Annual report pursuant to Section 13 and 15(d)

GOODWILL AND PURCHASED INTANGIBLE ASSETS

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GOODWILL AND PURCHASED INTANGIBLE ASSETS
 12 Months Ended
Jun. 30, 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 business combinations. We have four reportable segments and six operating segments. The operating segments are determined to be the same as reporting units.
The following table presents goodwill carrying value and the movements by reporting unit during the fiscal years ended June 30, 2022 and 2021(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 
Goodwill disposal from sale of business(2)
—  —  —  (34,250) —  (34,250)
Foreign currency adjustment 20  —  —  —  —  20 
Balance as of June 30, 2021 416,860  25,908  681,858  872,971  13,575  2,011,172 
Acquired goodwill 308,952  —  —  —  —  308,952 
Foreign currency adjustment (75) —  —  —  —  (75)
Balance as of June 30, 2022 $ 725,737  $ 25,908  $ 681,858  $ 872,971  $ 13,575  $ 2,320,049 
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(1)No goodwill was assigned to the Other reporting unit, and accordingly is not disclosed in the table above.
(2)Refer to the Non-controlling Interest section of Note 10 “Equity, Long-term Incentive Compensation Plans and Non-Controlling Interest” for more information on the sale of PixCell Medical Technologies Ltd. (“PixCell”).
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.
We performed the required annual goodwill impairment tests as of February 28, 2022 and 2021, and concluded that goodwill was not impaired. As a result of our qualitative assessments, we determined that it was not necessary to perform the quantitative assessments at those times. The required annual goodwill impairment tests for our fiscal year ended June 30, 2020 were performed as of February 28, 2020. We completed qualitative assessments for all reporting units and concluded that goodwill was not impaired for the Wafer Inspection and Patterning, Global Service and Support, and Component Inspection reporting units. However, due to the downward revision of the financial outlook for the Specialty Semiconductor Process and PCB and Display reporting units as well as the impact of the elevated risk and macroeconomic slowdown driven by the COVID-19 pandemic, we performed a quantitative goodwill impairment assessment for these two reporting units. As a result of the 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, during the quarter ended March 31, 2020.
Goodwill as of June 30, 2022, 2021 and 2020 is net of accumulated impairment losses of $534.2 million, of which $277.6 million was included in the Wafer Inspection and Patterning reporting unit, $144.2 million was included in the Specialty Semiconductor Process reporting unit, and $112.5 million was included in the PCB and Display reporting unit.
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, 2022. The next annual assessment of goodwill 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 June 30, 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
 $ 1,523,691  $ 668,175  $ 855,516  $ 1,382,612  $ 499,219  $ 883,393 
Customer relationships
4-9
 366,567  167,819  198,748  305,817  131,386  174,431 
Trade name/trademark
4-7
 121,083  68,194  52,889  117,383  53,493  63,890 
Order backlog and other
<1-9
 87,836  58,970  28,866  50,403  49,962  441 
Intangible assets subject to amortization 2,099,177  963,158  1,136,019  1,856,215  734,060  1,122,155 
IPR&D 64,457  6,062  58,395  63,256  100  63,156 
Total $ 2,163,634  $ 969,220  $ 1,194,414  $ 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. Impairment indicators primarily include the declines in our operating cash flows from the use of these assets. If 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 June 30, 2022 and 2021, there were no impairment indicators for purchased intangible assets.
Amortization expense for purchased intangible assets for the periods indicated below was as follows:
Year Ended June 30,
(In thousands) 2022 2021 2020
Amortization expense - Cost of revenues $ 168,957  $ 156,596  $ 145,823 
Amortization expense - SG&A 60,017  49,531  74,532 
Amortization expense - R&D 124  125  224 
Total $ 229,098  $ 206,252  $ 220,579 
Based on the purchased intangible assets’ gross carrying value recorded as of June 30, 2022, the remaining estimated annual amortization expense is expected to be as follows:
Fiscal Year Ending June 30: Amortization
(In thousands)
2023 $ 260,161 
2024 237,723 
2025 221,421 
2026 205,407 
2027 127,861 
Thereafter 83,446 
Total $ 1,136,019