Quarterly report pursuant to Section 13 or 15(d)

GOODWILL AND PURCHASED INTANGIBLE ASSETS

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GOODWILL AND PURCHASED INTANGIBLE ASSETS
9 Months Ended
Mar. 31, 2022
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 quarters’ business combinations. We have four reportable segments and six operating segments. The operating segments are determined to be the same as reporting units. For additional details, refer to Note 18 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements. The following table presents changes in goodwill carrying value during the nine months ended March 31, 2022(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, 2021 $ 416,860  $ 25,908  $ 681,858  $ 872,971  $ 13,575  $ 2,011,172 
Acquired goodwill 303,324  —  —  —  —  303,324 
Foreign currency adjustments (25) —  —  —  —  (25)
Balance as of March 31, 2022 $ 720,159  $ 25,908  $ 681,858  $ 872,971  $ 13,575  $ 2,314,471 
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(1)No goodwill was assigned to the Other reporting unit and, accordingly, it was excluded from 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: stock price or market capitalization, changes in the industry and competitive environment, budget-to-actual revenue and profitability performance from the prior year and projected revenue and profitability trends for future years at our reporting units. 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. 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.
We performed the required annual goodwill impairment testing for all reporting units as of February 28, 2022, and concluded that goodwill was not impaired. As a result of our qualitative assessment, we determined that it was not necessary to perform the quantitative assessment at this time. The next annual goodwill impairment assessment by reporting unit is scheduled to be performed in the third quarter of the fiscal year ending June 30, 2023.
Purchased Intangible Assets
The components of purchased intangible assets as of the dates indicated below were as follows:
(In thousands)   As of March 31, 2022 As of June 30, 2021
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
$ 1,521,291  $ 623,834  $ 897,457  $ 1,382,612  $ 499,219  $ 883,393 
Customer relationships
4-9
365,717  157,608  208,109  305,817  131,386  174,431 
Trade name / Trademark
4-7
121,083  64,400  56,683  117,383  53,493  63,890 
Order backlog and other
<1-9
87,836  52,807  35,029  50,403  49,962  441 
Intangible assets subject to amortization 2,095,927  898,649  1,197,278  1,856,215  734,060  1,122,155 
In-process research and development 64,456  6,062  58,394  63,256  100  63,156 
Total $ 2,160,383  $ 904,711  $ 1,255,672  $ 1,919,471  $ 734,160  $ 1,185,311 

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.
As of March 31, 2022, 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 March 31, Nine Months Ended March 31,
(In thousands) 2022 2021 2022 2021
Amortization expense - Costs of revenues $ 42,586  $ 40,309  $ 124,834  $ 116,087 
Amortization expense - SG&A 15,102  12,063  39,880  37,793 
Amortization expense - Research and development 31  32  93  94 
Total $ 57,719  $ 52,404  $ 164,807  $ 153,974 
Based on the purchased intangible assets gross carrying amount recorded as of March 31, 2022, the remaining estimated annual amortization expense is expected to be as follows:
Fiscal year ending June 30: Amortization (In thousands)
2022 (remaining three months) $ 65,342 
2023 259,649 
2024 237,210 
2025 220,908 
2026 204,894 
2027 and thereafter 209,275 
Total $ 1,197,278