Goodwill and Other Intangible Assets

12 Months Ended

Jun. 28, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

Additions and Dispositions

In connection with our sale of the Zurich Business, we transferred certain of our other intangible assets to II-VI. As of September 12, 2013, the date of the sale, and as of June 29, 2013, these other intangible assets had no carrying value. For the year ended June 29, 2013, we recorded $0.3 million in amortization related to these intangible assets, which has been reclassified to discontinued operations in the consolidated statements of operations.

In connection with our acquisition of Opnext on July 23, 2012, we recorded $16.4 million in other intangible assets as our estimate of the fair value of acquired intangible assets. The intangible assets acquired from Opnext consist of $8.7 million of developed technology with an estimated weighted average useful life of 6 years, $0.2 million of contract backlog with an estimated weighted average useful life of 1 year, $4.9 million of customer relationships with an estimated weighted average useful life of 11 years, and $2.7 million of trademarks and other with an estimated weighted average useful life of 6 years.

In connection with our acquisition of Mintera on July 21, 2010, we recorded $10.9 million in goodwill and $11.7 million in other intangible assets. The other intangible assets acquired from Mintera consist of core and current technology assets of $6.0 million with a weighted-average life of 6 years, a development agreement of $3.4 million with a weighted-average life of 7 years, customer relationships of $1.4 million with a weighted-average life of 8.5 years, manufacturing software of $0.7 million with a weighted-average life of 6 years, patents of $0.1 million with a weighted-average life of 5.5 years, trade names of $0.1 million with a weighted-average life of 1.5 years and backlog of $30,000 with a weighted-average life of 1.5 years.

Impairment Assessments

During the fourth quarter of fiscal year 2014, we reviewed our other intangible assets for impairment. We compared their carrying amounts to market prices or the future undiscounted cash flows the assets are expected to generate. We determined that the carrying value of the assets did not exceed the fair value based on market prices or future discounted cash flows. We did not record any impairment charges in fiscal year 2014.

During the fourth quarter of fiscal year 2013, we performed an annual analysis for potential impairment of our goodwill, which included examining the impact of current general economic conditions on our future prospects, the decline in our market capitalization, and the anticipated resizing of our operations with the recent sale of certain of our products and/or businesses. The first step of testing goodwill for impairment is based on a reporting unit’s “fair value,” which is generally determined through market prices. In certain cases, due to the absence of market prices for a particular element of our business, we have elected to base our analysis on discounted future expected cash flows. Based on this analysis, we concluded that our remaining goodwill on our consolidated balance sheet, which relates to our acquisition of Mintera, was impaired. We performed a second step impairment analysis, which indicated that the goodwill in connection with the Mintera reporting unit was fully impaired. Based upon this evaluation, we recorded $10.9 million for the goodwill impairment loss in our consolidated statement of operations for the year ended June 29, 2013. The impairment did not result in any cash expenditures. In connection with our second step goodwill impairment analysis, we also evaluated the fair value of our other intangible assets in this reporting unit, and our other reporting units, and concluded that based on declines in our forecasts, our decision to sell or abandon certain product lines and other factors, certain of these other intangible assets were also impaired as of June 29, 2013. We recorded impairment losses of $6.4 million related to intangibles acquired in connection with our acquisition of Mintera, $2.6 million related to intangibles acquired in connection with our acquisition of Opnext, and $5.2 million related to intangibles acquired in connection with other earlier acquisitions.

In addition, during fiscal year 2013, we determined that a portion of the technology we acquired in connection with our acquisition of Mintera in July 2010 was considered redundant, following the acquisition of Opnext and its product lines. We recorded $0.9 million for the impairment loss related to these intangibles in goodwill and other intangible assets in our consolidated statement of operations for the year ended June 29, 2013.

Amortization

Amortization of other intangible assets for the fiscal years ended June 28, 2014, June 29, 2013 and June 30, 2012, was $1.7 million, $5.0 million and $2.7 million, respectively. Amortization is recorded as an operating expense within the consolidated statements of operations.

Estimated future amortization expense of other intangible assets is as follows:



	Estimated Future Amortization
	(Thousands)
Fiscal Year:
2015	$	1,690
2016	1,690
2017	1,690
2018	1,690
2019	561
Thereafter	1,215
	$	8,536

The following table provides details regarding the changes in our goodwill for each of the three years then ended:



	Total
	(Thousands)
Balance at July 2, 2011 and June 30, 2012	$	10,904
Impairment	(10,904		)
Balance at June 29, 2013 and June 28, 2014	—

The following table summarizes the activity related to our other intangible assets for fiscal years ended June 28, 2014, June 29, 2013 and June 30, 2012:



	Core and Current Technology			Development and Supply Agreements			Customer Relationships			Patent Portfolio			Other Intangibles			Amortization			Total
	(Thousands)
Balance at July 2, 2011	$	10,252		$	6,559		$	2,807		$	2,910		$	965		$	(4,347	)	$	19,146
Amortization	—			—			—			—			—			(2,724		)	(2,724		)
Translations and adjustments	(14		)	(39		)	—			—			—			—			(53		)
Balance at June 30, 2012	$	10,238		$	6,520		$	2,807		$	2,910		$	965		$	(7,071	)	$	16,369
Additions	8,700			—			4,860			—			2,860			—			16,420
Amortization	—			—			—			—			—			(5,029		)	(5,029		)
Impairment	(9,119		)	(1,954		)	(1,568		)	(1,995		)	(475		)	—			(15,111		)
Translations and adjustments	(1,486		)	(10		)	(901		)	—			(12		)	(7		)	(2,416		)
Balance at June 29, 2013	$	8,333		$	4,556		$	5,198		$	915		$	3,338		$	(12,107	)	$	10,233
Amortization	—			—			—			—			—			(1,680		)	(1,680		)
Translations and adjustments	(66		)	104			(55		)	—			—			—			(17		)
Balance at June 28, 2014	$	8,267		$	4,660		$	5,143		$	915		$	3,338		$	(13,787	)	$	8,536

During fiscal year 2013, the Japanese yen declined in value relative to the U.S. dollar by approximately 20 percent, thus reducing the value of our Japanese yen denominated intangible assets, acquired in connection with our acquisition of Opnext, by approximately $2.4 million at June 29, 2013.

- 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.

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