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

3 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND PURCHASED INTANGIBLE ASSETS

NOTE 7 – 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 business combinations. We have four reportable segments and six reporting units. For additional details, refer to Note 18, “Segment Reporting and Geographic Information” of the Condensed Consolidated Financial

Statements. The following table presents goodwill carrying value and the movements during the three months ended September 30, 2019⁽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, 2019	$	360,615		$	25,908	$	821,842	$	989,918		$	13,575	$	2,211,858
Acquired goodwill	54,001			—		—		—			—		54,001
Foreign currency and other adjustments	(35		)	—		—		(2,135		)	—		(2,170		)
Balance as of September 30, 2019	$	414,581		$	25,908	$	821,842	$	987,783		$	13,575	$	2,263,689

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(1)	No goodwill was assigned to the Other reporting unit, and accordingly was excluded in the table above.

As of September 30, 2019, there have been no significant events or circumstances affecting the valuation of goodwill subsequent to the qualitative assessment performed in the third and fourth quarters of the fiscal year ended June 30, 2019. For additional details, refer to Note 7 “Goodwill and Purchased Intangible Assets,” of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. 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, 2020.

Purchased Intangible Assets

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



(In thousands)		As of September 30, 2019						As of June 30, 2019
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	$	1,251,277	$	232,203	$	1,019,074	$	1,224,629	$	196,582	$	1,028,047
Trade name / Trademark	4-7	117,133		28,537		88,596		114,573		25,052		89,521
Customer relationships	4-9	305,028		74,511		230,517		297,250		66,471		230,779
Backlog and other	<1-9	50,393		30,014		20,379		43,969		19,146		24,823
Intangible assets subject to amortization		1,723,831		365,265		1,358,566		1,680,421		307,251		1,373,170
In-process research and development		190,635		—		190,635		187,500		—		187,500
Total		$	1,914,466	$	365,265	$	1,549,201	$	1,867,921	$	307,251	$	1,560,670

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 recoverable. The change in the gross carrying amounts of intangible assets is due to acquisition of certain assets and liabilities of privately-held companies. For additional details, refer to Note 6 “Business Combinations” of the Condensed Consolidated Financial Statements.

Amortization expense for purchased intangible assets for the periods indicated below was as follows:



	Three Months Ended
	September 30,
(In thousands)	2019		2018
Amortization expense - Cost of revenues	$	35,621	$	890
Amortization expense - Selling, general and administrative	22,256		544
Amortization expense - Research and development	31		—
Total	$	57,908	$	1,434

Based on the purchased intangible assets gross carrying amount recorded as of September 30, 2019, the underlying assets, the remaining estimated annual amortization expense is expected to be as follows:



Fiscal year ending June 30:	Amortization (In thousands)
2020 (remaining 9 months)	$	161,422
2021	194,901
2022	192,323
2023	191,271
2024	188,714
2025 and thereafter	429,935
Total	$	1,358,566