511	$	7,813	$	4,150

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

Amortization Expense (by fiscal year)
2016	$	12,946
2017		12,859
2018		12,822
2019		12,498
2020		11,707
2021 and thereafter		16,941
Total future amortization excluding IPR&D	$	79,773