Quarterly report pursuant to Section 13 or 15(d)

GOODWILL AND PURCHASED INTANGIBLE ASSETS

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GOODWILL AND PURCHASED INTANGIBLE ASSETS
 3 Months Ended
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND PURCHASED INTANGIBLE ASSETS GOODWILL AND PURCHASED 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 the current and prior business combinations. We have four reportable segments and six reporting units. For additional details, refer to Note 18 “Segment Reporting and Geographic Information” of the Notes to the Condensed Consolidated Financial Statements. The following table presents goodwill carrying value and the movements during the three months ended September 30, 2020(1):
(In thousands) Wafer Inspection and Patterning
Global Service and Support (“GSS”)
Specialty Semiconductor Process PCB and Display Component Inspection Total
Balance as of June 30, 2020 $ 416,840  $ 25,908  $ 681,858  $ 907,221  $ 13,575  $ 2,045,402 
Foreign currency adjustments 30  —  —  —  —  30 
Balance as of September 30, 2020 $ 416,870  $ 25,908  $ 681,858  $ 907,221  $ 13,575  $ 2,045,432 
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(1)No goodwill was assigned to the Other reporting unit, and accordingly it was excluded in the table above.
    
Goodwill is not subject to amortization but is tested for impairment annually during the third fiscal quarter as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In testing goodwill for impairment, we utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. When performing the qualitative assessment, we consider the following factors: declines in our stock price or market capitalization, declines in our market share, and declines in revenues or profitability at our reporting units. Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge.
If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a quantitative assessment by comparing the carrying value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the carrying value, the amount of impairment is computed as the excess of the carrying value over the estimated fair value, not to exceed the carrying value of goodwill.
As of September 30, 2020, there have been no significant events or circumstances affecting the valuation of goodwill subsequent to the assessment performed in the third quarter of the fiscal year ended June 30, 2020. As a result of that assessment, we recorded $144.2 million and $112.5 million in impairment charges in the Specialty Semiconductor Process and PCB and Display reporting units, respectively, in the three months ended March 31, 2020. For additional details, refer to Note 7 “Goodwill and Purchased Intangible Assets” of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
Purchased Intangible Assets
The components of purchased intangible assets as of the dates indicated below were as follows:
As of As of
(In thousands)   September 30, 2020 June 30, 2020
Category
Range of
Useful 
Lives
(in years)
 Gross
Carrying
Amount		 Accumulated
Amortization,
and Impairment		 Net
Amount		 Gross
Carrying
Amount		 Accumulated
Amortization
and
Impairment		 Net
Amount
Existing technology
4-8
 $ 1,269,883  $ 379,663  $ 890,220  $ 1,269,883  $ 342,623  $ 927,260 
Customer relationships
4-9
 305,817  106,912  198,905  305,817  98,754  207,063 
Trade name / Trademark
4-7
 117,383  42,785  74,598  117,383  39,216  78,167 
Backlog and other
<1-9
 50,404  48,948  1,456  50,404  47,215  3,189 
Intangible assets subject to amortization 1,743,487  578,308  1,165,179  1,743,487  527,808  1,215,679 
In-process research and development 175,834  100  175,734  175,834  100  175,734 
Total $ 1,919,321  $ 578,408  $ 1,340,913  $ 1,919,321  $ 527,908  $ 1,391,413 

Purchased intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. The impairment indicator primarily includes the declines in our operating cash flows from the use of these assets. If the impairment indicators are present, we are required to perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to these long-lived assets to their carrying value.
We performed the required recoverability test for intangible assets in the third quarter of the fiscal year ended June 30, 2020 and concluded that there was no impairment based on the assessment. As of September 30, 2020, there were no impairment indicators for purchased intangible assets.
Amortization expense for purchased intangible assets for the periods indicated below was as follows:
Three Months Ended
September 30,
(In thousands) 2020 2019
Amortization expense - Cost of revenues $ 37,040  $ 35,621 
Amortization expense - Selling, general and administrative 13,429  22,256 
Amortization expense - Research and development 31  31 
Total $ 50,500  $ 57,908 
Based on the purchased intangible assets gross carrying amount recorded as of September 30, 2020, the remaining estimated annual amortization expense is expected to be as follows:
Fiscal year ending June 30: Amortization (In thousands)
2021 (remaining nine months) $ 147,317 
2022 195,239 
2023 194,147 
2024 191,630 
2025 179,421 
2026 and thereafter 257,425 
Total $ 1,165,179