OPERATING AND GEOGRAPHICAL SEGMENTS

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

OPERATING AND GEOGRAPHICAL SEGMENTS

OPERATING AND GEOGRAPHICAL SEGMENTS

The Company designs, develops, manufactures and sells semiconductor integrated circuit products. The Company’s operating segments represent management’s view of the Company’s businesses and how it allocates Company resources and measures performance of its major components. Each segment consists of product families with similar requirements for design, development and marketing. Each segment requires different design, development and marketing resources to produce and sell products.

During the first quarter of 2014, the Company realigned its business segments to better allocate resources and to focus more effectively on core markets.  As a result, the Company created a new reportable segment entitled "Multi-Market and Other" and eliminated the former Application Specific Integrated Circuit (“ASIC”) segment. A summary of each reportable segment follows:

• Microcontroller. This segment includes AVR 8-bit and 32-bit products, ARM based products, capacitive touch products, including maXTouch and QTouch, 8051 based products, designated wireless products, including low power radio and SOC products that meet Zigbee and Wi-Fi specifications and custom application specific microcontroller products.

• Nonvolatile Memory. This segment includes electrically erasable programmable read-only ("EEPROM"), erasable programmable read-only memory (“EPROM”) devices and secure cryptographic memory products.

• Automotive. This segment includes high voltage, connectivity and mixed signal products for automotive applications and RF identification products.

• Multi-Market and Other. This segment includes application specific and standard products for aerospace, programmable logic products, foundry business and XSense products.

Prior period operating segment presentations have been revised to conform to the Company's revised segment reporting.

The Company continually evaluates operating segment performance based on revenue and income or loss from operations excluding share-based compensation and other non-recurring items. Because the Company’s operating segments reflect the manner in which management reviews its business, they necessarily involve subjective judgments that management believes are reasonable in light of the circumstances under which they are made. These judgments may change over time or may be modified to reflect new facts or circumstances. Operating segments may also be changed or modified, as is being done with this Quarterly Report on Form 10Q, to reflect products, technologies or applications that are newly created, or that change over time, or other business conditions that evolve, each of which may result in reassessing specific segments and the elements included within each of those segments.

Operating segments are defined by the products they design and sell. They do not sell to each other. The Company’s net revenue and segment (loss) income from operations for each reportable segment is as follows:

Information about Reportable Segments

	Micro- Controller		Nonvolatile Memory		Automotive		Multi-Market and Other			Total
	(in thousands)
Three months ended June 30, 2014
Net revenue from external customers	$	254,775	$	40,180	$	35,994	$	24,585		$	355,534
Segment income (loss) from operations	$	30,326	$	8,036	$	3,284	$	(900	)	$	40,746
Three months ended June 30, 2013
Net revenue from external customers	$	247,016	$	36,351	$	36,319	$	28,130		$	347,816
Segment income from operations	$	15,170	$	5,318	$	1,403	$	5,726		$	27,617
Six months ended June 30, 2014
Net revenue from external customers	$	489,915	$	75,832	$	76,965	$	50,183		$	692,895
Segment income (loss) from operations	$	49,152	$	13,083	$	10,038	$	(1,457	)	$	70,816
Six months ended June 30, 2013
Net revenue from external customers	$	475,381	$	71,509	$	75,798	$	54,271		$	676,959
Segment income from operations	$	19,975	$	10,164	$	2,713	$	8,947		$	41,799

The Company's primary products are semiconductor integrated circuits, which constitutes a group of similar products. Therefore, it is impracticable to differentiate the revenues from external customers for each product sold. The Company does not allocate assets by segment, as management does not use asset information to measure or evaluate a segment’s performance.

Reconciliation of Segment Information to Condensed Consolidated Statements of Operations

	Three Months Ended						Six Months Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
	(in thousands)
Total segment income from operations	$	40,746		$	27,617		$	70,816		$	41,799
Unallocated amounts:
Share-based compensation expense	(15,278		)	(7,480		)	(30,895		)	(22,242		)
Loss from manufacturing facility damage and shutdown	—			—			(7,056		)	—
Acquisition-related charges	(1,497		)	(1,759		)	(3,125		)	(4,014		)
French building underutilization and other	(1,166		)	—			(2,462		)	—
Restructuring credits (charges)	1,583			(582		)	1,807			(43,396		)
Gain related to foundry arrangements	2,071			1,514			2,129			1,514
Recovery of receivables from foundry supplier	—			83			—			522
Settlement charges	—			—			—			(21,600		)
Gain on sale of assets	—			—			—			4,430
Consolidated income (loss) from operations	$	26,459		$	19,393		$	31,214		$	(42,987	)

Geographic sources of revenue were as follows:

	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
	(in thousands)
China, including Hong Kong	$	114,081	$	107,211	$	207,282	$	205,901
Germany	50,478		51,521		109,739		100,105
United States	50,348		45,213		103,258		89,394
South Korea	29,900		36,899		62,932		80,110
Taiwan	19,211		10,504		29,929		23,796
Singapore	16,647		10,068		28,237		18,795
Japan	8,860		8,745		14,400		18,903
France	2,709		11,802		5,789		17,873
Rest of Europe	35,451		28,995		73,804		57,388
Rest of Asia-Pacific	21,760		32,507		45,782		55,312
Rest of the World	6,089		4,351		11,743		9,382
Total net revenue	$	355,534	$	347,816	$	692,895	$	676,959

Net revenue is attributed to regions based on ship-to locations.

The Company had one distributor that accounted for 17% of net revenue in the three months ended June 30, 2014. The Company had two distributors that accounted for 16% and 11%, respectively, of net revenue in the six months ended June 30, 2014. No end customer accounted for 10% or more of net revenue in the three and six months ended June 30, 2014. The Company had one customer and one distributor, each of which accounted for 16% and 13% of net revenue in the three months ended June 30, 2013, respectively, and 14% and 12% of net revenue in the six months ended June 30, 2013, respectively.

Three distributors accounted for 22%, 11% and 11%, respectively, of accounts receivable at June 30, 2014 and no end customer accounted for 10% or more of accounts receivable at June 30, 2014. Two distributors accounted for 17% and 11%, respectively, of accounts receivable at June 30, 2013.

Physical locations of tangible long-lived assets were as follows:

	June 30, 2014		December 31, 2013
	(in thousands)
United States	$	111,550	$	104,912
Philippines	53,353		50,472
Germany	23,170		24,244
France	16,318		17,249
Rest of Asia-Pacific	19,955		23,815
Rest of Europe	7,869		7,026
Total	$	232,215	$	227,718

Excluded from the table above as of June 30, 2014 and December 31, 2013 are goodwill of $110.0 million and $108.2 million, respectively, intangible assets, net of $25.1 million and $28.1 million, respectively, and deferred income tax assets of $118.1 million and $134.4 million, respectively.