Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jan. 31, 2018

Basis of Presentation

Basis of Presentation

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. The Company evaluates the need to consolidate affiliates based on standards set forth in ASC 810, Consolidation (“ASC 810”).

The consolidated financial statements include the accounts of the Company and a variable interest entity (“VIE”) in which the Company has been determined to be the primary beneficiary. The Non-controlling interest in ALBS Solutions Sdn Bhd (“ALBS”) represents the 88.89% equity interest that is not held by the Company. All significant consolidated transactions and balances have been eliminated in consolidation.

Variable Interest Entities-Principles of Consolidation

Variable Interest Entities—Principles of Consolidation

The Company follows ASC 810-10-15 guidance with respect to accounting for VIEs. These entities do not have sufficient equity at risk to finance their activities without additional subordinated financial support from other parties or whose equity investors lack any of the characteristics of a controlling financial interest. A variable interest is an investment or other interest that will absorb portions of a VIE’s expected losses or receive portions of its expected residual returns and are contractual, ownership, or pecuniary in nature and that change with changes in the fair value of the entity’s net assets. A reporting entity is the primary beneficiary of a VIE and must consolidate it when that party has a variable interest, or combination of variable interests, that provides it with a controlling financial interest. A party is deemed to have a controlling financial interest if it meets both of the power and losses/benefits criteria. The power criterion is the ability to direct the activities of the VIE that most significantly impact its economic performance. The losses/benefits criterion is the obligation to absorb losses from, or right to receive benefits from, the VIE that could potentially be significant to the VIE. The VIE model requires an ongoing reconsideration of whether a reporting entity is the primary beneficiary of a VIE due to changes in facts and circumstances.

As of January 31, 2018 and July 31, 2017, the Company consolidated one and zero VIEs, respectively.

Xcerra is the primary beneficiary of ALBS which is qualified as a VIE. The assets and liabilities and revenues and expenses of this VIE are included in the financial statements of ALBS and are further included in the consolidated financial statements. As of January 31, 2018, the VIE had assets of $403,000 and liabilities of $259,000. For the three and six months ended January 31, 2018, ALBS had operating loss of $177,000 and operating income of $14,000, respectively. No assets were pledged or given as collateral against any borrowings.

Preparation of Financial Statements and Use of Estimates

Preparation of Financial Statements and Use of Estimates

The accompanying financial statements have been prepared by the Company, and reflect all adjustments, which, in the opinion of management, are necessary for fair presentation. The preparation of financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reporting periods. Actual results may differ from those estimates and such differences may be material to the consolidated financial statements.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue based on guidance provided in ASC 605, Revenue Recognition, and Accounting Standards Update 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”). The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price is fixed or determinable and collectability is reasonably assured.

Revenue related to equipment sales is recognized when: (a) the Company has a written sales agreement; (b) delivery has occurred or service has been rendered; (c) the price is fixed or determinable; (d) collectability is reasonably assured; (e) the equipment delivered is a standard product with historically demonstrated acceptance; and (f) there is no unique customer acceptance provision or payment tied to acceptance or an undelivered element significant to the functionality of the system. Generally, payment terms are time based after product shipment. From time to time, sales to a customer may involve multiple elements, in which case revenue is recognized on the delivered element provided that (1) the undelivered element is a proven technology, (2) there is a history of acceptance on the equipment with the customer, (3) the undelivered element is not essential to the customer’s application, (4) the delivered item(s) has value to the customer on a stand-alone basis, and (5) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. The arrangement consideration, or the amount of revenue to be recognized on each separate unit of accounting, is allocated at the inception of the arrangement to all deliverables on the basis of their relative selling price.

Revenue related to maintenance and service contracts is recognized ratably over the duration of the contracts. Net service sales as presented in the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss) includes revenue associated with LTXC maintenance or service contracts only, and excludes ECT and Multitest. ECT and Multitest generally do not provide maintenance and service contracts, but rather sell spare parts and other components, and as a result these sales are recognized as net product sales in the Company’s Consolidated Statement of Operations and Comprehensive Income (Loss). Revenue related to spare parts and components is recognized when the main criteria listed above are met. Generally customer acceptance is not required for spare parts and component sales.

Inventories

Inventories

Inventories are stated at the lower of cost and net realizable value, determined on the first-in, first-out (“FIFO”) method, and include materials, labor and manufacturing overhead. The components of inventories are as follows:

	January 31, 2018		July 31, 2017
	(in thousands)
Material and purchased components	$	36,386	$	30,746
Work-in-process		29,675		26,211
Finished equipment, including inventory consigned to customers		21,179		24,552
Total inventories	$	87,240	$	81,509

The Company establishes inventory reserves when conditions exist that indicate inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company’s products or market conditions. The Company regularly evaluates its ability to realize the value of inventory based on a combination of factors, including forecasted sales or usage, estimated product end of life dates, estimated current and future market value, and new product introductions.

Purchasing and usage alternatives are also explored to mitigate inventory exposure. When recorded, reserves are intended to reduce the carrying value of inventory to its net realizable value. As of January 31, 2018 and July 31, 2017, inventory was stated net of inventory reserves of $23.3 million and $22.0 million, respectively. If actual demand for products deteriorates or market conditions are less favorable than projected, additional inventory reserves may be required. Such reserves are not reversed until the related inventory is sold or otherwise disposed.

Goodwill and Other Intangibles

Goodwill and Other Intangibles

In accordance with ASC 350—Intangibles—Goodwill and Other (“ASC 350”), goodwill is not amortized. Rather, the Company’s goodwill is subject to periodic impairment testing. ASC 350 requires that the Company assign its goodwill to reporting units and test each reporting unit’s goodwill for impairment at least on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company completed its goodwill impairment testing at July 31, 2017 and determined no adjustment to goodwill was necessary.

The testing of goodwill for impairment is performed at a level referred to as a reporting unit. As of January 31, 2018, the Company’s goodwill is allocated to its Semiconductor Test reporting unit and its Contactors reporting unit. Based on ASC 350-20-35-3A, as of January 31, 2018, there were no triggering events that required the Company to complete impairment testing.

The Company’s goodwill consists of the following:

Goodwill	January 31, 2018		July 31, 2017
	(in thousands)
Semiconductor Test Reporting Unit
Merger with Credence Systems Corporation (August 29, 2008)	$	28,662	$	28,662
Acquisition of Step Tech Inc. (June 10, 2003)		14,368		14,368
Contactors Reporting Unit
Acquisition of Titan Semiconductor Tool LLC (February 2, 2015)		820		820
Semiconductor Handler Reporting Unit
Investment in ALBS Solutions Sdn Bhd (October 23, 2017)		2,023		—
Total goodwill	$	45,873	$	43,850

During the quarter ending January 31, 2018, the Company recorded approximately $2.0 million of goodwill related to its investment in ALBS Solutions Sdn Bhd (“ALBS”). During the quarter ending October 31, 2017, the Company, through one of its wholly-owned subsidiaries, LTX-Credence Singapore Pte. Ltd, entered into a Development, Manufacturing, and Distribution Agreement for development, manufacturing, and distribution work with ALBS and Subscription and Investment Agreement dated October 23, 2017 for the acquisition of ALBS’s entire business and equity. ALBS is a privately held corporation which provides high-tech semiconductor automation systems to different industrial users.

Amortizable intangible assets which relate to the acquisition of Titan Semiconductor Tool LLC (“Titan”), ECT, Multitest, and atg, and the merger with Credence Systems Corporation (“Credence”), consist of the following, and are included in intangible assets, net on the Company’s Consolidated Balance Sheets:

			As of January 31, 2018
Description	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Amount
	(in years)		(in thousands)		(in thousands)			(in thousands)
Developed technology—Credence, ECT, Multitest, atg, and Titan		6-20	$	29,882	$	(28,520	)	$	1,362
Customer Relationships—Titan		20		670		(45	)		625
Trade Names—Titan		10		70		(26	)		44
Total amortizable intangible assets			$	30,622	$	(28,591	)	$	2,031
			As of July 31, 2017
Description	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Amount
	(in years)		(in thousands)		(in thousands)			(in thousands)
Developed technology—Credence, ECT, Multitest, atg, and Titan		6-20	$	29,882	$	(28,266	)	$	1,616
Customer Relationships—ECT, Multitest, atg, and Titan		20		670		(8	)		662
Trade Names—Titan		10		70		(23	)		47
Total amortizable intangible assets			$	30,622	$	(28,297	)	$	2,325

Intangible assets, other than trademarks owned by the Company, are amortized based upon the pattern of estimated economic use over their estimated useful lives. The weighted average estimated remaining useful life over which these intangible assets will be amortized is 8.2 years.

The Company expects amortization for these intangible assets to be:

Year ending July 31, 2018	Amount (in thousands)
Remainder of 2018		257
2019		520
2020		406
2021		287
2022		191
Thereafter		370
Total	$	2,031

The identifiable intangible assets associated with the Dover Acquisition include $6.4 million of trademarks. The Company believes these trademarks will contribute to the Company’s cash flows indefinitely. Therefore, in accordance with ASC 350, the Company has assigned an indefinite useful life to the trademarks, and will not amortize the trademarks until their useful lives are no longer indefinite. These assets are subject to an annual impairment test or more frequently if triggering events occur. For the year ended July 31, 2017, the Company assessed qualitative factors to determine if a two-step quantitative impairment test was necessary. The Company determined, based on qualitative assessment, that it was more likely than not that the trademarks’ fair value was greater than their carrying amount, therefore no quantitative assessment was required, and there was no adjustment to the carrying value of the trademarks. As of January 31, 2018, there were no triggering events that required the Company to complete impairment testing on its trademarks.

Long Lived Assets

Long Lived Assets

On an on-going basis, management reviews the value of and period of amortization or depreciation of the Company’s long-lived assets. In accordance with ASC 360, Property, Plant and Equipment, the Company reviews whether impairment losses exist on its long-lived assets other than goodwill when indicators of impairment are present. During this review, the Company assesses future cash flows and re-evaluates the significant assumptions used in determining the original cost of long-lived assets other than goodwill. Although the assumptions may vary, they generally include revenue growth, operating results, cash flows and other indicators of value. Management then determines whether there has been a permanent impairment of the value of long-lived assets based upon events or circumstances that have occurred since acquisition. The impairment amount recognized is based upon a determination of the impaired asset’s fair value compared to its carrying value. As of January 31, 2018, there were no indicators that required the Company to conduct a recoverability test.

Foreign Currency Remeasurement and Translation

Foreign Currency Remeasurement and Translation

The financial statements of the Company’s foreign subsidiaries are remeasured in accordance with ASC 830, Foreign Currency Matters. The functional currency of the Company’s tester group is the U.S. Dollar (“USD”). Accordingly, the Company’s foreign subsidiaries that are included in this group remeasure monetary assets and liabilities at month-end exchange rates while long-term non-monetary items are remeasured at historical rates. Income and expense accounts are remeasured at the average rates in effect during the month. Net gains (losses) resulting from foreign currency remeasurement and transaction gains (losses) are included in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) as a component of other income (expense), net, and were $(1.5) million and $(1.9) million, for the three and six months ended January 31, 2018, respectively, and $0.6 million and $0.8 million for the three and six months ended January 31, 2017, respectively. The functional currency of ECT, Multitest and atg is local currency, predominantly Euro, USD, Malaysian Ringgit and Singapore Dollars, and net gains or losses resulting from foreign currency translation are recorded in stockholders’ equity as accumulated other comprehensive income (loss).

Product Warranty Costs

Product Warranty Costs

Certain of the Company’s products are sold with warranty provisions that require it to remedy deficiencies in quality or performance of products over a specified period of time at no cost to its customers. The Company generally offers a warranty for most of its products, the standard terms and conditions of which are based on the product sold and the customer. For all products sold, subject to a warranty, the Company accrues a liability for the estimated cost of the standard warranty at the time of shipment. Factors that impact the warranty liability include the number of installed products, historical and anticipated product failure rates, material usage and service labor costs. The Company periodically assesses the adequacy of its recorded liability and adjusts these amounts as necessary.

The following table shows the change in the Company’s product warranty liability, as required by ASC 460, Guarantees, to the FASB ASC for the six months ended January 31, 2018 and 2017:

	Six months Ended January 31,
Product Warranty Activity	2018			2017
	(in thousands)
Balance at beginning of period	$	3,610		$	2,725
Warranty expenditures for current period		(1,990	)		(1,865	)
Changes in liability related to pre-existing warranties		129			(31	)
Provision for warranty costs in the period		2,123			1,702
Balance at end of period	$	3,872		$	2,531

Trade Accounts Receivable and Allowance for Doubtful Accounts

Trade Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are recorded at the invoiced amount, do not bear interest, and typically have a contractual maturity of ninety days or less. A majority of the Company’s trade receivables are derived from sales to large multinational semiconductor manufacturers throughout the world. The volatility of the industries that the Company serves can cause certain of its customers to experience shortages of cash, which can impact their ability to make required payments. An allowance for doubtful accounts is maintained for potential credit losses based upon the Company’s assessment of the expected collectability of all accounts receivable. The allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowances. In any circumstances in which the Company is aware of a customer’s inability to meet its financial obligations, an allowance is provided, which is based on the age of the receivables, the circumstances surrounding the customer’s financial situation, and historical experience. If circumstances change, and the financial condition of customers is adversely affected resulting in their inability to meet their financial obligations to the Company, additional allowances may be recorded.

Engineering and Product Development Expenses

Engineering and Product Development Expenses

The Company expenses all engineering and product development costs as incurred. Expenses relating to certain software development costs, subject to capitalization in accordance with ASC 985, Software, were insignificant.

Shipping and Handling Costs

Shipping and Handling Costs

Shipping and handling costs are included in cost of sales in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Shipping and handling costs were insignificant for the three and six months ended January 31, 2018 and 2017.

Income Taxes

Income Taxes

The Company recorded an income tax provision of $4.2 million for the six months ended January 31, 2018, primarily due to foreign taxes in profitable locations.

The Company’s effective tax rate during the six months ended January 31, 2018 was not significantly impacted by the Tax Cuts and Jobs Act (“Act”), which was enacted into law on December 22, 2017. The income tax effects resulting from changes in tax laws are accounted for by the Company in accordance with the authoritative guidance, which requires that these tax effects be recognized in the period in which the law is enacted and the effects are recorded as a component of provision for income taxes. As a result, the Company recorded an income tax benefit of $0.2 million resulting from the enactment of the Act during the six months ended January 31, 2018.

The Act includes significant changes to the U.S. corporate income tax system, such as reducing the U.S. federal corporate tax rate from 35.0% to 21.0% as of January 1, 2018; shifting to a modified territorial tax regime which requires companies to pay a transition tax on earnings of certain foreign subsidiaries that were previously tax deferred; and imposing new taxes on certain foreign-sourced earnings. Because the Company has a July 31 fiscal year-end, the lower corporate federal income tax rate will result in a blended U.S. federal statutory rate of 26.48% for the fiscal year ending July 31, 2018 and a 21.0% rate for subsequent fiscal years. The new taxes for certain foreign-sourced earnings under the Act are effective for the Company after the fiscal year ending July 31, 2018.

The SEC staff has acknowledged the challenges companies face in incorporating the effects of the tax reform under the Act by their financial reporting deadlines. The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations in which companies do not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting, for certain income tax effects of the Act, as of the first reporting deadline following the enactment of the Act.

As of January 31, 2018, the Company had not fully completed its accounting for the tax effects of the enactment of the Act. The Company’s provision for income taxes for the six months ended January 31, 2018 is based, in part, on a reasonable estimate of the effects on its transition tax and existing deferred tax balances. For the amounts which the Company was able to reasonably estimate, the provision for income taxes decreased by $0.2 million during the six months ended January 31, 2018 due to the re-measurement of certain of the Company’s deferred tax assets and liabilities based on the Act’s new corporate tax rate of 21.0%. The Company is still analyzing certain aspects of the Act and refining the estimate of the expected reversal of its deferred tax balances. This can potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The Company is also currently estimating that it will not be subject to the transition tax because the aggregate cumulative post-1986 earnings and profits of its foreign subsidiaries are in an overall deficit. However, the Company has not yet completed its calculations of the total post-1986 earnings and profits and associated tax pools for its foreign subsidiaries. Additionally, the Company understands that there could be further interpretations from U.S. federal and state governments and regulatory organizations that may impact its final calculation. The Company will continue to refine its estimates related to the impact of the Act during the one year measurement period allowed under SAB 118.

The Act also includes provisions relating to Global Intangible Low-Taxed Income (“GILTI”) wherein taxes on foreign income are imposed in excess of a deemed return on tangible assets of foreign corporations. In general, this income will effectively be taxed at a 10.5% tax rate. As a result, the Company’s deferred tax assets and liabilities are being evaluated to determine if the deferred tax assets and liabilities should be recognized for the basis differences expected to reverse as a result of GILTI provisions that are effective for the Company after the fiscal year ending July 31, 2018, or if the tax on GILTI should be recognized in the period the Act was signed into law. Because of the complexity of the new provisions, the Company is continuing to evaluate on how the provisions will be accounted for under the U.S. generally accepted accounting principles permitting companies to make an accounting policy election of either (i) accounting for GILTI as a component of tax expense in the period in which the Company is subject to the rules (the “period cost method”), or (ii) accounting for GILTI in the Company’s measurement of deferred taxes (the “deferred method”). Currently, the Company has not elected a method and will only do so after its completion of the analysis of the GILTI provisions. The Company’s election method will depend, in part, on analyzing its global income to determine whether the Company expects to have future U.S. inclusions in its taxable income related to GILTI and, if so, the impact that is expected.

The Company’s total liability for unrecognized income tax benefits was $6.3 million and $6.2 million (of which $2.7 million and $2.6 million, if recognized, would impact the Company’s income tax rate) as of January 31, 2018 and July 31, 2017, respectively. The Company recognizes interest and penalties related to uncertain tax positions as a component of provision for income taxes. As of January 31, 2018 and July 31, 2017, the Company had accrued approximately $1.4 million and $1.3 million, respectively, for potential payment of accrued interest and penalties.

The Company conducts business globally and, as a result, the Company and its subsidiaries or branches file income tax returns in the U.S. federal jurisdiction and various U.S. state and foreign jurisdictions. In the normal course of business the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Singapore, Malaysia, China, France and Germany. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations for the years prior to 1998.

As a result of the Company’s merger with Credence on August 29, 2008, a greater than 50% cumulative ownership change in both entities triggered a significant limitation on net operating loss carryforward utilization. The Company’s ability to use acquired U.S. net operating loss and credit carryforwards is subject to annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. The Company currently estimates that the annual limitation on its use of net operating losses generated through August 29, 2008 will be approximately $10.1 million which, based on currently enacted federal carryforward periods, limits the amount of such net operating losses that are available for utilization to approximately $202 million. The Company has recorded a valuation allowance against the full value of its U.S. net operating loss and credit carryforwards, and will continue to assess the realizability of these carryforwards in subsequent periods.

Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

The Company has equity awards outstanding under the 2010 Stock Incentive Plan (“2010 Plan”) and can only grant awards from this 2010 Plan.

During the three months ended January 31, 2018, the Company granted 60,000 Restricted Stock Units (“RSUs”) which are subject to service-based vesting and vest in full on the twelve month anniversary of the grant date. The stock-based compensation expense related to these awards is recognized over their vesting periods.

The Company recognizes stock-based compensation expense on its equity awards in accordance with the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”). Under ASC 718, the Company is required to recognize as expense the estimated fair value as of the grant date of all share-based awards to employees. In accordance with this standard, the Company recognizes the compensation cost of each service-based award on a straight-line basis over the vesting period of such award. For the three and six months ended January 31, 2018, the Company recorded stock-based compensation expense of approximately $2.0 million and $4.1 million, respectively, in connection with its share-based awards. For the three and six months ended January 31, 2017, the Company recorded stock-based compensation expense of approximately $1.6 million and $3.1 million respectively, in connection with its share-based awards.

Net income per share

Net income per share

Basic net income per common share is computed by dividing net income attributable to Xcerra available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income per common share reflects the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive stock options and RSUs, and is computed by dividing net income by the weighted average number of common shares and the dilutive effect of all securities outstanding.

Reconciliation between basic and diluted net income per common share is as follows:

	Three Months Ended January 31,				Six Months Ended January 31,
	2018		2017		2018		2017
	(in thousands, except per share data)
Net income attributable to Xcerra	$	7,931	$	2,572	$	25,462	$	2,590
Basic EPS:
Weighted average shares outstanding- basic		54,836		54,120		54,720		53,993
Basic net income per share	$	0.14	$	0.05	$	0.47	$	0.05
Diluted EPS:
Weighted average shares outstanding- basic		54,836		54,120		54,720		53,993
Plus: impact of unvested RSUs		614		442		939		479
Weighted average shares outstanding- diluted		55,450		54,562		55,659		54,472
Diluted net income per share	$	0.14	$	0.05	$	0.46	$	0.05

During the six months ended January 31, 2018 and 2017, there were no outstanding options to purchase stock of the Company.

Cash and Cash Equivalents and Marketable Securities

Cash and Cash Equivalents and Marketable Securities

The Company considers all highly liquid investments that are readily convertible to cash and that have original maturity dates of three months or less to be cash equivalents. Cash and cash equivalents consist primarily of operating cash, money market accounts and reverse repurchase agreements. Marketable securities consist primarily of debt securities that are classified as available-for-sale, in accordance with ASC 320, Investments—Debt and Equity Securities. The Company also holds certain investments in commercial paper that it considers to be held to maturity, based on their maturity dates. Securities available for sale include corporate and governmental obligations with various contractual maturity dates some of which are greater than one year. The Company considers the securities to be liquid and convertible to cash within 30 days. The Company has the ability and intent to liquidate any security that the Company holds to fund operations over the next twelve months if necessary, and as such has classified all of its marketable securities as short-term. Governmental obligations include U.S. Government, State, Municipal and Federal Agency securities. The Company has an overnight sweep investment arrangement with its bank for certain accounts to allow the Company to enter into diversified overnight investments via a money market mutual fund which generally provides a higher investment yield than a regular operating account.

The market value and maturities of the Company’s marketable securities are as follows:

	Total Amount
	(in thousands)
January 31, 2018
Due in less than one year	$	23,378
Due in 1 to 3 years		29,447
Total marketable securities	$	52,825
	Total Amount
	(in thousands)
July 31, 2017
Due in less than one year	$	25,458
Due in 1 to 3 years		31,629
Total marketable securities	$	57,087

The market value and amortized cost of marketable securities are as follows:

	Market Value		Amortized Cost
	(in thousands)
January 31, 2018
Corporate (a)	$	26,686	$	26,695
Government		10,072		10,072
Mortgage-Backed		2,687		2,697
Asset-Backed		13,380		13,417
Total	$	52,825	$	52,881
	Market Value		Amortized Cost
	(in thousands)
July 31, 2017
Corporate (a)	$	24,969	$	24,828
Government		12,408		12,410
Mortgage-Backed		2,335		2,332
Asset-Backed		17,375		17,348
Total	$	57,087	$	56,918

(a) There are no held to maturity investments included in the above figures as of January 31, 2018 or July 31, 2017

Unrealized gains and losses on investments held by the Company are reflected as a separate component of comprehensive income (loss) within Stockholders’ Equity. Realized gains, losses and interest on investments held by the Company are included in interest income in the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company analyzes its investments for impairment on a quarterly basis or upon occurrence of indicators of possible impairment. There were no other than temporary impairment losses recorded in the six months ended January 31, 2018 or 2017.

The following table summarizes marketable securities and related unrealized gains and losses as of January 31, 2018 and July 31, 2017:

January 31, 2018	Market Value		Unrealized Gain/ (Loss)
	(in thousands)
Securities < 12 months unrealized losses	$	19,945	$	(35	)
Securities > 12 months unrealized losses		28,245		(208	)
Securities < 12 months unrealized gains		3,432		1

January 31, 2018	Market Value		Unrealized Gain/ (Loss)
	(in thousands)
Securities > 12 months unrealized gains		1,203		2
Total	$	52,825	$	(240	)
July 31, 2017	Market Value		Unrealized Gain/ (Loss)
	(in thousands)
Securities < 12 months unrealized losses	$	23,378	$	(28	)
Securities > 12 months unrealized losses		18,411		(32	)
Securities < 12 months unrealized gains		2,080		3
Securities > 12 months unrealized gains		13,218		23
Total	$	57,087	$	(34	)

Property and Equipment

Property and Equipment

Property and equipment acquired is recorded at cost. The Company records depreciation using the straight-line method. Charges are made to operating expenses in amounts that are sufficient to amortize the cost of the assets over their estimated useful lives. Equipment spares used for service and internally manufactured test systems used for testing components and engineering projects are recorded at cost and depreciated over seven years. Repair and maintenance costs that do not extend the lives of property and equipment are expensed as incurred. The Company’s property and equipment as of January 31, 2018 and July 31, 2017 are summarized as follows:

	January 31, 2018			July 31, 2017			Estimated Useful Lives
	(in thousands)						(in years)
Equipment spares	$	27,792		$	27,680			7
Machinery, equipment and internally manufactured systems		33,678			30,707			3-7
Office furniture and equipment		1,558			1,302			3-7
Purchased software		555			547			3
Land		2,508			2,508			—
Buildings		7,990			7,990			10-40 years
Leasehold improvements		9,969			9,679			Term of lease or useful life, not to exceed 10 years
Property and equipment, gross		84,050			80,413
Accumulated depreciation and amortization		(53,959	)		(51,904	)
Property and equipment, net	$	30,091		$	28,509