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, 2023
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. Prior to July 1, 2022, we had a fourth segment, Other, but core assets from that segment were sold, making it non-operational and the segment was eliminated.
The following table presents goodwill carrying value and the movements by reporting unit during the fiscal years ended June 30, 2023 and 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 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 
Acquired goodwill 6,776  —  —  —  —  6,776 
Goodwill disposal from sale of business(2)
—  —  —  (42,622) —  (42,622)
Goodwill adjustments (5,337) —  —  —  —  (5,337)
Foreign currency adjustment (46) —  —  —  —  (46)
Balance as of June 30, 2023 $ 727,130  $ 25,908  $ 681,858  $ 830,349  $ 13,575  $ 2,278,820 
_________________
(1)No goodwill was assigned to the Other reporting unit, which existed until June 30, 2022, and, accordingly, it is not disclosed in the table above.
(2)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 performed the required annual goodwill impairment tests as of February 28, 2023 and 2022, 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.
Goodwill as of June 30, 2023, 2022 and 2021 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, 2023. 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, 2024.
Purchased Intangible Assets
The components of purchased intangible assets as of the dates indicated below were as follows:
(In thousands) As of June 30, 2023 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  $ 841,815  $ 695,011  $ 1,523,691  $ 668,175  $ 855,516 
Customer relationships
4-9
 358,567  205,037  153,530  366,567  167,819  198,748 
Trade name/trademark
4-7
 116,583  78,749  37,834  121,083  68,194  52,889 
Order backlog and other
<1-7
 85,836  82,264  3,572  87,836  58,970  28,866 
Intangible assets subject to amortization(1)
2,097,812  1,207,865  889,947  2,099,177  963,158  1,136,019 
IPR&D 61,322  15,966  45,356  64,457  6,062  58,395 
Total $ 2,159,134  $ 1,223,831  $ 935,303  $ 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 intangible assets 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.
Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” for our policy of testing purchased intangible assets for impairment.
As of June 30, 2023 and 2022, 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) 2023 2022 2021
Amortization expense - Cost of revenues $ 181,405  $ 168,957  $ 156,596 
Amortization expense - SG&A 79,089  60,017  49,531 
Amortization expense - R&D 125  124  125 
Total $ 260,619  $ 229,098  $ 206,252 
Based on the purchased intangible assets’ gross carrying value recorded as of June 30, 2023, the remaining estimated annual amortization expense is expected to be as follows:
Fiscal Year Ending June 30: Amortization
(In thousands)
2024 $ 238,575 
2025 222,123 
2026 206,210 
2027 129,630 
2028 47,232 
Thereafter 46,177 
Total $ 889,947