Goodwill and Intangible Assets

6 Months Ended

Jul. 27, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill – Changes in the carrying amount of goodwill were as follows:



(in thousands)	Signal Integrity		Signal, Integrity and Timing			Wireless and Sensing			Wireless, Sensing and Timing		Total
Balance as of January 26, 2014	$	—	$	261,891		$	15,007		$	—	$	276,898
Transfers	261,891		(261,891		)	(15,007		)	15,007		—
Balance at July 27, 2014	$	261,891	$	—		$	—		$	15,007	$	276,898

On January 27, 2014, the Timing product line was integrated with the Wireless and Sensing reporting unit to form the Wireless, Sensing and Timing reporting unit. Simultaneously, the Signal, Integrity and Timing reporting unit was reorganized into the Signal Integrity reporting unit. No portion of the goodwill associated with the previous Signal, Integrity and Timing reporting unit, which originated with the March 2012 acquisition of Gennum Corporation, was allocated to the Timing product line as it was never integrated into the Signal, Integrity and Timing reporting unit. In reaching this conclusion, the Company considered the events leading up to the multiple reorganizations and the short time span between the December 2013 and January 27, 2014 reorganizations.

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.

Goodwill is allocated to two reporting units (Signal Integrity and Wireless, Sensing and Timing). These reporting units also represent the related operating segment since segment management who report to the CODM regularly review operating results and make resource allocation decisions at this level. 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. No Goodwill is allocated to the newly identified Systems Innovation Group operating segment (see Note 14).

Goodwill was tested for impairment as of November 30, 2013 at the reporting unit level, the date of the Company’s annual impairment review. The Company estimated the fair values using an income approach, as well as other generally accepted valuation methodologies. The cash flows for each reporting unit were based on discrete financial forecasts developed by management for planning purposes. Cash flows beyond the discrete forecasts were estimated using a terminal value calculation, which incorporated historical and forecasted financial trends for each identified reporting unit and considered perpetual earnings growth rates for publicly traded peer companies.

Goodwill is measured at fair value on a non-recurring basis. That is, goodwill is not measured at fair value on an ongoing basis, but is subject to fair value adjustments using Level 3 inputs in certain circumstances (e.g. when there is evidence of impairment). At July 27, 2014, the Company concluded that there were no indicators of such impairment.

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:



		July 27, 2014							January 26, 2014
(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	$	146,925	$	(45,817	)	$	101,108	$	146,925	$	(35,357	)	$	111,568
Customer relationships	7-10 years	28,630		(9,579		)	19,051		28,630		(7,505		)	21,125
Technology licenses (1)	5-10 years	4,842		(1,103		)	3,739		3,842		(367		)	3,475
Other intangibles assets	1-5 years	6,600		(6,197		)	403		6,600		(5,824		)	776
Total finite-lived intangible assets		$	186,997	$	(62,696	)	$	124,301	$	185,997	$	(49,053	)	$	136,944


(1)	Technology licenses relate to in-license agreements for intellectual property that is used by the Company in research and development activities and also has alternative future uses. Amortization expense related to technology licenses is reported as “Product development and engineering” in the condensed consolidated statements of income.

The Company’s finite-lived intangible assets resulting from purchases, additions from acquisitions, and transfers from In-process Research and Development (“IPR&D”) was $187.0 million and $186.0 million as of July 27, 2014 and January 26, 2014, respectively.

For the three months ended July 27, 2014 and July 28, 2013, amortization expense related to acquired finite-lived intangible assets was $6.4 million and $7.2 million, respectively. For the six months ended July 27, 2014 and July 28, 2013, amortization expense related to finite-lived intangible assets was $12.9 million and $15.1 million, respectively. Amortization expense related to acquired finite-lived intangible assets is reported as “Intangible amortization and impairments” in the condensed consolidated 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:	Core Technologies		Customer Relationships		Technology Licenses		Other Intangibles		Total
Remaining six months of fiscal year 2015	$	10,459	$	2,075	$	898	$	310	$	13,742
Fiscal year 2016	20,919		4,149		1,798		93		26,959
Fiscal year 2017	20,919		4,149		1,043		—		26,111
Fiscal year 2018	20,919		4,130		—		—		25,049
Fiscal year 2019	17,507		4,000		—		—		21,507
Thereafter	10,385		548		—		—		10,933
Total expected amortization expense	$	101,108	$	19,051	$	3,739	$	403	$	124,301

At July 27, 2014 and January 26, 2014, the Company had a total of $4.0 million of indefinite-lived intangible assets consisting of IPR&D from previous acquisitions for which development is continuing.

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.

Indefinite-lived intangible assets are measured at fair value on a non-recurring basis using Level 3 inputs in certain circumstances (e.g. when there is evidence of impairment). At July 27, 2014 the Company concluded that there were no indicators of impairment. During the three month period ending July 28, 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.

- 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