KLA Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Purchased Intangible Assets

Goodwill and Purchased Intangible Assets

6 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Purchased Intangible Assets

GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill

The following table presents goodwill balances and the movements during the six months ended December 31, 2014:



(In thousands)
As of June 30, 2014	$	335,355
Adjustments	(82		)
As of December 31, 2014	$	335,273

The changes in the gross goodwill balance since June 30, 2014 resulted from foreign currency translation adjustments.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in prior business combinations. The Company has four reporting units: Defect Inspection, Metrology, Service and Other. As of December 31, 2014, substantially all of the goodwill balance resided within the Defect Inspection reporting unit.

The Company performed a qualitative assessment of the goodwill by reporting unit as of November 30, 2014 during the three months ended December 31, 2014 and concluded that it was more likely than not that the fair value of each of the reporting units exceeded its carrying amount. As a result of the Company’s determination following its qualitative assessment, it was not necessary to perform the two-step quantitative goodwill impairment test at this time. In assessing the qualitative factors, the Company considered the impact of key factors, including changes in the industry and competitive environment, market capitalization, stock price, earnings multiples, budgeted-to-actual revenue performance from prior year, gross margin and cash flows from operating activities.

Based on the Company’s assessment, goodwill in the reporting units was not impaired as of December 31, 2014 or 2013.

Purchased Intangible Assets

The components of purchased intangible assets as of the dates indicated below were as follows:



(In thousands)		As of December 31, 2014						As of June 30, 2014
Category	Range of Useful Lives	Gross Carrying Amount		Accumulated Amortization and Impairment		Net Amount		Gross Carrying Amount		Accumulated Amortization and Impairment		Net Amount
Existing technology	4-7 years	$	141,659	$	130,671	$	10,988	$	141,659	$	126,567	$	15,092
Patents	6-13 years	57,648		55,698		1,950		57,648		54,398		3,250
Trade name/Trademark	4-10 years	19,893		18,177		1,716		19,893		17,427		2,466
Customer relationships	6-7 years	54,680		50,357		4,323		54,680		48,915		5,765
Other	0-1 year	17,599		17,025		574		17,599		16,475		1,124
Total		$	291,479	$	271,928	$	19,551	$	291,479	$	263,782	$	27,697

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 recoverable.

For the three months ended December 31, 2014 and 2013, amortization expense for intangible assets was $4.0 million and $3.9 million, respectively. For the six months ended December 31, 2014 and 2013, amortization expense for intangible assets was $8.1 million and $8.4 million, respectively. Based on the intangible assets recorded as of December 31, 2014, and assuming no subsequent additions to, or impairment of, the underlying assets, the remaining estimated amortization expense is expected to be as follows:



Fiscal year ending June 30:	Amortization (In thousands)
2015 (remaining 6 months)	$	7,656
2016	7,564
2017	2,806
2018	1,525
Total	$	19,551

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details