Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jan. 31, 2018

Components of 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

Goodwill

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

Amortizable Intangible Assets

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

Expected Remaining Amortization of Intangible Assets

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

Change in Product Warranty Liability

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

Reconciliation Between Basic and Diluted Net Income Per Common Share

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

Market Value and Maturities of Marketable Securities

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

Market Value and Amortized Cost of Marketable Securities

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

Summary of Marketable Securities and Related Unrealized Gains and Losses

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	)

Summary of Property and Equipment

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