Goodwill and Intangible Assets

12 Months Ended

Jan. 29, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill – There were no changes in the carrying amount of goodwill during fiscal years 2017 and 2016. Goodwill by applicable reporting unit is as follows:



(in thousands)	Signal Integrity		Power and High-Reliability		Wireless and Sensing		Total
Balance at January 31, 2016	$	261,891	$	49,384	$	18,428	$	329,703
Additions	—		—		—		—
Balance at January 29, 2017	$	261,891	$	49,384	$	18,428	$	329,703

Goodwill is not amortized, but is tested for impairment using either a qualitative assessment or 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 three reporting units (Signal Integrity, Power and High-Reliability and Wireless and Sensing) (see Note 16). 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.

Goodwill was tested for impairment at the reporting unit level as of November 30, 2016 and November 30, 2015, the dates of the Company’s annual impairment review for fiscal years 2017 and 2016, respectively.

For fiscal year 2017, the Company performed a qualitative assessment and concluded that it was more likely than not that the fair value of each of the three reporting units exceeded its carrying value. As such, the Company did not perform a quantitative impairment analysis.

For fiscal year 2016, the Company performed the first step quantitative analysis of the goodwill impairment test. The Company estimated the fair values using an income approach. 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. Specifically, the income approach valuations included the following assumptions:



	November 30, 2015
Discount rate	11.0% - 24.0%
Perpetual growth rate	3.0%
Tax rate	13.5% - 40.0%
Risk-free rate	2.6%
Peer company beta	1.2 - 1.9

In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. As of January 29, 2017 and January 31, 2016, there were no indications of impairment of the Company's goodwill balances.

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:



		January 29, 2017							January 31, 2016
(in thousands)	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Core technologies	5-8 years	$	144,930	$	(92,940	)	$	51,990	$	148,210	$	(74,005	)	$	74,205
Customer relationships	5-10 years	30,030		(20,247		)	9,783		30,030		(15,847		)	14,183
Technology licenses ⁽¹⁾	2 years	100		(100		)	—		100		(58		)	42
Total finite-lived intangible assets		$	175,060	$	(113,287	)	$	61,773	$	178,340	$	(89,910	)	$	88,430


(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 Consolidated Statements of Income.

The Company reviews finite-lived intangible assets for impairment when there are indicators of impairment, by comparing the carrying amount of the asset to the future discounted cash flows that asset is expected to generate. In December 2014, certain intangible assets relating to the Systems Innovation reporting unit were determined to be impaired as a result of the Company's strategic decision to reduce its investment in the defense and microwave communications markets and its additional reductions in the long-haul optical market.

Impairments for technology licenses are included in "Product development and engineering" on the Consolidated Statements of Income. The impairment of core technologies and customer relationships is included in "Intangible asset impairments" on the Consolidated Statements of Income. Impairment charges for these items, which resulted in a new basis for the affected intangible assets, are included in the Consolidated Statements of Income as follows:



(in thousands)	January 29, 2017		January 31, 2016		January 25, 2015
Product development and engineering	$	—	$	—	$	3,119
Intangible asset impairments	—		—		11,636
Impairment of finite-lived intangible assets	$	—	$	—	$	14,755

The following table sets forth the Company’s changes to finite-lived intangible assets resulting from purchases, additions from acquisitions, and transfers from IPR&D:



(in thousands)	Gross Carrying Amount
Gross carrying value at January 25, 2015	$	169,048
Purchased intangible assets	12,000
Transfers from in-process research and development	4,000
Other	(108		)
Gross carrying value at January 31, 2016	184,940
Snowbush divestiture	(3,280		)
Gross carrying value at January 29, 2017	$	181,660

Amortization expense related to finite-lived intangible assets is reported as "Intangible amortization" in the Consolidated Statements of Income. The estimated annual amount of future amortization expense for finite-lived intangible assets is expected to be as follows:



(in thousands)
To be recognized in:	Core Technologies		Customer relationships		Technology licenses		Total
Fiscal year 2018	$	20,744	$	4,400	$	—	$	25,144
Fiscal year 2019	17,332		4,400		—		21,732
Fiscal year 2020	9,905		950		—		10,855
Fiscal year 2021	3,056		33		—		3,089
Fiscal year 2022	571		—		—		571
Thereafter	382		—		—		382
Total expected amortization expense	$	51,990	$	9,783	$	—	$	61,773

The following table sets forth the Company’s indefinite-lived intangible assets from additions to IPR&D, acquisitions, impairments, and transfers to core technologies:



(in thousands)	Gross Carrying Amount
Net carrying value at January 25, 2015	$	4,000
Transfers to core technologies	(4,000		)
Net carrying value at January 31, 2016	—
Net carrying value at January 29, 2017	$	—

The Company reviews indefinite-lived intangible assets for impairment as of November 30, each year, by comparing the carrying amount of the asset to the future discounted cash flows that asset is expected to generate.

- 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