OPERATING AND GEOGRAPHICAL SEGMENTS

9 Months Ended

Sep. 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 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 September 30, 2014
Net revenue from external customers	$	264,432	$	46,908	$	37,273	$	25,872		$	374,485
Segment income from operations	$	36,996	$	11,329	$	5,689	$	850		$	54,864
Three months ended September 30, 2013
Net revenue from external customers	$	244,061	$	43,265	$	39,954	$	28,988		$	356,268
Segment income from operations	$	22,531	$	8,275	$	3,664	$	3,446		$	37,916
Nine months ended September 30, 2014
Net revenue from external customers	$	754,348	$	122,739	$	114,238	$	76,055		$	1,067,380
Segment income (loss) from operations	$	86,148	$	24,413	$	15,727	$	(608	)	$	125,680
Nine months ended September 30, 2013
Net revenue from external customers	$	719,443	$	114,773	$	115,752	$	83,259		$	1,033,227
Segment income from operations	$	42,505	$	18,439	$	6,377	$	12,394		$	79,715

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						Nine Months Ended
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
	(in thousands)
Total segment income from operations	$	54,864		$	37,916		$	125,680		$	79,715
Unallocated amounts:
Share-based compensation expense	(14,917		)	(8,094		)	(45,812		)	(30,336		)
Gain (loss) from manufacturing facility damage and shutdown	3,571			—			(3,485		)	—
Acquisition-related charges	(7,162		)	(1,685		)	(10,287		)	(5,699		)
French building underutilization and other	(822		)	—			(3,284		)	—
Restructuring (charges) credits	(840		)	(8,149		)	967			(51,545		)
Gain (loss) related to foundry arrangements	454			(8,938		)	2,583			(7,424		)
Fair value adjustments to inventory from businesses acquired	(1,548		)	—			(1,548		)	—
Recovery of receivables from foundry supplier	—			—			—			522
Settlement charges	—			—			—			(21,600		)
Gain on sale of assets	—			—			—			4,430
Consolidated income (loss) from operations	$	33,600		$	11,050		$	64,814		$	(31,937	)

Geographic sources of revenue were as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2013
	(in thousands)
China, including Hong Kong	$	115,442	$	106,515	$	322,724	$	312,416
United States	58,969		51,515		162,227		140,909
Germany	51,279		48,414		161,018		148,519
South Korea	31,157		33,164		94,089		113,274
Taiwan	21,566		14,469		51,495		38,265
Singapore	15,208		15,638		43,445		34,433
Japan	10,062		10,119		24,463		29,022
France	3,618		4,811		9,407		22,684
Rest of Europe	34,300		33,294		108,104		90,682
Rest of Asia-Pacific	26,080		32,358		71,862		87,670
Rest of the World	6,804		5,971		18,546		15,353
Total net revenue	$	374,485	$	356,268	$	1,067,380	$	1,033,227

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

The Company had one distributor that accounted for 15% of net revenue in the three months ended September 30, 2014. The Company had two distributors that accounted for 16% and 10%, respectively, of net revenue in the nine months ended September 30, 2014. No end customer accounted for 10% or more of net revenue in the three and nine months ended September 30, 2014. The Company had one distributor and one customer, each of which accounted for 14% and 11% of net revenue in the three months ended September 30, 2013, respectively, and 13% each of net revenue in the nine months ended September 30, 2013, respectively.

Three distributors accounted for 15%, 12% and 11%, respectively, of accounts receivable at September 30, 2014 and no end customer accounted for 10% or more of accounts receivable at September 30, 2014. Two distributors accounted for 17% and 10%, respectively, of accounts receivable at September 30, 2013.

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

	September 30, 2014		December 31, 2013
	(in thousands)
United States	$	113,303	$	104,912
Philippines	35,715		50,472
Germany	20,371		24,244
France	14,663		17,249
Rest of Asia-Pacific	42,122		23,815
Rest of Europe	6,530		7,026
Total	$	232,704	$	227,718

Excluded from the table above as of September 30, 2014 and December 31, 2013 are goodwill of $195.0 million and $108.2 million, respectively, intangible assets, net, of $53.5 million and $28.1 million, respectively, and deferred income tax assets of $126.0 million and $134.4 million, respectively.