KLA TENCOR CORP | 2013 | FY | 3


GOODWILL AND PURCHASED INTANGIBLE ASSETS
Goodwill
The following table presents goodwill balances as of the dates indicated below: 
(In thousands)
As of
June 30, 2013
 
As of
June 30, 2012
Gross goodwill balance
$
604,205

 
$
604,302

Accumulated impairment losses
(277,570
)
 
(276,586
)
Net goodwill balance
$
326,635

 
$
327,716


The changes in the gross goodwill balance during the fiscal years ended June 30, 2013 and 2012 resulted from foreign currency translation adjustments. In September 2012, the Company decided to exit the solar inspection business due to adverse market conditions in that industry and recognized a goodwill impairment charge of $1.0 million.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In September 2011, the FASB amended its guidance to simplify testing goodwill for impairment, allowing an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test.
The Company has four reporting units: Defect Inspection, Metrology, Service, Software and Other. As of December 31, 2012, substantially all of the goodwill balance resided in the Defect Inspection reporting unit.
The Company performed a qualitative assessment of the goodwill by reporting unit as of November 30, 2012 during the three months ended December 31, 2012 and concluded that it was more likely than not that the fair value of each of the reporting units exceeded its carrying amount. In assessing the qualitative factors, the Company considered the impact of these key factors: change in industry and competitive environment, market capitalization, stock price, earnings multiples, budgeted-to-actual revenue performance from prior year, gross margin and cash flow from operating activities. As such, it was not necessary to perform the two-step goodwill impairment test at that time.
As noted above, the Company recognized a goodwill impairment charge of $1.0 million during the three months ended September 30, 2012 in connection with the Company's decision to exit the solar inspection business. As of December 31, 2012, the Company's assessment indicated that goodwill in the reporting units was not impaired. There have been no significant events or circumstances affecting the valuation of goodwill subsequent to the qualitative assessment performed in the second quarter of the fiscal year ended June 30, 2013. The next annual assessment of the goodwill by reporting unit will be performed in the second quarter of the fiscal year ending June 30, 2014.
Purchased Intangible Assets
The components of purchased intangible assets as of the dates indicated below were as follows:
 
(In thousands)
 
 
As of June 30, 2013
 
As of June 30, 2012
Category
Range of
Useful Lives
 
Gross
Carrying
Amount
 
Accumulated
Amortization and Impairment
 
Net
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization and Impairment
 
Net
Amount
Existing technology
4-7 years
 
$
133,659

 
$
119,106

 
$
14,553

 
$
134,561

 
$
110,370

 
$
24,191

Patents
6-13 years
 
57,648

 
51,068

 
6,580

 
57,648

 
46,966

 
10,682

Trade name/Trademark
4-10 years
 
19,893

 
15,928

 
3,965

 
19,893

 
14,428

 
5,465

Customer relationships
6-7 years
 
54,680

 
45,263

 
9,417

 
54,823

 
39,525

 
15,298

Other
0-1 year
 
16,200

 
16,200

 

 
16,200

 
16,200

 

Total
 
 
$
282,080

 
$
247,565

 
$
34,515

 
$
283,125

 
$
227,489

 
$
55,636


Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.
 For the fiscal years ended June 30, 2013, 2012 and 2011, amortization expense for other intangible assets was $20.8 million, $30.3 million and $32.9 million, respectively. Based on the intangible assets recorded as of June 30, 2013, and assuming no subsequent additions to or impairment of the underlying assets, the remaining estimated annual amortization expense is expected to be as follows:
Year ending June 30:
Amortization
(In thousands)
2014
$
15,368

2015
12,752

2016
5,564

2017
806

2018
25

Total
$
34,515


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