Goodwill and Intangible Assets

9 Months Ended

Oct. 27, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill – There were no changes to goodwill during the first nine months of fiscal year 2014.

Goodwill is not amortized, but is tested for impairment using a two-step method on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair market value of the reporting unit.

For the annual assessment of the Company's goodwill and indefinite-lived intangible assets as of November 30, 2013, the Company has elected to first perform the qualitative assessment ("step 0") to determine whether it is more likely than not that the fair value of a reporting unit or the fair value of indefinite-lived intangible assets is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit or the fair value of indefinite-lived intangible assets is less than its carrying amount, it would then perform the first step of the quantitative goodwill or indefinite-lived intangible assets impairment test; otherwise, no further impairment test would be required. Goodwill is allocated to three reporting units (Advanced Communications, Wireless and Sensing and Gennum). At the end of fiscal 2013, the fair value of all three reporting unit exceeded their carrying values. The difference between the fair value and the carrying amount of these reporting units is one of several factors the Company will consider before reaching its conclusion about whether to perform the first step of the goodwill impairment test.

The fair value of goodwill is tested for impairment on a non-recurring basis in the accompanying unaudited consolidated condensed financial statements using Level 3 inputs. The Company concluded that there were no indicators of impairment as of October 27, 2013.

Purchased Intangibles – The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and technology licenses purchased, which continue to be amortized:



		October 27, 2013							January 27, 2013
(in thousands)	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Core technologies	2-10 years	$	183,725	$	(58,145	)	$	125,580	$	173,724	$	(40,867	)	$	132,857
Customer relationships	7-10 years	40,130		(11,755		)	28,375		40,130		(7,736		)	32,394
Technology licenses (1)	5-10 years	8,496		(2,268		)	6,228		8,164		(1,056		)	7,108
Other intangibles assets	1-5 years	6,600		(5,721		)	879		6,600		(4,601		)	1,999
Total finite-lived intangible assets		$	238,951	$	(77,889	)	$	161,062	$	228,618	$	(54,260	)	$	174,358


(1)	Technology licenses relate to licensing agreements entered into by the Company that are used in research and development activities and have alternative future uses. Amortization expense related to technology licenses is reported as “Product development and engineering” in the unaudited consolidated condensed statements of income.

During the first nine months of fiscal year 2014, acquired finite-lived intangible assets increased by approximately $10.3 million primarily due to the transfer from indefinite-lived intangible assets to core technologies upon the completion of in-process research and development projects from the Gennum acquisition in March 2012.

For the three months ended October 27, 2013 and October 28, 2012, amortization expense related to acquired finite-lived intangible assets was $7.3 million and $8.2 million, respectively. For the nine months ended October 27, 2013 and October 28, 2012, amortization expense related to finite-lived intangible assets was $22.4 million and $21.1 million, respectively. Amortization expense related to acquired finite-lived intangible assets is reported as “Intangible amortization and impairments” in the unaudited consolidated condensed statements of income.

The estimated annual amount of future amortization expense for all finite-lived intangible assets will be as follows:



(in thousands)
To be recognized in:	Technology license		Sierra Monolithics		Gennum		Cycleo		Total
Remainder of fiscal year 2014	$	439	$	2,217	$	4,950	$	252	$	7,858
Fiscal year 2015	1,512		8,870		19,799		1,007		31,188
Fiscal year 2016	1,501		8,870		19,252		1,007		30,630
Fiscal year 2017	1,251		8,870		19,165		1,007		30,293
Fiscal year 2018	842		8,160		19,165		1,007		29,174
Thereafter	683		8,490		22,664		82		31,919
Total expected amortization expense	$	6,228	$	45,477	$	104,995	$	4,362	$	161,062

The following table sets forth the Company’s indefinite-lived intangible assets resulting from business acquisitions:



	October 27, 2013							January 27, 2013
(in thousands)	Gross Carrying Amount		Accumulated Impairment Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Impairment Loss			Net Carrying Amount
In-process research and development	$	24,870	$	(5,770	)	$	19,100	$	34,870	$	(3,170	)	$	31,700
Total indefinite-lived intangible assets	$	24,870	$	(5,770	)	$	19,100	$	34,870	$	(3,170	)	$	31,700

During the first nine months of fiscal year 2014, acquired indefinite-lived intangible assets decreased by approximately $10.0 million due to the transfer from indefinite-lived intangible assets to core technologies upon the completion of in-process research and development projects (“IPR&D”) from the Gennum acquisition in March 2012.

The Company reviews indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Recoverability of indefinite-lived intangible assets is measured by comparing the carrying amount of the asset to the future discounted cash flows the asset is expected to generate.

The fair value of indefinite-lived intangible assets is tested for impairment on a non-recurring basis in the accompanying unaudited consolidated condensed financial statements using Level 3 inputs. During the nine month period ending October 27, 2013, the Company made the strategic decision to discontinue development of microwave products which resulted in the Company recording a $2.6 million impairment to IPR&D from the acquisition of Sierra Monolithics, Inc (“SMI”). Other than this impairment charge, the Company performed an assessment for indicators of impairment for the remaining in-process research and development projects and noted none as of October 27, 2013.

- 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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