Annual report pursuant to Section 13 and 15(d)

Goodwill and Intangible Assets Notes

v3.10.0.1
Goodwill and Intangible Assets Notes
12 Months Ended
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets
Goodwill and Intangible Assets

Goodwill

Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. The fair values of net tangible assets and intangible assets acquired are based upon preliminary valuations and the Company's estimates and assumptions are subject to change within the measurement period (potentially up to one year from the acquisition date). During the year ended December 31, 2018, the Company adjusted its allocation of purchase price for the acquisition of Exar related to updates to estimates of certain tax-related assets acquired and liabilities assumed with a corresponding net increase in goodwill of $0.3 million.

The following table presents the changes in the carrying amount of goodwill for the periods indicated:    
 
Years Ended December 31,
 
2018
 
2017
 
(in thousands)
Beginning balance
$
237,992

 
$
76,015

Acquisitions

 
162,318

Adjustments
338

 
(341
)
Ending balance
$
238,330

 
$
237,992



The Company performs an annual goodwill impairment assessment on October 31st each year, using a two-step quantitative assessment. Step one is the identification of potential impairment. This involves comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds the carrying amount, the goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any.

The Company determined there were no indications of impairment associated with goodwill. As a result, no goodwill impairment was recognized as of October 31, 2018. In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. As of December 31, 2018, there were no indications of impairment of the Company's goodwill balances.
Acquired Intangibles
Finite-lived Intangible Assets
The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and other purchases, which continue to be amortized:
 
 
 
December 31, 2018
 
December 31, 2017
 
Weighted
Average
Useful Life
(in Years)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Carrying Amount
 
 
 
(in thousands)
Licensed technology
3.7
 
$
2,070

 
$
(1,130
)
 
$
940

 
$
2,070

 
$
(575
)
 
$
1,495

Developed technology
6.9
 
238,961

 
(74,630
)
 
164,331

 
241,561

 
(39,252
)
 
202,309

Trademarks and trade names
6.1
 
13,800

 
(4,252
)
 
9,548

 
13,800

 
(1,992
)
 
11,808

Customer relationships
4.6
 
121,100

 
(55,647
)
 
65,453

 
121,100

 
(26,661
)
 
94,439

Non-compete covenants
3.0
 
1,100

 
(872
)
 
228

 
1,100

 
(506
)
 
594

 
6.1
 
$
377,031

 
$
(136,531
)
 
$
240,500

 
$
379,631

 
$
(68,986
)
 
$
310,645



The following table sets forth amortization expense associated with finite-lived intangible assets, which is included in the consolidated statements of operations as follows:
 
 
Years Ended December 31,
 
 
2018
 
2017
 
2016
 
(in thousands)
Cost of net revenue
 
$
35,821

 
$
25,316

 
$
8,512

Research and development
 
150

 
551

 
619

Selling, general and administrative
 
31,976

 
28,827

 
6,953

 
 
$
67,947

 
$
54,694

 
$
16,084



Amortization of finite-lived intangible assets in cost of net revenue in the consolidated statements of operations results primarily from acquired developed technology.

The following table sets forth activity during the years ended December 31, 2018 and 2017 related to finite-lived intangible assets:
 
Years Ended December 31,
 
2018
 
2017
 
(in thousands)
Beginning balance
$
310,645

 
$
81,861

Acquisitions

 
245,500

Other additions

 
5,378

Transfers to developed technology from IPR&D

 
32,600

Amortization
(67,947
)
 
(54,694
)
Impairment losses
(2,198
)
 

Ending balance
$
240,500

 
$
310,645



The Company regularly reviews the carrying amounts of its long-lived assets subject to depreciation and amortization, as well as the related useful lives, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. An impairment loss is recognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss is measured based on the excess of the carrying amount of the asset over the asset’s fair value. Impairment losses related to finite-lived intangible assets for the year ended December 31, 2018 were $2.2 million and related to acquired developed technology. During the years ended December 31, 2017 and 2016, no impairment losses related to finite-lived intangible assets were recognized.

The following table presents future amortization of the Company’s finite-lived intangible assets at December 31, 2018:
 
Amortization
(in thousands)
2019
$
56,819

2020
55,954

2021
55,171

2022
37,641

2023
25,446

Thereafter
9,469

Total
$
240,500


Indefinite-lived Intangible Assets
Indefinite-lived intangible assets consist entirely of acquired in-process research and development technology, or IPR&D. The following table sets forth the Company’s activities related to the indefinite-lived intangible assets:
 
Years Ended December 31,
 
2018
 
2017
 
(in thousands)
Beginning balance
$
4,400

 
$
22,400

Acquisitions

 
16,600

Transfers to developed technology from IPR&D

 
(32,600
)
Impairment losses

 
(2,000
)
Ending balance
$
4,400

 
$
4,400


The Company performs its annual assessment of indefinite-lived intangible assets on October 31 each year or more frequently if events or changes in circumstances indicate that the asset might be impaired utilizing a qualitative test as a precursor to the quantitative test comparing the fair value of the assets with their carrying amount. Based on the qualitative test, if it is more likely than not that indicators of impairment exists, the Company proceeds to perform a quantitative analysis. Based on the Company’s assessment as of October 31, 2018, no indicators of impairment were identified. In the year ended December 31, 2018, no IPR&D impairment losses were recorded. In the year ended December 31, 2017, the Company recognized impairment losses of $2.0 million related to a single IPR&D project, which was abandoned. In the year ended December 31, 2016, the Company recognized impairment losses of $1.3 million related to the Company's abandonment of a single IPR&D project.