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GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended
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Jul. 01, 2023
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND INTANGIBLE ASSETS | 4. GOODWILL AND INTANGIBLE ASSETS 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. The Company performed its annual impairment test in the fourth quarter of fiscal 2022 and concluded that no impairment charge was required. Any future adverse changes in expected operating results and/or unfavorable changes in other economic factors used to estimate fair values could result in a non-cash impairment in the future. In each interim period, 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. During the three months ended July 1, 2023, the Company concluded that a triggering event had occurred in connection with the Lithography reporting unit. 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 Condensed Statements of Operations for the three and nine months ended July 1, 2023. While we have concluded that a triggering event for the other reporting units did not occur during the quarter ended July 1, 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. As discussed in Note 1, during the third quarter of fiscal year 2023, the Company reconsidered its reportable segments and has revised the related prior period presentation in its 2022 Annual Report. As a result, its four reportable segments are (1) Ball Bonding Equipment, (2) Wedge Bonding Equipment, (3) Advanced Solutions, and (4) Aftermarket Products and Services (“APS”). All other operating segments that do not meet the quantitative threshold to be disclosed as a separate reportable segment have been grouped within an “All Others” category. Please refer to Note 15 for further information on the revision of the reportable and operating segments. Accordingly, the Company’s goodwill as previously reported under “Capital Equipment” in prior periods has been disaggregated and presented separately into the Wedge Bonding Equipment reportable segment and the “All Others” category. There are no changes to the goodwill reported under the APS reportable segment. While there were no changes in the methodology and level at which the Company provides its goodwill impairment tests, and no resulting amendments to the total carrying amount of the goodwill, the following table shows the allocation of goodwill based on these revised segments. The following table summarizes the Company’s recorded goodwill, where applicable, by reportable segments and the “All Others” category (refer to Note 15 for further information) as of July 1, 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 |
Goodwill impairment |  | — |  |  | — |  |  | (9,794) |  |  | $ | (9,794) |
Other |  | — |  |  | 294 |  |  | 2,720 |  |  | $ | 3,014 |
Balance at July 1, 2023 |  | $ | 18,280 |  |  | $ | 26,201 |  |  | 44,810 |  |  | $ | 89,291 |
(1) Cumulative goodwill impairment pertaining to the “All Others” category as of October 1, 2022 was $35.2 million. During the quarter ended April 1, 2023, the Company recorded goodwill relating to the acquisition of AJA. For further information on the acquisition of AJA, please refer to Note 3. 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, the Company assessed tangible and intangible assets for impairment prior to performing the first step of the goodwill impairment test. The Company used a 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 three and nine months ended July 1, 2023. The impairment of intangible assets is a non-cash charge which has been reflected in the Company’s Consolidated Condensed Statements of Operations for the three and nine months ended July 1, 2023. The following table reflects net intangible assets as of July 1, 2023 and October 1, 2022:
| As of |  | Average estimated |
(dollar amounts in thousands) | July 1, 2023 |  | October 1, 2022 |  | useful lives (in years) |
Developed technology | $ | 99,614 |  |  | $ | 89,017 |  |  | 6.0 to 15.0 |
Accumulated amortization | (65,861) |  |  | (58,636) |  |  |  |
Impairment charges | $ | (6,900) |  |  | $ | — |  |  |  |
Net developed technology | $ | 26,853 |  |  | $ | 30,381 |  |  |  |
Customer relationships | $ | 37,259 |  |  | $ | 33,515 |  |  | 5.0 to 8.0 |
Accumulated amortization | (35,217) |  |  | (33,515) |  |  |  |
Net customer relationships | $ | 2,042 |  |  | $ | — |  |  |  |
In-process research and development | $ | 459 |  |  | $ | — |  |  | N.A |
Net in-process research and development | $ | 459 |  |  | $ | — |  |  |  |
Trade and brand name | $ | 7,212 |  |  | $ | 6,945 |  |  | 7.0 to 8.0 |
Accumulated amortization | (7,212) |  |  | (6,945) |  |  |  |
Net trade and brand name | — |  |  | — |  |  |  |
Other intangible assets | $ | 5,634 |  |  | $ | 4,700 |  |  | 1.0 to 8.0 |
Accumulated amortization | (3,570) |  |  | (3,142) |  |  |  |
Net other intangible assets | $ | 2,064 |  |  | $ | 1,558 |  |  |  |
| $ | 31,418 |  |  | $ | 31,939 |  |  |  |
The following table reflects estimated annual amortization expense related to intangible assets as of July 1, 2023:
| As of
(in thousands) | July 1, 2023
Remaining fiscal 2023 | $ | 1,378 |
Fiscal 2024 | 5,274 |
Fiscal 2025 | 5,110 |
Fiscal 2026 | 5,110 |
Fiscal 2027 | 4,835 |
Thereafter | 9,711 |
Total amortization expense | $ | 31,418 |

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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 350 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//350/tableOfContent + Details
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