GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The roll-forward of activity related to our goodwill was as follows (in thousands):



	Year Ended December 31,
	2015			2014
Balance, beginning of period	$	170,773		$	136,152
Goodwill additions	4,100			46,880
Goodwill impairment	(18,156		)	—
Goodwill adjustments	(11,110		)	(12,259		)
Balance, end of period	$	145,607		$	170,773

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in connection with our acquisitions. Additions to goodwill represent goodwill from acquisitions made during the period. See further discussion of goodwill impairment below. Adjustments to goodwill include translation adjustments resulting from fluctuations in the value of goodwill held in currencies other than U.S. dollars, as well as adjustments made for the finalization of the purchase price allocations.

Acquisition of DCG Systems, Inc.

On December 10, 2015, we acquired DCG Systems, Inc. (“DCG”) for approximately $161.8 million in cash. DCG, with approximately 200 employees and headquarters in Fremont, California, is a leading supplier of electrical fault characterization, localization and editing tools, providing process development, yield ramp and failure analysis applications for a wide range of semiconductor and electronics manufacturers.

Net assets acquired and the excess purchase price of $161.8 million are included in the consolidated balance sheet as of December 31, 2015 in other assets, net and are included in Industry Group assets in Note 20 of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. The allocation of the purchase price to identifiable intangible assets and goodwill is subject to the final determination on the valuation of assets acquired and liabilities assumed. Accordingly, there is no goodwill recorded for this acquisition as of December 31, 2015. In 2015, the acquired business contributed $1.0 million of revenue and a net loss of $1.4 million to our consolidated financial results.

No pro forma financial information has been provided for this acquisition as it is not significant compared to our overall consolidated financial position.

Acquisition of Eisenberg Bros Ltd.

On January 9, 2015 we acquired certain assets and liabilities of Eisenberg Bros Ltd. (“EB”), which previously operated as our exclusive agent of our products and services in Israel.

The total purchase price of the acquisition was $5.4 million. We paid $0.2 million in transaction costs, which were expensed as incurred and are recorded in selling, general and administrative costs in our consolidated statements of operations. The total purchase price was allocated to the net tangible and intangible assets acquired based on their preliminary fair values as of January 9, 2015. The fair value of net tangible liabilities assumed was $0.1 million and the fair value of net intangible assets acquired was $1.4 million, which consisted solely of customer relationships. The acquired customer relationships will be amortized over a period of 5 years. The excess of the purchase price over the fair value of the net assets acquired was $4.1 million, which was recorded as goodwill in the Industry Group and is primarily related to expected future cash flows from synergies arising from the establishment of a sales and service workforce in Israel. In 2015, the acquired business contributed $3.1 million of revenue and net income of $0.1 million to our consolidated financial results.

No pro forma financial information has been provided for this acquisition as it is not material.

Impairment of Goodwill and Long-Lived Assets

Oil and Gas Impairment

In accordance with Accounting Standards Codification 350 (“ASC 350”), Intangibles - Goodwill and Other, we perform an impairment analysis of goodwill and other indefinite lived intangible assets on an annual basis and whenever events or changes in circumstances indicate that it is more likely than not that these assets may be impaired. The continued decline in oil prices has adversely affected our oil and gas business within our Industry Group segment, resulting in lower expected future revenue, operating income, and cash flow. In the thirteen weeks ended September 27, 2015, we updated our strategic plan for the oil and gas business and as a result reduced our forecasted cash flows. This change was deemed to be a triggering event for impairment testing of both oil and gas long-lived assets and goodwill within our Industry Group. Accordingly, we performed a goodwill impairment test following the two step process defined in ASC 350. We recognized impairment charges of $8.4 million on developed technology intangible assets and $18.2 million on goodwill. The total impairment charge of $26.6 million was included in impairment of goodwill and long-lived assets on our consolidated statements of operations within operating expenses for the thirteen and thirty-nine week periods ended September 27, 2015. As a result of our finalization of the impairment analysis in the fourth quarter of 2015, no additional adjustments were recorded to intangible assets, goodwill and impairment charges in our consolidated statements of operations.

In performing step one of the two step impairment test, we first assessed the long-lived assets within the reporting unit for impairment. This assessment was done at the lowest level for which identifiable cash flows are available. In order to determine the fair value of the reporting unit, we first assessed the fair value of the existing intangible assets using discounted cash flow models based on estimated future revenue, operating income, and cash flow, as well as the relief from royalty method. The preliminary impairment charges on the developed technology assets were also based on revised lower expectations about future revenues from certain product and service offerings to oil and gas customers.

To calculate the fair value of the reporting unit we used several different methods, including discounted cash flow models and multiples of revenue based on comparable industry participants and transactions. Our determination of the fair value of the reporting unit incorporates multiple assumptions, including future business growth, earnings projections, and the weighted average cost of capital used for purposes of discounting. The result of the analysis showed that the carrying value was in excess of the fair value of the reporting unit. This was due to revised lower short-term expectations about future revenue, operating income, cash flows for the oil and gas business.

In the second step, the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit to determine an implied goodwill value. This allocation is similar to a purchase price allocation performed in purchase accounting. If the carrying amount of the reporting unit goodwill exceeds the implied goodwill value, an impairment loss should be recognized in an amount equal to that excess. The excess of the carrying value of the reporting unit goodwill exceeded the fair value of goodwill by $18.2 million.

Other Intangible Assets

Patents, trademarks and other acquired intangible assets are amortized using the straight-line method over their estimated useful lives of 2 to 10 years. Customer relationships are amortized using the straight-line method over their estimated useful lives of 5 to 10 years. Developed technology is amortized using the straight-line method over the estimated useful life of the related technology, which ranges from 5.5 years to 10 years. Note issuance costs were amortized over the life of the related debt, which was 7 years.

The gross amount of our other acquired intangible assets and the related accumulated amortization was as follows (in thousands):



	December 31,
	2015			2014
Patents, trademarks and other	$	26,947		$	25,333
Accumulated amortization	(15,804		)	(12,805		)
Net patents, trademarks and other	11,143			12,528
Customer relationships	21,245			21,739
Accumulated amortization	(8,083		)	(5,863		)
Net customer relationships	13,162			15,876
Developed technology	22,155			33,525
Accumulated amortization	(10,517		)	(7,818		)
Net developed technology	11,638			25,707
Note issuance costs	2,445			2,445
Accumulated amortization	(2,445		)	(2,445		)
Net note issuance costs	—			—
Total intangible assets included in other long-term assets	$	35,943		$	54,111

Amortization expense was as follows (in thousands):



	Year Ended December 31,
	2015		2014		2013
Patents, trademarks and other	$	4,265	$	5,965	$	3,553
Customer relationships	2,675		2,317		2,376
Developed technology	3,495		3,720		2,327
Note issuance costs	—		—		146
Total amortization expense	$	10,435	$	12,002	$	8,402

Expected amortization, without consideration for foreign currency effects, is as follows over the next five years and thereafter (in thousands):



	Patents, Trademarks and Other		Customer Relationships		Developed Technology		Total
2016	$	3,250	$	2,681	$	2,968	$	8,899
2017	3,041		2,335		1,490		6,866
2018	1,932		2,319		1,360		5,611
2019	1,844		1,828		1,360		5,032
2020	1,076		1,562		1,360		3,998
Thereafter	—		2,437		3,100		5,537
Total future amortization expense	$	11,143	$	13,162	$	11,638	$	35,943