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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2019
 
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                  to                    .
 
Commission File No. 0-121
KULICKE AND SOFFA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter) 
Pennsylvania
23-1498399
(State or other jurisdiction of incorporation)
(IRS Employer
 
Identification No.)
 
23A Serangoon North Avenue 5, #01-01 K&S Corporate Headquarters, Singapore 554369
(Address of principal executive offices and Zip Code)
(215) 784-6000
(Registrant's telephone number, including area code) 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
 
Securities registered pursuant to Section 12(b) of the Act:



Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, Without Par Value
KLIC
The Nasdaq Global Market

As of July 29, 2019, there were 63,407,840 shares of the Registrant's Common Stock, no par value, outstanding.


Table of Contents

KULICKE AND SOFFA INDUSTRIES, INC.
 
FORM 10 – Q
 
June 29, 2019
 Index
 
 
 
Page Number
 
 
 
PART I - FINANCIAL INFORMATION
 
 
 
Item 1.
FINANCIAL STATEMENTS (Unaudited)
 
 
 
 
 
Consolidated Condensed Balance Sheets as of June 29, 2019 and September 29, 2018
 
 
 
 
Consolidated Condensed Statements of Operations for the three and nine months ended June 29, 2019 and June 30, 2018
 
 
 
 
Consolidated Condensed Statements of Comprehensive Income (Loss) for the three and nine months ended June 29, 2019 and June 30, 2018
 
 
 
 
Consolidated Condensed Statements of Shareholders' Equity for the three and nine months ended June 29, 2019 and June 30, 2018
 
 
 
 
Consolidated Condensed Statements of Cash Flows for the nine months ended June 29, 2019 and June 30, 2018
 
 
 
 
Notes to Consolidated Condensed Financial Statements
 
 
 
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 
 
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 
 
Item 4.
CONTROLS AND PROCEDURES
 
 
 
PART II - OTHER INFORMATION
 
 
 
Item 1A.
RISK FACTORS
 
 
 
Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES
 
 
 
Item 6.
EXHIBITS
 
 
 
 
SIGNATURES




Table of Contents

PART I. - FINANCIAL INFORMATION
Item 1. – FINANCIAL STATEMENTS
KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
Unaudited
 
As of
 
June 29, 2019
 
September 29, 2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
395,538

 
$
320,630

Restricted cash
474

 
518

Short-term investments
248,000

 
293,000

Accounts and other receivable, net of allowance for doubtful accounts of $0 and $385, respectively
151,246

 
243,373

Inventories, net
98,049

 
115,191

Prepaid expenses and other current assets
25,133

 
14,561

     Total current assets
918,440

 
987,273

Property, plant and equipment, net
74,851

 
76,067

Goodwill
56,248

 
56,550

Intangible assets, net
46,198

 
52,871

Deferred income taxes
8,159

 
9,017

Equity investments
6,301

 
1,373

Other assets
2,372

 
2,589

     TOTAL ASSETS
$
1,112,569

 
$
1,185,740

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 

 
 

Current liabilities:
 

 
 

Short term debt
$
71,194

 
$

Accounts payable
42,337

 
48,527

Accrued expenses and other current liabilities
63,465

 
105,978

Income taxes payable
12,258

 
19,571

     Total current liabilities
189,254

 
174,076

Financing obligation
14,701

 
15,187

Deferred income taxes
27,154

 
25,591

Income taxes payable
84,617

 
81,491

Other liabilities
9,408

 
9,188

     TOTAL LIABILITIES
$
325,134

 
$
305,533

 
 
 
 
Commitments and contingent liabilities (Note 14)


 


 
 
 
 
SHAREHOLDERS' EQUITY:
 

 
 

Preferred stock, without par value:
 

 
 

Authorized 5,000 shares; issued - none
$

 
$

Common stock, no par value:
 

 
 

Authorized 200,000 shares; issued 85,349 and 84,659, respectively; outstanding 63,837 and 67,143 shares, respectively
530,016

 
519,244

Treasury stock, at cost, 21,512 and 17,516 shares, respectively
(334,248
)
 
(248,664
)
Retained earnings
595,803

 
613,529

Accumulated other comprehensive loss
(4,136
)
 
(3,902
)
     TOTAL SHAREHOLDERS' EQUITY
$
787,435

 
$
880,207

 
 
 
 
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
1,112,569

 
$
1,185,740

The accompanying notes are an integral part of these consolidated condensed financial statements.


1

Table of Contents

KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Unaudited
 
Three months ended
 
Nine months ended
 
June 29, 2019
 
June 30, 2018
 
June 29, 2019
 
June 30, 2018
Net revenue
$
127,109

 
$
268,834

 
$
400,225

 
$
704,297

Cost of sales
68,329

 
141,865

 
211,073

 
380,679

Gross profit
58,780

 
126,969

 
189,152

 
323,618

Selling, general and administrative
28,724

 
32,532

 
87,626

 
92,679

Research and development
28,229

 
29,974

 
87,609

 
88,881

Operating expenses
56,953

 
62,506

 
175,235

 
181,560

Income from operations
1,827

 
64,463

 
13,917

 
142,058

Interest income
3,956

 
3,459

 
11,647

 
8,420

Interest expense
(632
)
 
(263
)
 
(1,137
)
 
(799
)
Income before income taxes
5,151

 
67,659

 
24,427

 
149,679

Income tax expense
3,864

 
7,282

 
19,106

 
122,494

Share of results of equity-method investee, net of tax

 
121

 
72

 
144

Net income
$
1,287

 
$
60,256

 
$
5,249

 
$
27,041

 
 
 
 
 
 
 
 
Net income per share:
 

 
 

 
 

 
 

Basic
$
0.02

 
$
0.87

 
$
0.08

 
$
0.39

Diluted
$
0.02

 
$
0.86

 
$
0.08

 
$
0.38

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 

 
 

 
 

 
 

Basic
64,683

 
69,125

 
65,914

 
70,019

Diluted
65,431

 
70,302

 
66,597

 
71,113

 The accompanying notes are an integral part of these consolidated condensed financial statements.
 


2

Table of Contents

KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Unaudited
 
Three months ended
 
Nine months ended
 
June 29, 2019
 
June 30, 2018
 
June 29, 2019
 
June 30, 2018
Net income
$
1,287

 
$
60,256

 
$
5,249

 
$
27,041

Other comprehensive (loss)/income:
 
 
 
 
 
 
 
Foreign currency translation adjustment
(42
)
 
(8,409
)
 
(1,430
)
 
(817
)
Unrecognized actuarial (loss)/gain on pension plan, net of tax
(31
)
 
61

 
(9
)
 
36

 
(73
)
 
(8,348
)
 
(1,439
)
 
(781
)
 
 
 
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Unrealized (loss)/gain on derivative instruments, net of tax
(49
)
 
(1,542
)
 
39

 
(513
)
Reclassification adjustment for loss/(gain) on derivative instruments recognized, net of tax
33

 
(344
)
 
1,165

 
(1,884
)
Net (increase)/decrease from derivatives designated as hedging instruments, net of tax
(16
)
 
(1,886
)
 
1,204

 
(2,397
)
 
 
 
 
 
 
 
 
Total other comprehensive loss
(89
)
 
(10,234
)
 
(235
)
 
(3,178
)
 
 
 
 
 
 
 
 
Comprehensive income
$
1,198

 
$
50,022

 
$
5,014

 
$
23,863

The accompanying notes are an integral part of these consolidated condensed financial statements.













3

Table of Contents

KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands)
Unaudited
 
 Common Stock
 
Treasury Stock
 
Retained earnings
 
Accumulated Other Comprehensive loss
 
Shareholders' Equity
 
Shares
 
Amount
 
 
 
 
Balances as of September 29, 2018
67,143

 
$
519,244

 
$
(248,664
)
 
$
613,529

 
$
(3,902
)
 
$
880,207

Issuance of stock for services rendered
8

 
195

 

 

 

 
195

Repurchase of common stock
(1,233
)
 

 
(25,485
)
 

 

 
(25,485
)
Issuance of shares for market-based restricted stock and time-based restricted stock
642

 

 

 

 

 

Equity-based compensation

 
3,678

 

 

 

 
3,678

Cumulative effect of accounting changes

 

 

 
534

 

 
534

Cash dividend declared

 

 

 
(8,055
)
 

 
(8,055
)
Components of comprehensive income/(loss):
 
 
 
 
 
 
 
 
 
 

Net income

 

 

 
7,517

 

 
7,517

Other comprehensive loss

 

 

 

 
(182
)
 
(182
)
Total comprehensive income/(loss)

 

 

 
7,517

 
(182
)
 
7,335

Balances as of December 29, 2018
66,560

 
$
523,117

 
$
(274,149
)
 
$
613,525

 
$
(4,084
)
 
$
858,409

Issuance of stock for services rendered
10

 
195

 

 

 

 
195

Repurchase of common stock
(1,225
)
 

 
(26,922
)
 

 

 
(26,922
)
Issuance of shares for market-based restricted stock and time-based restricted stock
4

 

 

 

 

 

Equity-based compensation

 
3,107

 

 

 

 
3,107

Cash dividend declared

 

 

 
(8,057
)
 

 
(8,057
)
Components of comprehensive (loss)/income:
 
 
 
 
 
 
 
 
 
 
 
Net loss

 

 

 
(3,555
)
 

 
(3,555
)
Other comprehensive income

 

 

 

 
37

 
37

Total comprehensive (loss)/income

 

 

 
(3,555
)
 
37

 
(3,518
)
Balances as of March 30, 2019
65,349

 
$
526,419

 
$
(301,071
)
 
$
601,913

 
$
(4,047
)
 
$
823,214

Issuance of stock for services rendered
10

 
222

 

 

 

 
222

Repurchase of common stock
(1,538
)
 

 
(33,177
)
 

 

 
(33,177
)
Issuance of shares for market-based restricted stock and time-based restricted stock
16

 

 

 

 

 

Equity-based compensation

 
3,375

 

 

 

 
3,375

Cash dividend declared

 

 

 
(7,397
)
 

 
(7,397
)
Components of comprehensive income/(loss):
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
1,287

 

 
1,287

Other comprehensive loss

 

 

 

 
(89
)
 
(89
)
Total comprehensive income / (loss)

 

 

 
1,287

 
(89
)
 
1,198

Balances as of June 29, 2019
63,837

 
$
530,016

 
$
(334,248
)
 
$
595,803

 
$
(4,136
)
 
$
787,435



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KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands)
Unaudited

 
 Common Stock
 
Treasury Stock
 
Retained earnings
 
Accumulated Other Comprehensive income
 
Shareholders' Equity
 
Shares
 
Amount
 
 
 
 
Balances as of September 30, 2017
70,197

 
$
506,515

 
$
(157,604
)
 
$
569,080

 
$
2,039

 
$
920,030

Issuance of stock for services rendered
9

 
195

 

 

 

 
195

Repurchase of common stock
(148
)
 

 
(3,280
)
 

 

 
(3,280
)
Exercise of stock options
6

 
55

 

 

 

 
55

Issuance of shares for market-based restricted stock and time-based restricted stock
540

 

 

 

 

 

Equity-based compensation

 
2,557

 

 

 

 
2,557

Cumulative effect of accounting changes

 
1,414

 

 
4,006

 

 
5,420

Components of comprehensive (loss)/income:
 
 
 
 
 
 
 
 
 
 
 
Net loss

 

 

 
(69,528
)
 

 
(69,528
)
Other comprehensive income

 

 

 

 
1,825

 
1,825

Total comprehensive (loss)/income

 

 

 
(69,528
)
 
1,825

 
(67,703
)
Balances as of December 30, 2017
70,604

 
$
510,736

 
$
(160,884
)
 
$
503,558

 
$
3,864

 
$
857,274

Issuance of stock for services rendered
8

 
195

 

 

 

 
195

Repurchase of common stock
(898
)
 

 
(21,470
)
 

 

 
(21,470
)
Issuance of shares for market-based restricted stock and time-based restricted stock
73

 

 

 

 

 

Equity-based compensation

 
2,384

 

 

 

 
2,384

Components of comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
36,313

 

 
36,313

Other comprehensive income

 

 

 

 
5,231

 
5,231

Total comprehensive income

 

 

 
36,313

 
5,231

 
41,544

Balances as of March 31, 2018
69,787

 
$
513,315

 
$
(182,354
)
 
$
539,871

 
$
9,095

 
$
879,927

Issuance of stock for services rendered
8

 
195

 

 

 

 
195

Repurchase of common stock
(1,793
)
 

 
(42,584
)
 

 

 
(42,584
)
Issuance of shares for market-based restricted stock and time-based restricted stock
4

 

 

 

 

 

Equity-based compensation

 
2,698

 

 

 

 
2,698

Cash dividend declared

 

 

 
(8,176
)
 

 
(8,176
)
Components of comprehensive income/(loss):
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
60,256

 

 
60,256

Other comprehensive loss

 

 

 

 
(10,234
)
 
(10,234
)
Total comprehensive income / (loss)

 

 

 
60,256

 
(10,234
)
 
50,022

Balances as of June 30, 2018
68,006

 
$
516,208

 
$
(224,938
)
 
$
591,951

 
$
(1,139
)
 
$
882,082


 The accompanying notes are an integral part of these consolidated condensed financial statements.



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KULICKE AND SOFFA INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
 
Nine months ended
 
June 29, 2019
 
June 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net income
$
5,249

 
$
27,041

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
15,001

 
14,163

Equity-based compensation and employee benefits
10,772

 
8,224

Excess tax benefits from stock-based compensation

 
(50
)
Adjustment for doubtful accounts
(385
)
 
675

Adjustment for inventory valuation
2,059

 
3,419

Deferred income taxes
2,450

 
21,480

Gain on disposal of property, plant and equipment
(19
)
 
(421
)
Unrealized foreign currency translation
117

 
606

Share of results of equity-method investee
72

 
144

Changes in operating assets and liabilities:
 

 
 

Accounts and other receivable
92,696

 
(58,949
)
Inventory
15,960

 
(5,141
)
Prepaid expenses and other current assets
(10,623
)
 
2,702

Accounts payable, accrued expenses and other current liabilities
(48,148
)
 
(1,893
)
Income taxes payable
(3,655
)
 
84,105

Other, net
1,635

 
(2,262
)
Net cash provided by operating activities
83,181

 
93,843

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Purchases of property, plant and equipment
(9,665
)
 
(16,152
)
Proceeds from sales of property, plant and equipment
39

 
625

Purchase of equity investments
(5,000
)
 

Purchase of short-term investments
(489,000
)
 
(487,000
)
Maturity of short-term investments
534,000

 
445,000

Net cash provided by /(used in) investing activities
30,374

 
(57,527
)
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Payment on debts
(574
)
 
(526
)
Proceeds from exercise of common stock options

 
55

Repurchase of common stock
(85,469
)
 
(65,334
)
Dividend payment
(23,902
)
 

Proceeds from short term debt
71,194

 

Net cash used in financing activities
(38,751
)
 
(65,805
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
60

 
(251
)
Changes in cash, cash equivalents and restricted cash
74,864

 
(29,740
)
Cash, cash equivalents and restricted cash at beginning of period
321,148

 
392,940

Cash, cash equivalents and restricted cash at end of period
$
396,012

 
$
363,200

 
 
 
 
CASH PAID FOR:
 

 
 

Interest
$
747

 
$
799

Income taxes, net of refunds
$
21,373

 
$
9,500

The accompanying notes are an integral part of these consolidated condensed financial statements. 


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KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited



NOTE 1: BASIS OF PRESENTATION
These consolidated condensed financial statements include the accounts of Kulicke and Soffa Industries, Inc. and its subsidiaries (the “Company”), with appropriate elimination of intercompany balances and transactions.
The interim consolidated condensed financial statements are unaudited and, in management's opinion, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair statement of results for these interim periods. The interim consolidated condensed financial statements do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 2018, filed with the Securities and Exchange Commission, which includes Consolidated Balance Sheets as of September 29, 2018 and September 30, 2017, and the related Consolidated Statements of Operations, Statements of Other Comprehensive Income, Changes in Shareholders' Equity and Cash Flows for each of the years in the three-year period ended September 29, 2018. The results of operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full year.
Fiscal Year    
Each of the Company's first three fiscal quarters end on the Saturday that is 13 weeks after the end of the immediately preceding fiscal quarter. The fourth quarter of each fiscal year ends on the Saturday closest to September 30. Fiscal 2019 quarters end on December 29, 2018, March 30, 2019, June 29, 2019 and September 28, 2019. In fiscal years consisting of 53 weeks, the fourth quarter will consist of 14 weeks. Fiscal 2018 quarters ended on December 30, 2017, March 31, 2018, June 30, 2018 and September 29, 2018.
Nature of Business
The Company designs, manufactures and sells capital equipment and tools as well as services, maintains, repairs and upgrades equipment, all used to assemble semiconductor devices. The Company's operating results depend upon the capital and operating expenditures of semiconductor device manufacturers, integrated device manufacturers, outsourced semiconductor assembly and test providers (“OSATs”), and other electronics manufacturers including automotive electronics suppliers, worldwide which, in turn, depend on the current and anticipated market demand for semiconductors and products utilizing semiconductors. The semiconductor industry is highly volatile and experiences downturns and slowdowns which can have a severe negative effect on the semiconductor industry's demand for semiconductor capital equipment, including assembly equipment manufactured and sold by the Company and, to a lesser extent, tools, including those sold by the Company. These downturns and slowdowns have in the past adversely affected the Company's operating results. The Company believes such volatility will continue to characterize the industry and the Company's operations in the future.
Use of Estimates
The preparation of consolidated condensed financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities, net revenue and expenses during the reporting periods, and disclosures of contingent assets and liabilities as of the date of the consolidated condensed financial statements. On an ongoing basis, management evaluates estimates, including but not limited to, those related to accounts receivable, reserves for excess and obsolete inventory, carrying value and lives of fixed assets, goodwill and intangible assets, the valuation estimates and assessment of impairment and observable price adjustments, valuation allowances for deferred tax assets and deferred tax liabilities, repatriation of un-remitted foreign subsidiary earnings, equity-based compensation expense, and warranties. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable. As a result, management makes judgments regarding the carrying values of the Company's assets and liabilities that are not readily apparent from other sources. Authoritative pronouncements, historical experience and assumptions also are used as the basis for making estimates, and on an ongoing basis, management evaluates these estimates. Actual results may differ from these estimates.
Vulnerability to Certain Concentrations
Financial instruments which may subject the Company to concentrations of credit risk as of June 29, 2019 and September 29, 2018 consisted primarily of trade receivables. The Company manages credit risk associated with investments by investing its excess cash in highly rated debt instruments of the U.S. Government and its agencies, financial institutions, and corporations. The Company has established investment guidelines relative to diversification and maturities designed to maintain safety and liquidity. These


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KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


guidelines are periodically reviewed and modified as appropriate. The Company does not have any exposure to sub-prime financial instruments or auction rate securities.
The Company's trade receivables result primarily from the sale of semiconductor equipment, related accessories and replacement parts, and tools to a relatively small number of large manufacturers in a highly concentrated industry. Write-offs of uncollectible accounts have historically not been significant. The Company actively monitors its customers' financial strength to reduce the risk of loss.
The Company's products are complex and require raw materials, components and subassemblies having a high degree of reliability, accuracy and performance. The Company relies on subcontractors to manufacture many of these components and subassemblies and it relies on sole source suppliers for some important components and raw material inventory.
Foreign Currency Translation and Remeasurement
The majority of the Company's business is transacted in U.S. dollars; however, the functional currencies of some of the Company's subsidiaries are their local currencies. In accordance with ASC No. 830, Foreign Currency Matters (“ASC 830”), for a subsidiary of the Company that has a functional currency other than the U.S. dollar, gains and losses resulting from the translation of the functional currency into U.S. dollars for financial statement presentation are not included in determining net income, but are accumulated in the cumulative translation adjustment account as a separate component of shareholders' equity (accumulated other comprehensive income / (loss)). Under ASC 830, cumulative translation adjustments are not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. Gains and losses resulting from foreign currency transactions are included in the determination of net income.
The Company's operations are exposed to changes in foreign currency exchange rates due to transactions denominated in currencies other than the location's functional currency. The Company is also exposed to foreign currency fluctuations that impact the remeasurement of net monetary assets of those operations whose functional currency, the U.S. dollar, differs from their respective local currencies, most notably in Israel, Singapore and Switzerland. In addition to net monetary remeasurement, the Company has exposures related to the translation of subsidiary financial statements from their functional currency, the local currency, into its reporting currency, the U.S. dollar, most notably in the Netherlands, China, Taiwan, Japan and Germany. The Company's U.S. operations also have foreign currency exposure due to net monetary assets denominated in currencies other than the U.S. dollar.
Derivative Financial Instruments
The Company’s primary objective for holding derivative financial instruments is to manage the fluctuation in foreign exchange rates and accordingly is not speculative in nature. The Company’s international operations are exposed to changes in foreign exchange rates as described above. The Company has established a program to monitor the forecasted transaction currency risk to protect against foreign exchange rate volatility. Generally, the Company uses foreign exchange forward contracts in these hedging programs. These instruments, which have maturities of up to twelve months, are recorded at fair value and are included in prepaid expenses and other current assets, or accrued expenses and other current liabilities.
Our accounting policy for derivative financial instruments is based on whether they meet the criteria for designation as a cash flow hedge. A designated hedge with exposure to variability in the functional currency equivalent of the future foreign currency cash flows of a forecasted transaction is referred to as a cash flow hedge. The criteria for designating a derivative as a cash flow hedge include the assessment of the instrument’s effectiveness in risk reduction, matching of the derivative instrument to its underlying transaction, and the assessment of the probability that the underlying transaction will occur. For derivatives with cash flow hedge accounting designation, we report the after-tax gain / (loss) from the effective portion of the hedge as a component of accumulated other comprehensive income / (loss) and reclassify it into earnings in the same period in which the hedged transaction affects earnings and in the same line item on the Consolidated Condensed Statement of Operations as the impact of the hedged transaction. Derivatives that we designate as cash flow hedges are classified in the Consolidated Condensed Statement of Cash Flows in the same section as the underlying item, primarily within cash flows from operating activities.
The hedge effectiveness of these derivative instruments is evaluated by comparing the cumulative change in the fair value of the hedge contract with the cumulative change in the fair value of the forecasted cash flows of the hedged item.
If a cash flow hedge is discontinued because it is no longer probable that the original hedged transaction will occur as previously anticipated, the cumulative unrealized gain or loss on the related derivative is reclassified from accumulated other comprehensive income / (loss) into earnings. Subsequent gain / (loss) on the related derivative instrument is recognized into earnings in each period until the instrument matures, is terminated, is re-designated as a qualified cash flow hedge, or is sold. Ineffective portions of cash flow hedges, as well as amounts excluded from the assessment of effectiveness, are recognized in earnings.


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Table of Contents
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Cash equivalents are measured at fair value based on level one measurement, or quoted market prices, as defined by ASC No. 820, Fair Value Measurements and Disclosures.
Equity Investments
The Company invests in equity securities in companies to promote business and strategic objectives. Equity investments are measured and recorded as follows:
Equity method investments are equity securities in investees that provide the Company with the ability to exercise significant influence in which it lacks a controlling financial interest. Our proportionate share of the income or loss is recognized on a one-quarter lag and is recorded as share of results of equity-method investee, net of tax.
Non-marketable equity securities are equity securities without readily determinable fair value that are measured and recorded using a measurement alternative that measures the securities at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes.
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from its customers' failure to make required payments. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. If global or regional economic conditions deteriorate or political conditions were to change in some of the countries where the Company does business, it could have a significant impact on the results of operations, and the Company's ability to realize the full value of its accounts receivable.
Inventories
Inventories are stated at the lower of cost (on a first-in first-out basis) or net realizable value. The Company generally provides reserves for obsolete inventory and for inventory considered to be in excess of demand. Demand is generally defined as 18 months forecasted future consumption for equipment, 24 months forecasted future consumption for spare parts, and 12 months forecasted future consumption for tools. Forecasted consumption is based upon internal projections, historical sales volumes, customer order activity and a review of consumable inventory levels at customers' facilities. The Company communicates forecasts of its future consumption to its suppliers and adjusts commitments to those suppliers accordingly. If required, the Company reserves the difference between the carrying value of its inventory and the lower of cost or net realizable value, based upon projections about future consumption, and market conditions. If actual market conditions are less favorable than projections, additional inventory reserves may be required.
Inventory reserve provision for certain subsidiaries is determined based on management's estimate of future consumption for equipment and spare parts. This estimate is based on historical sales volumes, internal projections and market developments and trends.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. The cost of additions and those improvements which increase the capacity or lengthen the useful lives of assets are capitalized, while repair and maintenance costs are expensed as incurred. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives as follows: buildings 25 years; machinery, equipment, furniture and fittings 3 to 10 years; toolings 1 year; and leasehold improvements are based on the shorter of the life of lease or life of asset. Purchased computer software costs related to business and financial systems are amortized over a five-year period on a straight-line basis. Land is not depreciated.
Valuation of Long-Lived Assets
In accordance with ASC No. 360, Property, Plant & Equipment ("ASC 360"), the Company's property, plant and equipment is tested for impairment based on undiscounted cash flows when triggering events occur, and if impaired, written-down to fair value based on either discounted cash flows or appraised values. ASC 360 also provides a single accounting model for long-lived assets to be disposed of by sale and establishes additional criteria that would have to be met to classify an asset as held for sale. The carrying amount of an asset or asset group is not recoverable to the extent it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. Estimates of future cash flows used to test the recoverability of a long-lived asset or asset group must incorporate the entity's own assumptions about its use of the asset or asset group and must factor in all available evidence.


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KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


ASC 360 requires that long-lived assets be tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Such events include significant under-performance relative to historical internal forecasts or projected future operating results; significant changes in the manner of use of the assets; significant negative industry or economic trends; or significant changes in market capitalization. During the three and nine months ended June 29, 2019, no "triggering" events occurred.
Accounting for Impairment of Goodwill
ASC No. 350, Intangibles-Goodwill and Other ("ASC 350") requires goodwill and other intangible assets with indefinite lives to be reviewed for impairment annually, or more frequently if circumstances indicate a possible impairment. We assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after assessing the qualitative factors, a company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, then performing the two-step impairment test is unnecessary. However, if a company concludes otherwise, then it is required to perform the first step of the two-step goodwill impairment test. If the carrying value of a reporting unit exceeds its fair value in the first step of the test, then a company is required to perform the second step of the goodwill impairment test to measure the amount of the reporting unit's goodwill impairment loss, if any. 
In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under this guidance, the goodwill 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, although it cannot exceed the total amount of goodwill allocated to that reporting unit. This ASU will be effective for us beginning in our first quarter of 2021 and early adoption is permitted. During the third quarter of 2017, we elected to prospectively adopt ASU2017-04. This eliminates the requirement to perform step 2 of the goodwill impairment test.
As part of the annual evaluation, the Company performs an impairment test of its goodwill in the fourth quarter of each fiscal year to coincide with the completion of its annual forecasting and refreshing of its business outlook processes. On an ongoing basis, the Company monitors if a “triggering” event has occurred that may have the effect of reducing the fair value of a reporting unit below its respective carrying value. 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 charge in the future.
Impairment assessments inherently involve judgment as to the assumptions made about the expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact the assumptions as to prices, costs, growth rates or other factors that may result in changes in the estimates of future cash flows. Although the Company believes the assumptions that it has used in testing for impairment are reasonable, significant changes in any one of the assumptions could produce a significantly different result. Indicators of potential impairment may lead the Company to perform interim goodwill impairment assessments, including significant and unforeseen customer losses, a significant adverse change in legal factors or in the business climate, a significant adverse action or assessment by a regulator, a significant stock price decline or unanticipated competition.
For further information on goodwill and other intangible assets, see Note 3 below.
Revenue Recognition
In accordance with ASC No. 606, Revenue from Contracts with Customers, the Company recognizes revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay.
The Company recognizes revenue from sales of our products, including sales to our distributors, at a point in time, generally upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. Control is considered transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where applicable, when the customer has accepted the products or upon expiration of the acceptance period. For sales to distributors, payment is due on our standard commercial terms and is not contingent upon resale of the products.
Our business is subject to contingencies related to customer orders, including:
Right of Return: A large portion of our revenue comes from the sale of equipments used in the semiconductor assembly process. Other product sales relate to consumable products, which are sold in high-volume quantities, and are generally maintained at low stock levels at our customer's facility. Customer returns have historically represented a very small percentage of customer sales on an annual basis.


10

Table of Contents
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


Warranties: Our equipment is generally shipped with a one-year warranty against manufacturing defects. We establish reserves for estimated warranty expense when revenue for the related equipment is recognized. The reserve for estimated warranty expense is based upon historical experience and management's estimate of future expenses, including product parts replacement, freight charges and labor costs expected to be incurred to correct product failures during the warranty period.
Conditions of Acceptance: Sales of our consumable products generally do not have customer acceptance terms. In certain cases, sales of our equipment have customer acceptance clauses which may require the equipment to perform in accordance with customer specifications or when installed at the customer's facility. In such cases, if the terms of acceptance are satisfied at our facility prior to shipment, the revenue for the equipment will be recognized upon shipment. If the terms of acceptance are satisfied at our customers' facilities, the revenue for the equipment will not be recognized until acceptance, which is typically obtained after installation and testing, is received from the customer.
Service revenue is generally recognized over time as the services are performed. For the three and nine months ended June 29, 2019, and June 30, 2018, the service revenue is not material.
The Company measures revenue based on the amount of consideration we expect to be entitled to in exchange for products or services. Any variable consideration such as sales incentives are recognized as a reduction of net revenue at the time of revenue recognition.
The length of time between invoicing and payment is not significant under any of our payment terms. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component.
Shipping and handling costs billed to customers are recognized in net revenue. Shipping and handling costs paid by the Company are included in cost of sales.
Research and Development
The Company charges research and development costs associated with the development of new products to expense when incurred. In certain circumstances, pre-production machines that the Company intends to sell are carried as inventory until sold.
Income Taxes
In accordance with ASC No. 740, Income Taxes, deferred income taxes are determined using the balance sheet method. The Company records a valuation allowance to reduce its deferred tax assets to the amount it expects is more likely than not to be realized. While the Company has considered future taxable income and its ongoing tax planning strategies in assessing the need for the valuation allowance, if it were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period when such determination is made. Likewise, should the Company determine it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax asset would decrease income in the period when such determination is made.
In accordance with ASC No. 740 Topic 10, Income Taxes, General (“ASC 740.10”), the Company accounts for uncertain tax positions taken or expected to be taken in its income tax return. Under ASC 740.10, the Company utilizes a two-step approach for evaluating uncertain tax positions. Step one, or recognition, requires a company to determine if the weight of available evidence indicates a tax position is more likely than not to be sustained upon examination solely based on its technical merit. Step two, or measurement, is based on the largest amount of benefit, which is more likely than not to be realized on settlement with the taxing authority, including resolution of related appeals or litigation processes, if any.


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Table of Contents
KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


Equity-Based Compensation
The Company accounts for equity-based compensation under the provisions of ASC No. 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 requires the recognition of the fair value of the equity-based compensation in net income. Compensation expense associated with Relative TSR Performance Share Units is determined using a Monte-Carlo valuation model, and compensation expense associated with time-based and Special/Growth Performance Share Units is determined based on the number of shares granted and the fair value on the date of grant. See Note 9 for a summary of the terms of these performance-based awards. The fair value of the Company's stock option awards is estimated using a Black-Scholes option valuation model. The fair value of equity-based awards is amortized over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the adoption of ASC 718.
Earnings per Share
Earnings per share (“EPS”) are calculated in accordance with ASC No. 260, Earnings per Share. Basic EPS include only the weighted average number of common shares outstanding during the period. Diluted EPS include the weighted average number of common shares and the dilutive effect of stock options, restricted stock awards, performance share units and restricted share units outstanding during the period, when such instruments are dilutive.
Accounting for Business Acquisitions
The Company accounts for business acquisitions in accordance with ASC No. 805, Business Combinations. The fair value of the net assets acquired and the results of operations of the acquired businesses are included in the Unaudited Consolidated Condensed Financial Statements from the acquisition date forward. The Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and results of operations during the reporting period. Estimates are used in accounting for, among other things, the fair value of acquired net operating assets, property, plant and equipment, deferred revenue, intangible assets and related deferred tax liabilities, useful lives of property, plant and equipment, and amortizable lives of acquired intangible assets. Any excess of the purchase consideration over the identified fair value of the assets and liabilities acquired is recognized as goodwill. The valuation of these tangible and identifiable intangible assets and liabilities is subject to further management review and may change materially between the preliminary allocation and end of the purchase price allocation period.
Restructuring charges
Restructuring charges may consist of voluntary or involuntary severance-related charges, asset-related charges and other costs due to exit activities. We recognize voluntary termination benefits when an employee accepts the offered benefit arrangement. We recognize involuntary severance-related charges depending on whether the termination benefits are provided under an ongoing benefit arrangement or under a one-time benefit arrangement. If the former, we recognize the charges once they are probable and the amounts are estimable. If the latter, we recognize the charges once the benefits have been communicated to employees.
Recent Accounting Pronouncements
Income Taxes
In October 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The new guidance is effective for the Company beginning fiscal 2019 and requires the tax effects of intercompany transactions (other than transfers of inventory) to be recognized currently. The Company has adopted the modified retrospective approach for the transition based on the new guidance and, as of the beginning of the period of adoption, has recorded the cumulative effect of adjustments related to intra-entity transfers of intangible and fixed assets of $0.5 million in prior years as an increase to retained earnings.
Leases
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP.
Subsequently in July 2018, the FASB issued ASU 2018-11 -Leases (Topic 842): Targeted Improvements, provides additional information concerning the new leases standard in ASU 2016-02, Leases (Topic 842). The targeted improvements provide entities with additional and optional transition methods.
In November 2018, the FASB issued ASU 2018-20 – Leases (Topic 842): Narrow-Scope Improvements for Lessors. This ASU provides guidance in several areas, including the accounting policy election for sales taxes and other similar taxes collected from lessees, accounting for certain lessor costs and accounting for variable payments for contracts with lease and nonlease components.



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KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


The Company will adopt these ASUs utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of its first quarter of 2020. In addition, we will elect the package of practical expedients permitted under the transition guidance that allowed us to apply prior conclusions related to lease definition, classification and initial direct costs. The adoption of these ASUs will result in an increase in our consolidated balance sheets for these right of use assets and corresponding liabilities. However, the ultimate impact of adopting these ASUs will depend on the Company's lease portfolio as of the adoption date. We are currently evaluating the effects of the adoption of these ASUs on our financial statements.
Financial Instruments
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the impairment methodology in current GAAP, which delays recognition of credit losses until it is probable a loss has been incurred, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU will be effective for us beginning in our first quarter of fiscal 2021. We are currently evaluating the impact of the adoption of this ASU on our financial statements.
Derivatives and Hedging
In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815). The new guidance expands and refines hedge accounting for both financial and non-financial risks. The new guidance also modifies disclosure requirements for hedging activities. The new guidance will be effective for us beginning in our first quarter of fiscal 2020, and early adoption is permitted in any interim period. We do not expect the adoption of this ASU to have a material impact on our financial statements.
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers.
Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”); and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20” and collectively, the “new revenue standards”).
The Company has performed an evaluation of this ASU and its impact on the financial statements. This included tasks such as identifying contracts, performance obligations and reviewing the applicable revenue streams. We have completed our assessment and implemented policies, processes, and controls to support the standard's measurement and disclosure requirements. The new standard was adopted in the first quarter of fiscal 2019 using a modified retrospective approach.
Based on our review of all our customer agreements for the affected periods, our revenue from sales of our products, such as equipment and spare parts, will continue to be recognized at a point in time, generally upon shipment or delivery to customers or distributors, depending upon the terms of the sales order, consistent with our current revenue recognition model. Revenue related to the sale of services will generally continue to be recognized over time as the services are performed. In certain instances, where collection of consideration is not probable, recognition of revenue may occur later under the new model after we have completed all of our obligations under the contract. However, when adopting the new standard, we did not identify any balances where collection of consideration is not probable. This ASU did not have a material impact on the amount and timing of revenue recognized in the Company’s consolidated financial statements.
Collaborative Arrangements
In November 2018, the FASB issued ASU 2018-18 – Collaborative Arrangements (Topic 808). This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. This ASU will be effective for us in the first quarter of 2021 with early adoption permitted. This ASU requires retrospective adoption to the date we adopted ASC 606 by recognizing a cumulative-effect adjustment to the opening balance of retained earnings of the earliest annual period presented. We are currently evaluating the timing and the effects of the adoption of this ASU on our financial statements.


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KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


NOTE 2: BALANCE SHEET COMPONENTS
The following tables reflect the components of significant balance sheet accounts as of June 29, 2019 and September 29, 2018:
 
As of
(in thousands)
June 29, 2019
 
September 29, 2018
 
 
 
 
Short term investments, available-for-sale(1)
$
248,000

 
$
293,000

 
 
 
 
Inventories, net:
 

 
 

Raw materials and supplies
$
58,336

 
$
63,894

Work in process
31,590

 
37,829

Finished goods
35,890

 
40,357

 
125,816

 
142,080

Inventory reserves
(27,767
)
 
(26,889
)
 
$
98,049

 
$
115,191

Property, plant and equipment, net:
 

 
 

Land
$
2,182

 
$
2,182

Buildings and building improvements (2)
42,125

 
41,616

Leasehold improvements (2)
24,125

 
23,561

Data processing equipment and software
36,027

 
35,469

Machinery, equipment, furniture and fixtures
74,189

 
68,666

Construction in progress
6,576

 
6,940

 
185,224

 
178,434

Accumulated depreciation
(110,373
)
 
(102,367
)
 
$
74,851

 
$
76,067

Accrued expenses and other current liabilities:
 

 
 

Accrued customer obligations (3)
$
27,491

 
$
34,918

Wages and benefits
16,623

 
44,505

Dividend payable
7,664

 
8,057

Commissions and professional fees
2,024

 
5,549

Deferred rent
1,763

 
1,847

Severance
355

 
1,415

Other
7,545

 
9,687

 
$
63,465

 
$
105,978

(1)
All short-term investments were classified as available-for-sale and were measured at fair value based on level one measurement, or quoted market prices, as defined by ASC 820. The Company did not recognize any realized gains or losses on the sale of investments during the three and nine months ended June 29, 2019 and June 30, 2018.
(2)
Certain balances as at September 29, 2018 relating to Property, plant and equipment have been reclassified. These reclassifications have no impact to the Consolidated Balance Sheet as at September 29, 2018.
(3)
Represents customer advance payments, customer credit program, accrued warranty expense and accrued retrofit obligations.

NOTE 3: 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


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KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


individually. The goodwill also includes the value of expected future cash flows of 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 2018 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 noncash impairment in the future.
During the three and nine months ended June 29, 2019, 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 and concluded that no triggering event had occurred.
The following table summarizes the Company's recorded goodwill as of June 29, 2019 and September 29, 2018:
 
As of
(in thousands)
June 29, 2019
 
September 29, 2018
Capital Equipment
$
29,920

 
$
30,159

APS
26,328

 
26,391

Total goodwill
$
56,248

 
$
56,550


 
 
 
 
 
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 and trade and brand names.
The following table reflects net intangible assets as of June 29, 2019 and September 29, 2018
 
As of
 
Average estimated
(dollar amounts in thousands)
June 29, 2019
 
September 29, 2018
 
useful lives (in years)
Developed technology
$
89,334

 
$
90,500

 
7.0 to 15.0
Accumulated amortization
(48,243
)
 
(45,229
)
 
 
Net developed technology
$
41,091

 
$
45,271

 
 
 
 
 
 
 
 
Customer relationships
$
35,805

 
$
36,131

 
5.0 to 6.0
Accumulated amortization
(31,670
)
 
(29,820
)
 
 
Net customer relationships
$
4,135

 
$
6,311

 
 
 
 
 
 
 
 
Trade and brand names
$
7,321

 
$
7,377

 
7.0 to 8.0
Accumulated amortization
(6,349
)
 
(6,088
)
 
 
Net trade and brand names
$
972

 
$
1,289

 
 
 
 
 
 
 
 
Other intangible assets
$
2,500

 
$
2,500

 
1.9
Accumulated amortization
(2,500
)
 
(2,500
)
 
 
Net other intangible assets
$

 
$

 
 
 
 
 
 
 
 
Net intangible assets
$
46,198

 
$
52,871

 
 



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KULICKE AND SOFFA INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited (continued)


The following table reflects estimated annual amortization expense related to intangible assets as of June 29, 2019:
 
As of
(in thousands)
June 29, 2019
Remaining fiscal 2019
$
1,870

Fiscal 2020
7,479

Fiscal 2021
5,417

Fiscal 2022
4,439

Fiscal 2023 and onwards
26,993

Total amortization expense
$
46,198

 

NOTE 4: CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS
Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase. In general, these investments are free of trading restrictions.
Cash, cash equivalents, restricted cash and short-term investments consisted of the following as of June 29, 2019:
(in thousands)
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair Value
Current assets:
 
 
 
 
 
 
 
Cash
$
261,806

 
$