GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Intangible assets classified as goodwill are not amortized. The goodwill established in connection with our acquisitions represents the estimated future economic benefits arising from the assets we acquired that did not qualify to be identified and recognized individually. The goodwill also includes the value of expected future cash flows from the acquisitions, expected synergies with our other affiliates and other unidentifiable intangible assets.

The Company performs an annual impairment test of its goodwill during the fourth quarter of each fiscal year, which coincides with the completion of its annual forecasting and refreshing of business outlook process.

During the fiscal year ended September 30, 2023, the Company reviewed qualitative factors to ascertain if a "triggering" event may have taken place that may have the effect of reducing the fair value of the reporting unit below its carrying value. The Company concluded that a triggering event had occurred during the third quarter in the fiscal year ended September 30, 2023 in connection with the Lithography reporting unit, which is grouped within the “All Others” category. The triggering event occurred based on the long-term financial and business outlook for the Lithography reporting unit updated as part of the Company’s annual strategic planning process performed during the third quarter. This updated outlook projected that the near-term projected cash flows are expected to be lower than previously forecasted due to a shift in market penetration timeline and increase in cost of materials being purchased. Under ASC 350, the Company is required to test its goodwill and other intangible assets for impairment annually or when a triggering event has occurred that would indicate it is more likely than not that the fair value of the reporting unit is less than the carrying value including goodwill and other intangible assets. Accordingly, the Company has performed the goodwill impairment test for the Lithography reporting unit with reference to the guidance under ASC 350.

The Company used a discounted cash flow model to determine the fair value of the Lithography reporting unit. The cash flow projections used within the discounted cash flow model were prepared using the forecasted financial results of the reporting unit, which was based upon underlying estimates of the total market size using independent third party industry reports, and market share data developed using the combination of independent third-party data and our internal data. Significant assumptions used to determine the fair value of the Lithography reporting unit include revenue forecasts, terminal growth rate of 2.5%, working capital, tax rate and a weighted average cost of capital (discount rate) of 11.7%.

In accordance with the guidance under ASC 350, the Company’s impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value. Based on the calculation, the Company determined that the carrying value exceeded the fair value of this reporting unit which resulted in a goodwill impairment charge of $9.8 million, representing the entire goodwill assigned to this reporting unit. This goodwill impairment charge, which is a non-cash charge, has been reflected in the Company’s Consolidated Statements of Operations for the fiscal year ended September 30, 2023.

While we have concluded that a triggering event for the other reporting units did not occur during the fiscal year ended September 30, 2023, the persistent macroeconomic headwinds could impact the results of operations due to changes to assumptions utilized in the determination of the estimated fair values of the reporting units that could be significant enough to trigger an impairment.

Net sales and earnings growth rates could be negatively impacted by reductions or changes in demand for our products. The discount rate utilized in our valuation model could also be impacted by changes in the underlying interest rates and risk premiums included in the determination of the cost of capital.

The following table summarizes the Company’s recorded goodwill based on its reportable segments as of September 30, 2023 and October 1, 2022:


(in thousands)	Wedge Bonding Equipment	APS	All Others	Total
Balance at October 1, 2022(1)	18,280	25,907	23,909	68,096
Acquired in business combination	—	—	27,975	27,975
Impairment charges	—	—	(9,794)	(9,794)
Other	—	202	2,194	2,396
Balance at September 30, 2023	18,280	26,109	44,284	88,673

(1) Cumulative goodwill impairment as of October 1, 2022 was approximately $35.2 million.

Intangible Assets

Intangible assets with determinable lives are amortized over their estimated useful lives. The Company’s intangible assets consist primarily of developed technology, customer relationships, in-process research and development, and trade and brand names.

In connection with the evaluation of the goodwill impairment in the Lithography reporting unit performed during the third quarter of fiscal year ended September 30, 2023, the Company assessed tangible and intangible assets for impairment prior to performing the first step of the goodwill impairment test. The Company first compared the carrying value to the undiscounted cash flows of the reporting unit which was lower. Subsequently, the Company proceeded to measure the impairment loss by comparing the carrying value against the discounted cash flow model to determine the fair value of the asset group for the Lithography reporting unit, where significant assumptions include revenue forecasts, terminal growth rate of 2.5%, working capital, tax rate and a weighted average cost of capital (discount rate) of 11.7%.

As a result of the analysis, the Company determined an impairment charge of $6.9 million on the developed technology reported within the “All Others” category for the fiscal year ended September 30, 2023. The impairment of intangible assets is a non-cash charge which has been reflected in the Company’s Consolidated Statements of Operations for the fiscal year ended September 30, 2023.

The following table reflects net intangible assets as of September 30, 2023 and October 1, 2022:


	As of				Average estimated
(dollar amounts in thousands)	September 30, 2023		October 1, 2022		useful lives (in years)
Developed technology	$	80,959	$	89,017	6.0 to 15.0
Accumulated amortization	$	(55,877)	$	(58,636)

Net developed technology	$	25,082	$	30,381

Customer relationships	$	36,764	$	33,515	5.0 to 8.0
Accumulated amortization	$	(34,789)	$	(33,515)
Net customer relationships	$	1,975	$	—

In-process research and development	$	459	$	—	N.A.

Net in-process research and development	$	459	$	—

Trade and brand name	$	7,130	$	6,945	7.0 to 8.0
Accumulated amortization	$	(7,130)	$	(6,945)
Net trade and brand name	$	—	$	—

Other intangible assets	$	5,617	$	4,700	1.0 to 8.0
Accumulated amortization	$	(3,776)	$	(3,142)
Net other intangible assets	$	1,841	$	1,558

Net intangible assets	$	29,357	$	31,939

The following table reflects estimated annual amortization expense related to intangible assets as of September 30, 2023:


	As of
(in thousands)	September 30, 2023
Fiscal 2024	$	5,154
Fiscal 2025	$	4,990
Fiscal 2026	$	4,990
Fiscal 2027	$	4,715
Fiscal 2028	$	4,290
Fiscal 2029 and thereafter	$	5,218
Total amortization expense	$	29,357