OPERATING AND GEOGRAPHICAL SEGMENTS

9 Months Ended

Sep. 30, 2015

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.

A summary of each reportable segment follows:

• Microcontroller. This segment includes Atmel's general purpose microcontroller and microprocessor families, AVR® 8-bit and 32-bit products, Atmel^®| SMART^TM ARM^® based products, Atmel's 8051 8-bit products, designated commercial wireless products, including low power radio and SOC products that meet Bluetooth, Bluetooth Low Energy, Zigbee and Wi-Fi specifications, Atmel's maXTouch capacitive touch product families and optimized products for smart energy, touch button, and mobile sensor hub and LED lighting applications.

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

• Automotive. This segment includes devices for automotive electronics, including products using radio frequency technology.

• Multi-Market and Other. This segment includes application specific and standard products for aerospace applications and legacy products. On April 16, 2015, the Company completed the sale of its XSense touch sensor manufacturing assets and separately licensed to UniPixel, Inc. its XSense intellectual property assets, which the Company retained. See Note 12 for further information.

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 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 income (loss) 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, 2015
Net revenue from external customers	$	201,061	$	34,188	$	34,158	$	17,126		$	286,533
Segment income from operations	$	21,712	$	2,782	$	5,473	$	6,264		$	36,231
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
Nine months ended September 30, 2015
Net revenue from external customers	$	624,850	$	121,089	$	107,119	$	58,116		$	911,174
Segment income from operations	$	56,620	$	24,520	$	14,868	$	16,107		$	112,115
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

The Company's primary products are semiconductor integrated circuits, which constitute a group of similar products. Therefore, it is impracticable to differentiate the revenue 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, 2015			September 30, 2014			September 30, 2015			September 30, 2014
	(in thousands)
Total segment income from operations	$	36,231		$	54,864		$	112,115		$	125,680
Unallocated amounts:
Share-based compensation expense	(12,719		)	(14,917		)	(38,943		)	(45,812		)
Gain (loss) from manufacturing facility damage and shutdown	—			3,571			—			(3,485		)
Acquisition-related charges	(2,390		)	(7,162		)	(10,600		)	(10,287		)
French building underutilization	(500		)	(822		)	(714		)	(3,284		)
Restructuring credit (charges)	584			(840		)	(5,445		)	967
(Loss) gain related to foundry arrangements	(2,487		)	454			(4,444		)	2,583
Fair value adjustments to inventory from businesses acquired	—			(1,548		)	—			(1,548		)
(Loss) gain on sale of assets	(427		)	—			1,626			—
Merger expenses and other	(7,818		)	—			(7,818		)	—
Consolidated income from operations	$	10,474		$	33,600		$	45,777		$	64,814

Geographic sources of revenue were as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
	(in thousands)
China, including Hong Kong	$	93,481	$	115,442	$	286,489	$	322,724
United States	49,113		58,969		160,582		162,227
Germany	41,335		51,279		123,880		161,018
South Korea	16,561		31,157		62,641		94,089
Japan	11,254		10,062		39,170		24,463
Singapore	9,073		15,208		28,412		43,445
Taiwan	6,480		21,566		26,930		51,495
France	3,224		3,618		11,775		9,407
Rest of Europe	28,671		34,300		87,410		108,104
Rest of Asia-Pacific	20,459		26,080		63,155		71,862
Rest of the World	6,882		6,804		20,730		18,546
Total net revenue	$	286,533	$	374,485	$	911,174	$	1,067,380

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

The Company had one distributor that accounted for 18% of net revenue in the three months endedSeptember 30, 2015. The Company had onedistributor that accounted for 18% of net revenue in the nine months endedSeptember 30, 2015. No end customer accounted for 10% or more of net revenue in the three and nine months endedSeptember 30, 2015 and 2014. The Company had one distributor that accounted for 15% of net revenue in the three months endedSeptember 30, 2014. The Company had two distributors that accounted for 16% and 10%, respectively, of net revenue in the nine months endedSeptember 30, 2014.

Two distributors accounted for 19% and 13%, respectively, of accounts receivable at September 30, 2015 and no end customer accounted for 10% or more of accounts receivable at September 30, 2015. 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.

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

	September 30, 2015		December 31, 2014
	(in thousands)
United States	$	85,049	$	92,466
Philippines	57,579		56,094
Germany	8,300		17,920
France	11,125		13,714
Rest of Asia-Pacific	16,954		20,237
Rest of Europe	5,095		5,854
Total	$	184,102	$	206,285

Excluded from the table above are auction-rate securities of $1.1 million at September 30, 2015 and December 31, 2014, which are included in other assets on the Condensed Consolidated Balance Sheets. Also excluded from the table above as of September 30, 2015 and December 31, 2014 is goodwill of $189.6 million and $191.1 million, respectively, intangible assets, net, of $41.4 million and $50.3 million, respectively, and deferred income tax assets of $104.6 million and $117.3 million, respectively.