J. GOODWILL AND INTANGIBLE ASSETS
Goodwill
Teradyne performs its annual goodwill impairment test as required under the provisions of ASC 350-10, “Intangibles—Goodwill and Other” on December 31 of each fiscal year unless interim indicators of impairment exist. Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its estimated fair value. Fair values are estimated using a discounted cash flow methodology.
Teradyne performed step one of the two step impairment test for 2013 and 2012. Teradyne performed step zero impairment test for 2011. Annual goodwill impairment test is done at the Wireless Test reporting unit level which is an operating and reportable segment and the only operating and reportable segment that has goodwill. There was no impairment.
During 2012, Teradyne recorded a $3.5 million decrease in goodwill and a $3.5 million increase in income tax receivable.
The changes in the carrying amount of goodwill by reporting units for the years ended December 31, 2013 and 2012 are as follows:
| Semiconductor Test |
System Test |
Wireless Test |
Total | |||||||||||||
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Balance at December 31, 2011: |
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Goodwill |
$ | 260,540 | $ | 148,183 | $ | 352,778 | $ | 761,501 | ||||||||
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Accumulated impairment losses |
(260,540 | ) | (148,183 | ) | — | (408,723 | ) | |||||||||
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| — | — | 352,778 | 352,778 | |||||||||||||
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Activity during the year |
— | — | (3,506 | ) | (3,506 | ) | ||||||||||
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Balance at December 31, 2012: |
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Goodwill |
260,540 | 148,183 | 349,272 | 757,995 | ||||||||||||
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Accumulated impairment losses |
(260,540 | ) | (148,183 | ) | — | (408,723 | ) | |||||||||
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| — | — | 349,272 | 349,272 | |||||||||||||
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ZTEC acquisition |
— | — | 12,520 | 12,520 | ||||||||||||
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Balance at December 31, 2013: |
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Goodwill |
260,540 | 148,183 | 361,792 | 770,515 | ||||||||||||
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Accumulated impairment losses |
(260,540 | ) | (148,183 | ) | — | (408,723 | ) | |||||||||
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| $ | — | $ | — | $ | 361,792 | $ | 361,792 | |||||||||
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Intangible Assets
Amortizable intangible assets consist of the following and are included in intangible assets, net on the balance sheets:
| December 31, 2013 | ||||||||||||||||
| Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
Weighted Average Useful Life |
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| (in thousands) | ||||||||||||||||
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Developed technology |
$ | 362,055 | $ | 193,756 | $ | 168,299 | 6.3 years | |||||||||
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Customer relationships |
146,341 | 81,742 | 64,599 | 8.0 years | ||||||||||||
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Tradenames and trademarks |
33,840 | 14,447 | 19,393 | 9.0 years | ||||||||||||
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Customer backlog |
1,000 | 1,000 | — | 0.4 years | ||||||||||||
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Total intangible assets |
$ | 543,236 | $ | 290,945 | $ | 252,291 | 7.0 years | |||||||||
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| December 31, 2012 | ||||||||||||||||
| Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
Weighted Average Useful Life |
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Developed technology |
$ | 357,555 | $ | 143,126 | $ | 214,429 | 6.3 years | |||||||||
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Customer relationships |
144,971 | 63,464 | 81,507 | 8.0 years | ||||||||||||
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Tradenames and trademarks |
33,840 | 10,909 | 22,931 | 9.0 years | ||||||||||||
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Customer backlog |
1,000 | 1,000 | — | 0.4 years | ||||||||||||
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Total intangible assets |
$ | 537,366 | $ | 218,499 | $ | 318,867 | 7.0 years | |||||||||
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During the year ended December 31, 2013, Teradyne recorded intangible assets in the amount of $4.9 million related to its ZTEC acquisition.
During the year ended December 31, 2012, Teradyne reduced the gross amount of intangible assets by $0.6 million for the excess tax benefit realized due to the exercise of stock options vested as of the Nextest acquisition date.
Aggregate intangible assets amortization expense for the years ended December 31, 2013, 2012 and 2011 was $72.4 million, $73.5 million, and $40.5 million, respectively. Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:
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Year |
Amortization Expense | |||
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2014 |
$ | 70,141 | ||
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2015 |
53,391 | |||
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2016 |
53,391 | |||
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2017 |
47,232 | |||
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2018 |
22,691 | |||