Quarterly report pursuant to Section 13 or 15(d)

GOODWILL AND PURCHASED INTANGIBLE ASSETS

v3.22.4
GOODWILL AND PURCHASED INTANGIBLE ASSETS
 6 Months Ended
Dec. 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 business combinations. We have three reportable segments and five 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 six months ended December 31, 2022:
(In thousands) Wafer Inspection and Patterning
Global Service and Support (“GSS”)
Specialty Semiconductor Process Printed Circuit Board (“PCB”) and Display Component Inspection Total
Balance as of June 30, 2022 $ 725,737  $ 25,908  $ 681,858  $ 872,971  $ 13,575  $ 2,320,049 
Acquired goodwill 6,776  —  —  —  —  6,776 
Goodwill disposal from sale of business (1)
—  —  —  (42,622) —  (42,622)
Goodwill adjustments (5,337) —  —  —  —  (5,337)
Foreign currency adjustments (57) —  —  —  —  (57)
Balance as of December 31, 2022 $ 727,119  $ 25,908  $ 681,858  $ 830,349  $ 13,575  $ 2,278,809 
(1) Refer to the “Business Dispositions” section of Note 6 “Business Combinations and Dispositions” for more information on the sale of Orbograph.
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 completed the required annual testing of goodwill for impairment for all reporting units as of February 28, 2022 and concluded there was no goodwill impairment as a result of that assessment.
There have been no significant events or circumstances affecting the valuation of goodwill subsequent to the annual assessment performed in the third quarter of the fiscal year ended June 30, 2022.
Purchased Intangible Assets
The components of purchased intangible assets as of the dates indicated below were as follows:
(In thousands)   As of December 31, 2022 As of June 30, 2022
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
 $ 1,536,826  $ 750,923  $ 785,903  $ 1,523,691  $ 668,175  $ 855,516 
Customer relationships
4-9
 358,567  185,462  173,105  366,567  167,819  198,748 
Trade name / Trademark
4-7
 116,583  71,281  45,302  121,083  68,194  52,889 
Order backlog and other
<1-9
 85,836  70,411  15,425  87,836  58,970  28,866 
Intangible assets subject to amortization(1)
2,097,812  1,078,077  1,019,735  2,099,177  963,158  1,136,019 
In-process research and development 61,322  15,966  45,356  64,457  6,062  58,395 
Total $ 2,159,134  $ 1,094,043  $ 1,065,091  $ 2,163,634  $ 969,220  $ 1,194,414 
(1) The disposition of Orbograph during the three months ended September 30, 2022 resulted in a decrease in the gross amount of intangible assets subject to amortization of $34.5 million, a decrease in accumulated amortization of $15.9 million, and a decrease in the net amount of $18.6 million. Refer to the “Business Dispositions” section of Note 6 “Business Combinations and Dispositions” for more information on the sale of Orbograph.
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 December 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 December 31, Six Months Ended December 31,
(In thousands) 2022 2021 2022 2021
Amortization expense - Costs of revenues $ 45,446  $ 41,124  $ 90,512  $ 82,248 
Amortization expense - SG&A 20,128  12,389  40,256  24,778 
Amortization expense - Research and development 31  31  62  62 
Total $ 65,605  $ 53,544  $ 130,830  $ 107,088 
Based on the purchased intangible assets gross carrying amount recorded as of December 31, 2022, the remaining estimated annual amortization expense is expected to be as follows:
Fiscal year ending June 30: Amortization (In thousands)
2023 (remaining six months) $ 129,787 
2024 238,575 
2025 222,123 
2026 206,211 
2027 129,630 
2028 and thereafter 93,409 
Total $ 1,019,735