MICROCHIP TECHNOLOGY INC | 2013 | FY | 3


INTANGIBLE ASSETS AND GOODWILL
 
Intangible assets consist of the following (amounts in thousands):
 
 
March 31, 2013
 
 
Gross Amount
 
Accumulated Amortization
 
Net Amount
Developed technology
 
$
375,006

 
$
(69,107
)
 
$
305,899

Customer-related
 
194,500

 
(68,522
)
 
125,978

Trademarks and trade names
 
15,730

 
(3,941
)
 
11,789

Backlog
 
24,610

 
(17,310
)
 
7,300

In-process technology
 
78,968

 

 
78,968

Distribution rights
 
5,236

 
(5,101
)
 
135

Covenants not to compete
 
400

 
(333
)
 
67

 
 
$
694,450

 
$
(164,314
)
 
$
530,136


 
 
March 31, 2012
 
 
Gross Amount
 
Accumulated Amortization
 
Net Amount
Developed technology
 
$
94,681

 
$
(35,920
)
 
$
58,761

Customer-related
 
20,400

 
(4,633
)
 
15,767

Trademarks and trade names
 
1,730

 
(684
)
 
1,046

Backlog
 
2,410

 
(2,410
)
 

In-process technology
 
14,086

 

 
14,086

Distribution rights
 
5,236

 
(4,660
)
 
576

Covenants not to compete
 
400

 
(200
)
 
200

 
 
$
138,943

 
$
(48,507
)
 
$
90,436



The Company amortizes intangible assets over their expected useful lives, which range between 1 and 15 years.  In fiscal 2013, the Company acquired $263.8 million of developed technology which has a weighted average amortization period of 8 years, $174.1 million of customer-related intangible assets which has a weighted average amortization period of 5 years, $14 million of trademark and trade names with an amortization period of 5 years, $22.2 million of intangible assets related to
backlog with an amortization period of 1 year and $81.6 million of in-process technology which will begin amortization once the technology reaches technological feasibility. The following is an expected amortization schedule for the intangible assets for fiscal 2014 through fiscal 2018, absent any future acquisitions or impairment charges (amounts in thousands):

Year ending
March 31,
Projected Amortization
Expense
2014
$100,673
2015
133,005
2016
88,223
2017
59,183
2018
44,902

 
Amortization expense attributed to intangible assets was $115.8 million, $13.0 million and $13.9 million for fiscal years 2013, 2012 and 2011, respectively.  In fiscal 2013, approximately $3.9 million was charged to cost of sales and approximately $111.9 million was charged to operating expenses.  In fiscal 2012, approximately $1.4 million was charged to cost of sales and approximately $11.6 million was charged to operating expenses.  In fiscal 2011, $0.9 million was charged to cost of sales and $13.0 million was charged to operating expenses.  The Company found no indication of impairment of its intangible assets in fiscal 2013, 2012 or 2011.
 
Goodwill activity for fiscal years 2013 and 2012 was as follows (amounts in thousands):
 
Semiconductor Products
Reporting Unit
 
Technology
Licensing
Reporting Unit
Balance at March 31, 2011
$
56,818

 
$
19,200

Additions due to contingent consideration payments
120

 

Additions due to the acquisition of Ident Technology AG
17,375

 

Balance at March 31, 2012
74,313

 
19,200

Additions due to the acquisition of SMSC
169,065

 

Additions due to the acquisition of Roving Networks
8,652

 

Additions due to contingent consideration payments
118

 

Balance at March 31, 2013
$
252,148

 
$
19,200


 
In the year ended March 31, 2012, the Company acquired Ident Technology AG. This acquisition resulted in approximately $17.4 million of goodwill which was allocated to the semiconductor products reporting unit.

In the year ended March 31, 2013, the Company acquired SMSC and Roving Networks. The SMSC acquisition resulted in approximately $169.1 million of goodwill which was allocated to the semiconductor products reporting unit. The Roving Networks acquisition resulted in approximately $8.7 million of goodwill which was allocated to the semiconductor products reporting unit.

At March 31, 2013, $252.1 million of goodwill was recorded in the Company's semiconductor products reporting unit and $19.2 million was recorded in the Company's technology licensing reporting unit. At March 31, 2013, the Company applied a qualitative goodwill impairment screen to its two reporting units, concluding it was not more likely than not that goodwill was impaired. Through March 31, 2013, the Company has never recorded an impairment charge against its goodwill balance.

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