Silicon Laboratories (SLAB) 10-Q 25 Oct 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 17, 2017
Document and Entity Information
Entity Registrant Name	SILICON LABORATORIES INC
Entity Central Index Key	1,038,074
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-30
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		42,565,135
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q3

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 236,459	$ 141,106
Short-term investments	482,396	153,961
Accounts receivable, net	76,188	74,401
Inventories	72,895	59,578
Prepaid expenses and other current assets	37,563	61,805
Total current assets	905,501	490,851
Long-term investments	5,471	5,196
Property and equipment, net	129,075	129,559
Goodwill	288,629	276,130
Other intangible assets, net	89,859	103,565
Other assets, net	59,251	76,543
Total assets	1,477,786	1,081,844
Current liabilities:
Accounts payable	38,857	39,577
Accrued expenses	60,376	50,100
Deferred income on shipments to distributors	56,701	45,568
Income taxes	4,057	4,450
Total current liabilities	159,991	139,695
Long-term debt		72,500
Convertible debt	338,717
Other non-current liabilities	36,246	42,691
Total liabilities	534,954	254,886
Commitments and contingencies
Stockholders' equity:
Preferred stock - $0.0001 par value; 10,000 shares authorized; no shares issued
Common stock - $0.0001 par value; 250,000 shares authorized; 42,562 and 41,889 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	4	4
Additional paid-in capital	87,004	24,463
Retained earnings	856,159	801,999
Accumulated other comprehensive income (loss)	(335)	492
Total stockholders' equity	942,832	826,958
Total liabilities and stockholders' equity	$ 1,477,786	$ 1,081,844

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Condensed Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	42,562,000	41,889,000
Common stock, shares outstanding	42,562,000	41,889,000

Condensed Consolidated Statemen

Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Condensed Consolidated Statements of Income
Revenues	$ 198,723	$ 178,083	$ 567,849	$ 515,016
Cost of revenues	82,149	69,880	232,922	202,988
Gross margin	116,574	108,203	334,927	312,028
Operating expenses:
Research and development	52,000	48,437	156,756	149,118
Selling, general and administrative	39,606	38,034	119,587	116,716
Operating expenses	91,606	86,471	276,343	265,834
Operating income	24,968	21,732	58,584	46,194
Other income (expense):
Interest income and other, net	1,923	273	4,094	449
Interest expense	(4,764)	(643)	(9,265)	(1,939)
Income before income taxes	22,127	21,362	53,413	44,704
Provision for income taxes	2,178	1,344	1,469	3,319
Net income	$ 19,949	$ 20,018	$ 51,944	$ 41,385
Earnings per share:
Basic (in dollars per share)	$ 0.47	$ 0.48	$ 1.23	$ 0.99
Diluted (in dollars per share)	$ 0.46	$ 0.47	$ 1.20	$ 0.98
Weighted-average common shares outstanding:
Basic (in shares)	42,553	41,614	42,376	41,673
Diluted (in shares)	43,374	42,307	43,194	42,263

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Condensed Consolidated Statements of Comprehensive Income
Net income	$ 19,949	$ 20,018	$ 51,944	$ 41,385
Net changes to available-for-sale securities
Unrealized gains (losses) arising during the period	129	(84)	536	(137)
Net changes to cash flow hedges
Unrealized gains (losses) arising during the period		202		(211)
Reclassification for (gains) losses included in net income		64	(1,808)	191
Other comprehensive income (loss), before tax	129	182	(1,272)	(157)
Provision (benefit) for income taxes	45	63	(445)	(55)
Other comprehensive income (loss)	84	119	(827)	(102)
Comprehensive income	$ 20,033	$ 20,137	$ 51,117	$ 41,283

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016
Operating Activities
Net Income	$ 51,944	$ 41,385
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation of property and equipment	11,068	9,912
Amortization of other intangible assets and other assets	20,531	21,461
Amortization of debt discount and debt issuance costs	6,984
Stock-based compensation expense	33,007	30,057
Income tax shortfall from stock-based awards		(1,611)
Deferred income taxes	(5,703)	(1,460)
Changes in operating assets and liabilities:
Accounts receivable	(1,587)	(11,322)
Inventories	(13,196)	(1,558)
Prepaid expenses and other assets	23,506	7,404
Accounts payable	1,746	1,280
Accrued expenses	9,720	8,930
Deferred income on shipments to distributors	11,039	11,573
Income taxes	(424)	1,459
Other non-current liabilities	(7,269)	(10,891)
Net cash provided by operating activities	141,366	106,619
Investing Activities
Purchases of available-for-sale investments	(471,938)	(131,741)
Sales and maturities of available-for-sale investments	143,765	129,511
Purchases of property and equipment	(10,494)	(8,545)
Purchases of other assets	(2,622)	(4,994)
Acquisition of business, net of cash acquired	(13,658)
Net cash used in investing activities	(354,947)	(15,769)
Financing Activities
Proceeds from issuance of long-term debt, net	389,468
Payments on debt	(72,500)	(5,000)
Repurchases of common stock		(40,543)
Payment of taxes withheld for vested stock awards	(14,870)	(10,148)
Proceeds from the issuance of common stock	6,836	8,451
Payment of acquisition-related contingent consideration		(9,500)
Net cash provided by (used in) financing activities	308,934	(56,740)
Increase in cash and cash equivalents	95,353	34,110
Cash and cash equivalents at beginning of period	141,106	114,085
Cash and cash equivalents at end of period	$ 236,459	$ 148,195

Significant Accounting Policies

Significant Accounting Policies	9 Months Ended
	Sep. 30, 2017
Significant Accounting Policies
Significant Accounting Policies	1. Significant Accounting Policies Basis of Presentation and Principles of Consolidation The Condensed Consolidated Financial Statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments which, in the opinion of management, are necessary to present fairly the condensed consolidated financial position of Silicon Laboratories Inc. and its subsidiaries (collectively, the “Company”) at September 30, 2017 and December 31, 2016, the condensed consolidated results of its operations for the three and nine months ended September 30, 2017 and October 1, 2016, the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and October 1, 2016, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and October 1, 2016. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited Condensed Consolidated Financial Statements do not include certain footnotes and financial presentations normally required under U.S. generally accepted accounting principles (GAAP). Therefore, these Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2016, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (SEC) on February 1, 2017. The Company prepares financial statements on a Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Among the significant estimates affecting the financial statements are those related to inventories, stock-based compensation, investments in auction-rate securities, acquired intangible assets, goodwill, long-lived assets and income taxes. Actual results could differ from those estimates, and such differences could be material to the financial statements. Reclassifications Certain reclassifications have been made to prior year financial statements to conform to current year presentation. Revenue Recognition Revenues are generated predominately by sales of the Company’s products. The Company recognizes revenue when all of the following criteria are met: 1) there is persuasive evidence that an arrangement exists, 2) delivery of goods has occurred, 3) the sales price is fixed or determinable, and 4) collectibility is reasonably assured. Generally, revenue from product sales to direct customers and contract manufacturers is recognized upon shipment. A portion of the Company’s sales are made to distributors under agreements allowing certain rights of return and price protection related to the final selling price to the end customers. Accordingly, the Company defers revenue and cost of revenue on such sales until the distributors sell the product to the end customers. The net balance of deferred revenue less deferred cost of revenue associated with inventory shipped to a distributor but not yet sold to an end customer is recorded in the deferred income on shipments to distributors liability on the Consolidated Balance Sheet. Such net deferred income balance reflects the Company’s estimate of the impact of rights of return and price protection. A small portion of the Company’s revenues is derived from the sale of patents. The above revenue recognition criteria for patent sales are generally met upon the execution of the patent sale agreement. Recent Accounting Pronouncements In August 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-12 , Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. In January 2017, the FASB issued ASU No. 2017-03 , Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323). Revenue from Contracts with Customers (Topic 606) Leases (Topic 842) Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In January 2017, the FASB issued ASU No. 2017-04 , Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued ASU No. 2017-01 , Business Combinations (Topic 805): Clarifying the Definition of a Business. In August 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic326): Measurement of Credit Losses on Financial Instruments. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. In May 2014, the FASB issued ASU No. 2014-09 , Revenue from Contracts with Customers (Topic 606) Revenue Recognition Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, Compensation—Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers

Earnings Per Share

Earnings Per Share	9 Months Ended
	Sep. 30, 2017
Earnings Per Share
Earnings Per Share	2. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Net income $ 19,949 $ 20,018 $ 51,944 $ 41,385 Shares used in computing basic earnings per share 42,553 41,614 42,376 41,673 Effect of dilutive securities: Stock options and other stock-based awards 821 693 818 590 Shares used in computing diluted earnings per share 43,374 42,307 43,194 42,263 Earnings per share: Basic $ 0.47 $ 0.48 $ 1.23 $ 0.99 Diluted $ 0.46 $ 0.47 $ 1.20 $ 0.98 For the three months ended September 30, 2017 and October 1, 2016 and the nine months ended September 30, 2017 and October 1, 2016, approximately 0.0 million, 0.1 million, 0.0 million and 0.2 million shares, respectively, consisting of restricted stock units (RSUs), market stock units (MSUs) and stock options, were not included in the diluted earnings per share calculation since the shares were anti-dilutive. The Company intends to settle the principal amount of its convertible senior notes in cash and any excess value in shares in the event of a conversion. Accordingly, shares issuable upon conversion of the principal amount have been excluded from the calculation of diluted earnings per share. If the market value of the notes under certain prescribed conditions exceeds the conversion amount, the excess will be included in the denominator for the computation of diluted earnings per share using the treasury stock method. As of September 30, 2017, no such shares were included in the denominator for the calculation of diluted earnings per share. See Note 7, Debt

Fair Value of Financial Instrum

Fair Value of Financial Instruments	9 Months Ended
	Sep. 30, 2017
Fair Value of Financial Instruments
Fair Value of Financial Instruments	3. Fair Value of Financial Instruments The fair values of the Company’s financial instruments are recorded using a hierarchical disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities. The three levels are described below: Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 - Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 - Inputs are unobservable for the asset or liability and are developed based on the best information available in the circumstances, which might include the Company’s own data. The following summarizes the valuation of the Company’s financial instruments (in thousands). The tables do not include either cash on hand or assets and liabilities that are measured at historical cost or any basis other than fair value. Fair Value Measurements Description Quoted Prices in Significant Other Significant Total Assets: Cash equivalents: Money market funds $ 107,869 $ — $ — $ 107,869 Corporate debt securities — 21,317 — 21,317 Government debt securities — 8,946 — 8,946 Total cash equivalents $ 107,869 $ 30,263 $ — $ 138,132 Short-term investments: Government debt securities $ 62,494 $ 222,276 $ — $ 284,770 Corporate debt securities — 197,626 — 197,626 Total short-term investments $ 62,494 $ 419,902 $ — $ 482,396 Long-term investments: Auction rate securities $ — $ — $ 5,471 $ 5,471 Total long-term investments $ — $ — $ 5,471 $ 5,471 Total $ 170,363 $ 450,165 $ 5,471 $ 625,999 Liabilities: Other non-current liabilities: Contingent consideration $ — $ — $ 4,154 $ 4,154 Total $ — $ — $ 4,154 $ 4,154 Fair Value Measurements Description Quoted Prices in Significant Other Significant Total Assets: Cash equivalents: Money market funds $ 69,432 $ — $ — $ 69,432 Corporate debt securities — 7,153 — 7,153 Government debt securities — 3,904 — 3,904 Total cash equivalents $ 69,432 $ 11,057 $ — $ 80,489 Short-term investments: Government debt securities $ 12,416 $ 97,103 $ — $ 109,519 Corporate debt securities — 44,442 — 44,442 Total short-term investments $ 12,416 $ 141,545 $ — $ 153,961 Long-term investments: Auction rate securities $ — $ — $ 5,196 $ 5,196 Total long-term investments $ — $ — $ 5,196 $ 5,196 Other assets, net: Derivative instruments $ — $ 1,808 $ — $ 1,808 Total $ — $ 1,808 $ — $ 1,808 Total $ 81,848 $ 154,410 $ 5,196 $ 241,454 Valuation methodology The Company’s cash equivalents and short-term investments that are classified as Level 2 are valued using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Investments classified as Level 3 are valued using a discounted cash flow model. The assumptions used in preparing the discounted cash flow model include estimates for interest rates, amount of cash flows, expected holding periods of the securities and a discount to reflect the Company’s inability to liquidate the securities. The Company’s derivative instruments are valued using discounted cash flow models. The assumptions used in preparing the valuation models include quoted interest swap rates, foreign exchange rates, forward and spot prices for currencies, and market observable data of similar instruments. The Company’s contingent consideration is valued using a probability weighted discounted cash flow model. The assumptions used in preparing the discounted cash flow model include estimates for the outcome if the milestone goal is achieved, the probability of achieving each outcome and discount rates. Available-for-sale investments The Company’s investments typically have original maturities greater than ninety days as of the date of purchase. Investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive income (loss) in the Consolidated Balance Sheet. The following summarizes the contractual underlying maturities of the Company’s Cost Fair Due in one year or less $ 345,420 $ 345,451 Due after one year through ten years 189,524 189,507 Due after ten years 91,570 91,041 $ 626,514 $ 625,999 The available-for-sale investments that were in a continuous unrealized loss position, aggregated by length of time that individual securities have been in a continuous loss position, were as follows (in thousands): Less Than 12 Months 12 Months or Greater Total As of September 30, 2017 Fair Gross Fair Gross Fair Gross Government debt securities $ 122,053 $ (109 ) $ — $ — $ 122,053 $ (109 ) Corporate debt securities 93,480 (102 ) — — 93,480 (102 ) Auction rate securities — — 5,471 (529 ) 5,471 (529 ) $ 215,533 $ (211 ) $ 5,471 $ (529 ) $ 221,004 $ (740 ) Less Than 12 Months 12 Months or Greater Total As of December 31, 2016 Fair Gross Fair Gross Fair Gross Government debt securities $ 79,743 $ (156 ) $ — $ — $ 79,743 $ (156 ) Corporate debt securities 21,737 (132 ) — — 21,737 (132 ) Auction rate securities — — 5,196 (804 ) 5,196 (804 ) $ 101,480 $ (288 ) $ 5,196 $ (804 ) $ 106,676 $ (1,092 ) The gross unrealized losses as of September 30, 2017 and December 31, 2016 were due primarily to the illiquidity of the Company’s auction-rate securities and, to a lesser extent, to changes in market interest rates. The Company’s auction-rate securities have been illiquid since 2008 when auctions for the securities failed because sell orders exceeded buy orders. These securities have a contractual maturity date of 2046 at September 30, 2017. The Company does not expect to need access to the capital represented by any of its auction-rate securities prior to their maturities. The Company does not intend to sell, and believes it is not more likely than not that it will be required to sell, its auction-rate securities before their anticipated recovery in market value or final settlement at the underlying par value. The Company believes that the credit ratings and credit support of the security issuers indicate that they have the ability to settle the securities at par value. As such, the Company has determined that no other-than-temporary impairment losses existed as of September 30, 2017. At September 30, 2017 and December 31, 2016, there were no material unrealized gains associated with the Company’s available-for-sale investments. Level 3 fair value measurements The following summarizes quantitative information about Level 3 fair value measurements. Auction rate securities Fair Value at Valuation Technique Unobservable Input Weighted Average $ 5,471 Discounted cash flow Estimated yield 1.27% Expected holding period 10 years Estimated discount rate 3.27% The Company has followed an established internal control procedure used in valuing auction rate securities. The procedure involves the analysis of valuation techniques and evaluation of unobservable inputs commonly used by market participants to price similar instruments, and which have been demonstrated to provide reasonable estimates of prices obtained in actual market transactions. Outputs from the valuation process are assessed against various market sources when they are available, including marketplace quotes, recent trades of similar illiquid securities, benchmark indices and independent pricing services. The technique and unobservable input parameters may be recalibrated periodically to achieve an appropriate estimation of the fair value of the securities. Significant changes in any of the unobservable inputs used in the fair value measurement of auction rate securities in isolation could result in a significantly lower or higher fair value measurement. An increase in expected yield would result in a higher fair value measurement, whereas an increase in expected holding period or estimated discount rate would result in a lower fair value measurement. Generally, a change in the assumptions used for expected holding period is accompanied by a directionally similar change in the assumptions used for estimated yield and discount rate. Contingent consideration Fair Value at Valuation Technique Unobservable Input Weighted Average $ 4,154 Discounted cash flow Expected term 3 months Estimated discount rate 12.0% The Company has followed an established internal control procedure used in valuing contingent consideration. The valuation of contingent consideration for the Zentri acquisition is based on a discounted cash flow model. The fair value of this valuation is estimated on a quarterly basis through a collaborative effort by the Company’s sales, marketing and finance departments. Significant changes in any of the unobservable inputs used in the fair value measurement of contingent consideration in isolation could result in a significantly lower or higher fair value. A change in projected revenue would be accompanied by a directionally similar change in fair value. The following summarizes the activity in Level 3 financial instruments for the three and nine months ended September 30, 2017 (in thousands): Assets Auction Rate Securities Three Months Nine Months Beginning balance $ 5,379 $ 5,196 Gain included in other comprehensive income (loss) 92 275 Balance at September 30, 2017 $ 5,471 $ 5,471 Liabilities Contingent Consideration (1) Three Months Nine Months Beginning balance $ 3,993 $ — Issues — 3,829 Loss recognized in earnings 161 325 Balance at September 30, 2017 $ 4,154 $ 4,154 Net loss for the period included in earnings attributable to contingent consideration held at the end of the period: $ (161 ) $ (325 ) (1) Fair values of other financial instruments The Company’s debt is recorded at cost, but is measured at fair value for disclosure purposes. The fair value of the Company’s convertible senior notes is determined using observable market prices. The notes are traded in less active markets and are therefore classified as a Level 2 fair value measurement. The fair value of the convertible senior notes at September 30, 2017 was $442.6 million. The Company’s prior debt under the Credit Facility bore interest at the Eurodollar rate plus an applicable margin. Fair value was estimated based on Level 2 inputs, using a discounted cash flow analysis of future principal payments and projected interest based on current market rates. As of September 30, 2017 and December 31, 2016, the fair value of the Company’s debt under the Credit Facility was approximately $0.0 and $72.5 million, respectively. The Company’s other financial instruments, including cash, accounts receivable and accounts payable, are recorded at amounts that approximate their fair values due to their short maturities.

Derivative Financial Instrument

Derivative Financial Instruments	9 Months Ended
	Sep. 30, 2017
Derivative Financial Instruments
Derivative Financial Instruments	4. Derivative Financial Instruments The Company uses derivative financial instruments to manage certain exposures to the variability of interest rates and foreign currency exchange rates. The Company’s objective is to offset increases and decreases in expenses resulting from these exposures with gains and losses on the derivative contracts, thereby reducing volatility of earnings. Interest Rate Swaps The Company is exposed to interest rate fluctuations in the normal course of its business, including through its Credit Facility. The interest payments on the facility are calculated using a variable-rate of interest. The Company entered into an interest rate swap agreement with an original notional value of $72.5 million and, effectively, converted the Eurodollar portion of the variable-rate interest payments to fixed-rate interest payments through July 2020. The Company terminated the swap agreement on March 6, 2017 in connection with the payoff of its Credit Facility. The Company’s interest rate swap agreement was designated and qualified as a cash flow hedge. The effective portion of the gain or loss on the interest rate swap was recorded in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity and was subsequently recognized as interest expense in the Consolidated Statement of Income when the hedged exposure affected earnings. The termination of the swap agreement resulted in the reclassification of $1.8 million of unrealized gains that were previously recorded in accumulated other comprehensive income (loss) into earnings during the three months ended April 1, 2017. The Company did not discontinue any other cash flow hedges in any of the periods presented. The Company’s derivative financial instrument in cash flow hedging relationships consisted of the following (in thousands): Fair Value Balance Sheet Location September 30, December 31, Interest rate swap Other assets, net $ — $ 1,808 The before-tax effect of derivative instruments in cash flow hedging relationships was as follows (in thousands): Gain (Loss) Recognized in Gain (Loss) Reclassified Three Months Ended Location of Loss Three Months Ended September 30, October 1, Reclassified into September 30, October 1, Interest rate swaps $ — $ 202 Interest expense $ — $ (64 ) Nine Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Interest rate swaps $ — $ (211 ) Interest expense $ 1,808 $ (191 ) Foreign Currency Forward Contracts The Company uses foreign currency forward contracts to manage exposure to foreign exchange risk. These instruments are used to reduce the earnings impact that exchange rate fluctuations have on non-U.S. dollar balance sheet exposures. The Company recognizes gains and losses on the foreign currency forward contracts in interest income and other, net in the Consolidated Statement of Income in the same period as the remeasurement loss and gain of the related foreign currency denominated asset or liability. The Company does not apply hedge accounting to its foreign currency derivative instruments. As of September 30, 2017 and October 1, 2016, the Company held one foreign currency forward contract denominated in Norwegian Krone with a notional value of $3.2 million and $4.9 million, respectively. The fair value of the contracts was not material as of September 30, 2017 or October 1, 2016. The contract held as of September 30, 2017 has The before-tax effect of derivative instruments not designated as hedging instruments was as follows (in thousands): Three Months Ended Nine Months Ended Loss Recognized in Income September 30, October 1, September 30, October 1, Location Foreign currency forward contracts $ (203 ) $ (219 ) $ (332 ) $ (471 ) Interest income and other, net

Balance Sheet Details

Balance Sheet Details	9 Months Ended
	Sep. 30, 2017
Balance Sheet Details
Balance Sheet Details	5. Balance Sheet Details The following shows the details of selected Condensed Consolidated Balance Sheet items (in thousands): Inventories September 30, December 31, Work in progress $ 53,366 $ 40,755 Finished goods 19,529 18,823 $ 72,895 $ 59,578

Acquisitions

Acquisitions	9 Months Ended
	Sep. 30, 2017
Acquisitions
Acquisitions	6. Zentri On January 20, 2017, the Company acquired Zentri, Inc., a private company. Zentri is an innovator in low-power, cloud-connected Wi-Fi® technologies for the Internet of Things (IoT). The Company acquired Zentri for approximately $18.1 million, including initial cash consideration of approximately $14.3 million, and potential additional consideration with an estimated fair value of approximately $3.8 million at the date of acquisition. The amount of potential additional consideration is up to approximately $10.0 million based on fiscal 2017 revenue from certain Zentri products. The purchase price was allocated as follows: intangible assets—$6.7 million; goodwill—$12.5 million; and other net liabilities—$1.1 million. T Pro forma information related to this acquisition has not been presented because it would not be materially different from amounts reported.

Debt

Debt	9 Months Ended
	Sep. 30, 2017
Debt
Debt	7. Debt 1.375% Convertible Senior Notes On March 6, 2017, the Company completed a private offering of $400 million principal amount convertible senior notes (the “Notes”). The Notes bear interest semi-annually at a rate of 1.375% per year and will mature on March 1, 2022, unless repurchased, redeemed or converted at an earlier date. The Company used $72.5 million of the proceeds to pay off the remaining balance of its Amended Credit Agreement. The Notes are convertible at an initial conversion rate of 10.7744 shares of common stock per $1,000 principal amount of the Notes, which is equivalent to a conversion price of approximately $92.81 per share. The conversion rate is subject to adjustment under certain circumstances. Holders may convert the Notes under the following circumstances: during any calendar quarter after the calendar quarter ending on June 30, 2017 if the closing price of the Company’s common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to 130% of the conversion price of the Notes; during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the closing sale price of our common stock and the conversion rate on each such trading day; if specified distributions or corporate events occur; if the Notes are called for redemption; or at any time after December 1, 2021. The Company may redeem all or any portion of the Notes, at its option, on or after March 6, 2020, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period. Upon conversion, the Notes may be settled in cash, shares of the Company’s common stock or a combination of cash and shares, at the Company’s election. The principal balance of the Notes was separated into liability and equity components, and was recorded initially at fair value. The excess of the principal amount of the liability component over its carrying amount represents the debt discount, which is amortized to interest expense over the term of the Notes using the effective interest method. The carrying amount of the liability component was estimated by discounting the contractual cash flows of similar non-convertible debt at an appropriate market rate at the date of issuance. The Company incurred debt issuance costs of approximately $10.6 million, which was allocated to the liability and equity components in proportion to the allocation of the proceeds. The costs allocated to the liability component are being amortized as interest expense over the term of the Notes using the effective interest method. The carrying amount of the Notes consisted of the following (in thousands): September 30, Liability component Principal $ 400,000 Unamortized debt discount (53,247 ) Unamortized debt issuance costs (8,036 ) Net carrying amount $ 338,717 Equity component Net carrying amount $ 57,735 The liability component of the Notes is recorded in long-term debt on the Consolidated Balance Sheet. The equity component of the Notes is recorded in additional paid-in capital. The effective interest rate for the liability component was 4.75%. As of September 30, 2017, the remaining period over which the debt discount and debt issuance costs will be amortized was 4.4 years. Interest expense related to the Notes was comprised of the following (in thousands): Three Months Nine Months September 30, September 30, Contractual interest expense $ 1,360 $ 3,117 Amortization of debt discount 2,674 6,068 Amortization of debt issuance costs 404 916 $ 4,438 $ 10,101 Amended Credit Agreement On July 31, 2012, the Company and certain of its domestic subsidiaries (the “Guarantors”) entered into a $230 million five-year Credit Agreement (the “Credit Agreement”), which consisted of a $100 million Term Loan Facility and a $130 million Revolving Credit Facility. On July 24, 2015, the Company and the Guarantors amended the Credit Agreement (the “Amended Credit Agreement”) in order to, among other things, increase the borrowing capacity under the Revolving Credit Facility to $300 million (the “Credit Facility”), eliminate the Term Loan Facility and extend the maturity date to five years from the closing date. On July 24, 2015, the Company borrowed $82.5 million under the Amended Credit Agreement and paid off the remaining balance of its Term Loan Facility. In connection with the Company’s offering of the Notes, it entered into a second amendment to the Credit Agreement (the “Second Amended Credit Agreement”) on February 27, 2017 and paid off the remaining balance of $72.5 million. The Second Amended Credit Agreement retained the key terms and provisions of the first Amended Credit Agreement, including a $25 million letter of credit sublimit and a $10 million swingline loan sublimit. The Company also has an option to increase the size of the borrowing capacity by up to an aggregate of $200 million in additional commitments, subject to certain conditions. The Revolving Credit Facility, other than swingline loans, will bear interest at the Eurodollar rate plus an applicable margin or, at the option of the Company, a base rate (defined as the highest of the Wells Fargo prime rate, the Federal Funds rate plus 0.50% and the Eurodollar Base Rate plus 1.00%) plus an applicable margin. Swingline loans accrue interest at the base rate plus the applicable margin for base rate loans. The applicable margins for the Eurodollar rate loans range from 1.25% to 2.00% and for base rate loans range from 0.25% to 1.00%, depending in each case, on the leverage ratio as defined in the Agreement. The Second Amended Credit Agreement contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including financial covenants that the Company must maintain a leverage ratio (funded debt/EBITDA) of no more than 3.00 to 1 and a minimum fixed charge coverage ratio (EBITDA/interest payments, income taxes and capital expenditures) of no less than 1.25 to 1. As of September 30, 2017, the Company was in compliance with all covenants of the Second

Stockholders' Equity

Stockholders' Equity	9 Months Ended
	Sep. 30, 2017
Stockholders' Equity
Stockholders' Equity	8. Stockholders’ Equity Common Stock The Company issued 0.7 million shares of common stock during the nine months ended September 30, 2017. Share Repurchase Programs The Board of Directors authorized the following share repurchase programs (in thousands): Program Program Program October 2017 December 2018 $ 100,000 January 2017 December 2017 $ 100,000 August 2015 December 2016 $ 100,000 These programs allow for repurchases to be made in the open market or in private transactions, including structured or accelerated transactions, subject to applicable legal requirements and market conditions. The Company Reclassifications From Accumulated Other Comprehensive Income (Loss) The following table summarizes the effect on net income from reclassifications out of accumulated other comprehensive income (loss) (in thousands): Three Months Ended Nine Months Ended Reclassification September 30, October 1, September 30, October 1, Gains (losses) on cash flow hedges to: Interest expense $ — $ (64 ) $ 1,808 $ (191 ) Income tax benefit (provision) — 22 (633 ) 67 Total reclassifications $ — $ (42 ) $ 1,175 $ (124 )

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Sep. 30, 2017
Stock-Based Compensation
Stock-Based Compensation	9. Stock-Based Compensation In fiscal 2009, the stockholders of the Company approved the 2009 Stock Incentive Plan (the “2009 Plan”) and the 2009 Employee Stock Purchase Plan (the “2009 Purchase Plan”). In the second quarter of fiscal 2017, the stockholders of the Company approved amendments to both the 2009 Plan and the 2009 Purchase Plan. These amendments authorized additional shares of common stock for issuance, to comply with changes in applicable law, improve the Company’s corporate governance and to implement other best practices. The amended plans are currently effective. Stock-based compensation costs are based on the fair values on the date of grant for stock awards and stock options and on the date of enrollment for the employee stock purchase plans. The fair values of stock awards (such as RSUs, performance stock units (PSUs) and restricted stock awards (RSAs)) are estimated based on their intrinsic values. The fair values of MSUs are estimated using a Monte Carlo simulation. The fair values of stock options and employee stock purchase plans are estimated using the Black-Scholes option-pricing model. The following table presents details of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income (in thousands): Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Cost of revenues $ 281 $ 272 $ 803 $ 807 Research and development 5,411 4,580 16,161 14,695 Selling, general and administrative 5,663 4,343 16,043 14,555 11,355 9,195 33,007 30,057 Income tax benefit 2,674 2,124 11,131 6,630 $ 8,681 $ 7,071 $ 21,876 $ 23,427 The increases in income tax benefit in the three and nine months ended September 30, 2017 were primarily due to the recognition of excess tax benefits in connection with the Company’s adoption of ASU 2016-09. The Company had approximately $71.6 million of total unrecognized compensation costs related to granted stock options and awards as of September 30, 2017 that are expected to be recognized over a weighted-average period of approximately 2.1 years. There were no significant stock-based compensation costs capitalized into assets in any of the periods presented.

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Sep. 30, 2017
Commitments and Contingencies
Commitments and Contingencies	10. Commitments and Contingencies Patent Litigation On January The Delaware On July 16, 2014, the Company filed a lawsuit against Cresta Technology in the United States District Court in the Northern District of California alleging infringement of six United States Patents. These The Company intends to continue to vigorously defend Other The Company is involved in various other legal proceedings that have arisen in the normal course of business. While the ultimate results of these matters cannot be predicted with certainty, the Company does not expect them to have a material adverse effect on its Consolidated Financial Statements.

Income Taxes

Income Taxes	9 Months Ended
	Sep. 30, 2017
Income Taxes
Income Taxes	11. Income Taxes Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences. On July 27, 2015, the U.S. Tax Court (the “Court”) issued an opinion in Altera Corp. v. Commissioner related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision was entered by the Court The Company’s Norwegian subsidiary is currently under examination by the Norwegian Tax Administration (NTA) for income tax matters relating to fiscal years 2013, 2014 and 2015. While it has not yet received a final assessment from the NTA, in June 2017, the Norwegian subsidiary received a proposed notice of reassessment from the NTA concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction. The adjustment to 2013 taxable income would result in additional Norwegian tax of approximately $33 million, excluding interest and penalties. The Company disagrees with the NTA’s assessment and intends to defend itself vigorously in this matter. The Company plans to exhaust all available administrative remedies, and if unable to resolve this matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies. The Company believes that it has made adequate payments or accrued adequate reserves related to all matters contained in tax periods open to examination. Should the Company experience an unfavorable outcome in the NTA matter, however, such an outcome could have a material impact on its financial statements. As of September 30, 2017, the Company had gross unrecognized tax benefits of $3.3 million, of which $1.8 million would affect the effective tax rate if recognized. During the three months ended September 30, 2017, the Company released $0.5 million of unrecognized tax benefits and interest as a result of a lapse in the statute of limitations. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. These amounts were not material for any of the periods presented. Tax years 2012 through 2017 remain open to examination by the major taxing jurisdictions to which the Company is subject. The Company is not currently under audit in any major taxing jurisdiction, except Norway. The Company believes it is reasonably possible that the gross unrecognized tax benefits will decrease by approximately $1.9 million in the next 12 months due to the lapse of the statute of limitations applicable to tax deductions and tax credits claimed on prior year tax returns.

Significant Accounting Polici18

Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2017
Significant Accounting Policies
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Among the significant estimates affecting the financial statements are those related to inventories, stock-based compensation, investments in auction-rate securities, acquired intangible assets, goodwill, long-lived assets and income taxes. Actual results could differ from those estimates, and such differences could be material to the financial statements.
Reclassifications	Reclassifications Certain reclassifications have been made to prior year financial statements to conform to current year presentation.
Revenue Recognition	Revenue Recognition Revenues are generated predominately by sales of the Company’s products. The Company recognizes revenue when all of the following criteria are met: 1) there is persuasive evidence that an arrangement exists, 2) delivery of goods has occurred, 3) the sales price is fixed or determinable, and 4) collectibility is reasonably assured. Generally, revenue from product sales to direct customers and contract manufacturers is recognized upon shipment. A portion of the Company’s sales are made to distributors under agreements allowing certain rights of return and price protection related to the final selling price to the end customers. Accordingly, the Company defers revenue and cost of revenue on such sales until the distributors sell the product to the end customers. The net balance of deferred revenue less deferred cost of revenue associated with inventory shipped to a distributor but not yet sold to an end customer is recorded in the deferred income on shipments to distributors liability on the Consolidated Balance Sheet. Such net deferred income balance reflects the Company’s estimate of the impact of rights of return and price protection. A small portion of the Company’s revenues is derived from the sale of patents. The above revenue recognition criteria for patent sales are generally met upon the execution of the patent sale agreement.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In August 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-12 , Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. In January 2017, the FASB issued ASU No. 2017-03 , Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323). Revenue from Contracts with Customers (Topic 606) Leases (Topic 842) Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In January 2017, the FASB issued ASU No. 2017-04 , Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued ASU No. 2017-01 , Business Combinations (Topic 805): Clarifying the Definition of a Business. In August 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic326): Measurement of Credit Losses on Financial Instruments. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. In May 2014, the FASB issued ASU No. 2014-09 , Revenue from Contracts with Customers (Topic 606) Revenue Recognition Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, Compensation—Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers

Earnings Per Share (Tables)

Earnings Per Share (Tables)	9 Months Ended
	Sep. 30, 2017
Earnings Per Share
Schedule of computation of basic and diluted earnings per share	The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Net income $ 19,949 $ 20,018 $ 51,944 $ 41,385 Shares used in computing basic earnings per share 42,553 41,614 42,376 41,673 Effect of dilutive securities: Stock options and other stock-based awards 821 693 818 590 Shares used in computing diluted earnings per share 43,374 42,307 43,194 42,263 Earnings per share: Basic $ 0.47 $ 0.48 $ 1.23 $ 0.99 Diluted $ 0.46 $ 0.47 $ 1.20 $ 0.98

Fair Value of Financial Instr20

Fair Value of Financial Instruments (Tables)	9 Months Ended
	Sep. 30, 2017
Fair Value of Financial Instruments
Financial assets and liabilities measured at fair value on a recurring basis	The following summarizes the valuation of the Company’s financial instruments (in thousands). The tables do not include either cash on hand or assets and liabilities that are measured at historical cost or any basis other than fair value. Fair Value Measurements Description Quoted Prices in Significant Other Significant Total Assets: Cash equivalents: Money market funds $ 107,869 $ — $ — $ 107,869 Corporate debt securities — 21,317 — 21,317 Government debt securities — 8,946 — 8,946 Total cash equivalents $ 107,869 $ 30,263 $ — $ 138,132 Short-term investments: Government debt securities $ 62,494 $ 222,276 $ — $ 284,770 Corporate debt securities — 197,626 — 197,626 Total short-term investments $ 62,494 $ 419,902 $ — $ 482,396 Long-term investments: Auction rate securities $ — $ — $ 5,471 $ 5,471 Total long-term investments $ — $ — $ 5,471 $ 5,471 Total $ 170,363 $ 450,165 $ 5,471 $ 625,999 Liabilities: Other non-current liabilities: Contingent consideration $ — $ — $ 4,154 $ 4,154 Total $ — $ — $ 4,154 $ 4,154 Fair Value Measurements Description Quoted Prices in Significant Other Significant Total Assets: Cash equivalents: Money market funds $ 69,432 $ — $ — $ 69,432 Corporate debt securities — 7,153 — 7,153 Government debt securities — 3,904 — 3,904 Total cash equivalents $ 69,432 $ 11,057 $ — $ 80,489 Short-term investments: Government debt securities $ 12,416 $ 97,103 $ — $ 109,519 Corporate debt securities — 44,442 — 44,442 Total short-term investments $ 12,416 $ 141,545 $ — $ 153,961 Long-term investments: Auction rate securities $ — $ — $ 5,196 $ 5,196 Total long-term investments $ — $ — $ 5,196 $ 5,196 Other assets, net: Derivative instruments $ — $ 1,808 $ — $ 1,808 Total $ — $ 1,808 $ — $ 1,808 Total $ 81,848 $ 154,410 $ 5,196 $ 241,454
Summarization of contractual underlying maturities of available-for-sale investments	The following summarizes the contractual underlying maturities of the Company’s Cost Fair Due in one year or less $ 345,420 $ 345,451 Due after one year through ten years 189,524 189,507 Due after ten years 91,570 91,041 $ 626,514 $ 625,999
Schedule of available-for-sale investments in continuous unrealized loss position by length of time	The available-for-sale investments that were in a continuous unrealized loss position, aggregated by length of time that individual securities have been in a continuous loss position, were as follows (in thousands): Less Than 12 Months 12 Months or Greater Total As of September 30, 2017 Fair Gross Fair Gross Fair Gross Government debt securities $ 122,053 $ (109 ) $ — $ — $ 122,053 $ (109 ) Corporate debt securities 93,480 (102 ) — — 93,480 (102 ) Auction rate securities — — 5,471 (529 ) 5,471 (529 ) $ 215,533 $ (211 ) $ 5,471 $ (529 ) $ 221,004 $ (740 ) Less Than 12 Months 12 Months or Greater Total As of December 31, 2016 Fair Gross Fair Gross Fair Gross Government debt securities $ 79,743 $ (156 ) $ — $ — $ 79,743 $ (156 ) Corporate debt securities 21,737 (132 ) — — 21,737 (132 ) Auction rate securities — — 5,196 (804 ) 5,196 (804 ) $ 101,480 $ (288 ) $ 5,196 $ (804 ) $ 106,676 $ (1,092 )
Summary of quantitative information about level 3 asset fair value measurements	Auction rate securities Fair Value at Valuation Technique Unobservable Input Weighted Average $ 5,471 Discounted cash flow Estimated yield 1.27% Expected holding period 10 years Estimated discount rate 3.27% Contingent consideration Fair Value at Valuation Technique Unobservable Input Weighted Average $ 4,154 Discounted cash flow Expected term 3 months Estimated discount rate 12.0%
Summary of activity in Level 3 financial instruments	The following summarizes the activity in Level 3 financial instruments for the three and nine months ended September 30, 2017 (in thousands): Assets Auction Rate Securities Three Months Nine Months Beginning balance $ 5,379 $ 5,196 Gain included in other comprehensive income (loss) 92 275 Balance at September 30, 2017 $ 5,471 $ 5,471 Liabilities Contingent Consideration (1) Three Months Nine Months Beginning balance $ 3,993 $ — Issues — 3,829 Loss recognized in earnings 161 325 Balance at September 30, 2017 $ 4,154 $ 4,154 Net loss for the period included in earnings attributable to contingent consideration held at the end of the period: $ (161 ) $ (325 ) (1)

Derivative Financial Instrume21

Derivative Financial Instruments (Tables)	9 Months Ended
	Sep. 30, 2017
Derivative Financial Instruments
Schedule of derivative financial instrument	The Company’s derivative financial instrument in cash flow hedging relationships consisted of the following (in thousands): Fair Value Balance Sheet Location September 30, December 31, Interest rate swap Other assets, net $ — $ 1,808
Schedule of before-tax effect of derivative instruments in cash flow hedging relationships	The before-tax effect of derivative instruments in cash flow hedging relationships was as follows (in thousands): Gain (Loss) Recognized in Gain (Loss) Reclassified Three Months Ended Location of Loss Three Months Ended September 30, October 1, Reclassified into September 30, October 1, Interest rate swaps $ — $ 202 Interest expense $ — $ (64 ) Nine Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Interest rate swaps $ — $ (211 ) Interest expense $ 1,808 $ (191 )
Schedule of before-tax effect of derivative instruments not designated as hedging instruments	The before-tax effect of derivative instruments not designated as hedging instruments was as follows (in thousands): Three Months Ended Nine Months Ended Loss Recognized in Income September 30, October 1, September 30, October 1, Location Foreign currency forward contracts $ (203 ) $ (219 ) $ (332 ) $ (471 ) Interest income and other, net

Balance Sheet Details (Tables)

Balance Sheet Details (Tables)	9 Months Ended
	Sep. 30, 2017
Balance Sheet Details
Inventories	The following shows the details of selected Condensed Consolidated Balance Sheet items (in thousands): Inventories September 30, December 31, Work in progress $ 53,366 $ 40,755 Finished goods 19,529 18,823 $ 72,895 $ 59,578

Debt (Tables)

Debt (Tables)	9 Months Ended
	Sep. 30, 2017
Debt
Summary of information about the equity and liability components of the convertible senior notes	The carrying amount of the Notes consisted of the following (in thousands): September 30, Liability component Principal $ 400,000 Unamortized debt discount (53,247 ) Unamortized debt issuance costs (8,036 ) Net carrying amount $ 338,717 Equity component Net carrying amount $ 57,735
Schedule of components of interest expense	Interest expense related to the Notes was comprised of the following (in thousands): Three Months Nine Months September 30, September 30, Contractual interest expense $ 1,360 $ 3,117 Amortization of debt discount 2,674 6,068 Amortization of debt issuance costs 404 916 $ 4,438 $ 10,101

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)	9 Months Ended
	Sep. 30, 2017
Stockholders' Equity
Schedule of share repurchase programs	The Board of Directors authorized the following share repurchase programs (in thousands): Program Program Program October 2017 December 2018 $ 100,000 January 2017 December 2017 $ 100,000 August 2015 December 2016 $ 100,000
Schedule of reclassifications out of accumulated other comprehensive income (loss)	The following table summarizes the effect on net income from reclassifications out of accumulated other comprehensive income (loss) (in thousands): Three Months Ended Nine Months Ended Reclassification September 30, October 1, September 30, October 1, Gains (losses) on cash flow hedges to: Interest expense $ — $ (64 ) $ 1,808 $ (191 ) Income tax benefit (provision) — 22 (633 ) 67 Total reclassifications $ — $ (42 ) $ 1,175 $ (124 )

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	9 Months Ended
	Sep. 30, 2017
Stock-Based Compensation
Schedule of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income	The following table presents details of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income (in thousands): Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Cost of revenues $ 281 $ 272 $ 803 $ 807 Research and development 5,411 4,580 16,161 14,695 Selling, general and administrative 5,663 4,343 16,043 14,555 11,355 9,195 33,007 30,057 Income tax benefit 2,674 2,124 11,131 6,630 $ 8,681 $ 7,071 $ 21,876 $ 23,427

Significant Accounting Polici26

Significant Accounting Policies (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Basis of Presentation and Principles of Consolidation
Length of fiscal year	364 days	364 days
Number of days in each fiscal quarter for 52-week fiscal year	91 days
Low end of range
Basis of Presentation and Principles of Consolidation
Length of fiscal year	364 days
High end of range
Basis of Presentation and Principles of Consolidation
Length of fiscal year	371 days

Significant Accounting Polici27

Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Recent Accounting Pronouncements
Excess tax benefit	$ 2,178	$ 1,344	$ 1,469	$ 3,319
Accounting Standards Update 2016-09 - Compensation-Stock Compensation | Scenario, Adjustment
Recent Accounting Pronouncements
Excess tax benefit			$ (4,100)

Earnings Per Share (Details)

Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Net income	$ 19,949	$ 20,018	$ 51,944	$ 41,385
Shares used in computing basic earnings per share (in shares)	42,553,000	41,614,000	42,376,000	41,673,000
Effect of dilutive securities:
Stock options and other stock-based awards (in shares)	821,000	693,000	818,000	590,000
Shares used in computing diluted earnings per share (in shares)	43,374,000	42,307,000	43,194,000	42,263,000
Earnings per share:
Basic (in dollars per share)	$ 0.47	$ 0.48	$ 1.23	$ 0.99
Diluted (in dollars per share)	$ 0.46	$ 0.47	$ 1.20	$ 0.98
Shares excluded from computation of diluted earning per share (in shares)	0	100,000	0	200,000
Shares issued upon conversion of principal amount
Earnings per share:
Shares excluded from computation of diluted earning per share (in shares)			0

Fair Value of Financial Instr29

Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Financial assets and liabilities measured at fair value on a recurring basis
Total short-term investments	$ 482,396	$ 153,961
Total long-term investments	5,471	5,196
Assets and liabilities measured at fair value on recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	107,869	69,432
Total short-term investments	62,494	12,416
Total assets at fair value	170,363	81,848
Assets and liabilities measured at fair value on recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market funds
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	107,869	69,432
Assets and liabilities measured at fair value on recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Government debt securities
Financial assets and liabilities measured at fair value on a recurring basis
Total short-term investments	62,494	12,416
Assets and liabilities measured at fair value on recurring basis | Significant Other Observable Inputs (Level 2)
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	30,263	11,057
Total short-term investments	419,902	141,545
Derivative instruments		1,808
Other assets, net		1,808
Total assets at fair value	450,165	154,410
Assets and liabilities measured at fair value on recurring basis | Significant Other Observable Inputs (Level 2) | Corporate debt securities
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	21,317	7,153
Total short-term investments	197,626	44,442
Assets and liabilities measured at fair value on recurring basis | Significant Other Observable Inputs (Level 2) | Government debt securities
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	8,946	3,904
Total short-term investments	222,276	97,103
Assets and liabilities measured at fair value on recurring basis | Significant Unobservable Inputs (Level 3)
Financial assets and liabilities measured at fair value on a recurring basis
Total long-term investments	5,471	5,196
Total assets at fair value	5,471	5,196
Contingent consideration, noncurrent	4,154
Total liabilities at fair value	4,154
Assets and liabilities measured at fair value on recurring basis | Significant Unobservable Inputs (Level 3) | Auction rate securities
Financial assets and liabilities measured at fair value on a recurring basis
Total long-term investments	5,471	5,196
Assets and liabilities measured at fair value on recurring basis | Fair Value
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	138,132	80,489
Total short-term investments	482,396	153,961
Total long-term investments	5,471	5,196
Derivative instruments		1,808
Other assets, net		1,808
Total assets at fair value	625,999	241,454
Contingent consideration, noncurrent	4,154
Total liabilities at fair value	4,154
Assets and liabilities measured at fair value on recurring basis | Fair Value | Money market funds
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	107,869	69,432
Assets and liabilities measured at fair value on recurring basis | Fair Value | Corporate debt securities
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	21,317	7,153
Total short-term investments	197,626	44,442
Assets and liabilities measured at fair value on recurring basis | Fair Value | Government debt securities
Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	8,946	3,904
Total short-term investments	284,770	109,519
Assets and liabilities measured at fair value on recurring basis | Fair Value | Auction rate securities
Financial assets and liabilities measured at fair value on a recurring basis
Total long-term investments	$ 5,471	$ 5,196

Fair Value of Financial Instr30

Fair Value of Financial Instruments - Available-for-sale investments (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Cost
Due in one year or less, Cost	$ 345,420
Due after one year through ten years, Cost	189,524
Due after ten years, Cost	91,570
Total Cost	626,514
Fair Value
Due in one year or less, Fair Value	345,451
Due after one year through ten years, Fair Value	189,507
Due after ten years, Fair Value	91,041
Total Fair Value	625,999
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale securities, continuous loss position for less than twelve months	215,533	$ 101,480
Fair value of available-for-sale securities, continuous loss position for twelve months or longer	5,471	5,196
Total fair value of available-for-sale securities, continuous loss position	221,004	106,676
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale securities, continuous loss position for less than 12 months, gross unrealized losses	(211)	(288)
Available-for-sale securities, continuous loss position for 12 months or greater, gross unrealized losses	(529)	(804)
Available-for-sale securities, total gross unrealized losses	(740)	(1,092)
Other than temporary impairment losses
Other-than-temporary impairment losses	0
Government debt securities
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale securities, continuous loss position for less than twelve months	122,053	79,743
Total fair value of available-for-sale securities, continuous loss position	122,053	79,743
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale securities, continuous loss position for less than 12 months, gross unrealized losses	(109)	(156)
Available-for-sale securities, total gross unrealized losses	(109)	(156)
Corporate debt securities
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale securities, continuous loss position for less than twelve months	93,480	21,737
Total fair value of available-for-sale securities, continuous loss position	93,480	21,737
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale securities, continuous loss position for less than 12 months, gross unrealized losses	(102)	(132)
Available-for-sale securities, total gross unrealized losses	(102)	(132)
Auction rate securities
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale securities, continuous loss position for twelve months or longer	5,471	5,196
Total fair value of available-for-sale securities, continuous loss position	5,471	5,196
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale securities, continuous loss position for 12 months or greater, gross unrealized losses	(529)	(804)
Available-for-sale securities, total gross unrealized losses	$ (529)	$ (804)

Fair Value of Financial Instr31

Fair Value of Financial Instruments - Auction rate securities and Contingent consideration (Details) - Significant Unobservable Inputs (Level 3) - Weighted Average - Discounted cash flow	9 Months Ended
	Sep. 30, 2017
Assets and liabilities measured at fair value on recurring basis
Quantitative information for Level 3 Fair Value Measurements Assets
Expected holding period	3 months
Estimated discount rate (as a percent)	12.00%
Auction rate securities
Quantitative information for Level 3 Fair Value Measurements Assets
Estimated yield (as a percent)	1.27%
Expected holding period	10 years
Estimated discount rate (as a percent)	3.27%

Fair Value of Financial Instr32

Fair Value of Financial Instruments - Assets in Level 3 (Details) - Assets and liabilities measured at fair value on recurring basis - Significant Unobservable Inputs (Level 3) - Auction rate securities - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017
Fair value assets reconciliation of changes
Balance at the beginning of the period	$ 5,379	$ 5,196
Gain included in other comprehensive income (loss)	92	275
Balance at the end of the period	$ 5,471	$ 5,471

Fair Value of Financial Instr33

Fair Value of Financial Instruments - Liabilities in Level 3 (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017	Dec. 31, 2016
Fair value liabilities reconciliation of changes
Fair value of debt	$ 0	$ 0	$ 72,500
Assets and liabilities measured at fair value on recurring basis | Significant Unobservable Inputs (Level 3) | Contingent consideration
Fair value liabilities reconciliation of changes
Balance at the beginning of the period	3,993
Issues		3,829
Loss recognized in earnings	161	325
Balance at the end of the period	4,154	4,154
Net loss for the period included in earnings attributable to contingent consideration held at the end of the period:	(161)	(325)
Convertible Senior Notes
Fair value liabilities reconciliation of changes
Fair value of debt	$ 442,600	$ 442,600

Derivative Financial Instrume34

Derivative Financial Instruments (Details) $ in Millions	Sep. 30, 2017USD ($)
Cash flow hedges | Interest rate swaps
Notional amount
Original notional value	$ 72.5

Derivative Financial Instrume35

Derivative Financial Instruments - Financial Instrument (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 01, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016	Dec. 31, 2016
Derivative financial instrument
Reclassification of unrealized gains included in net income	$ 1,800	$ (64)	$ 1,808	$ (191)
Other assets, net
Derivative financial instrument
Fair value of interest rate swap					$ 1,808

Derivative Financial Instrume36

Derivative Financial Instruments - Before-tax Effect (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017USD ($)contract	Oct. 01, 2016USD ($)contract	Sep. 30, 2017USD ($)contract	Oct. 01, 2016USD ($)contract
Not Designated as Hedging Instrument | Foreign currency forward contracts
Derivative Instruments, Gain (Loss)
Number of foreign currency forward contract held | contract	1	1	1	1
Original notional value	$ 3,200	$ 4,900	$ 3,200	$ 4,900
Not Designated as Hedging Instrument | Foreign currency forward contracts | Interest income and other, net
Derivative Instruments, Gain (Loss)
Loss Recognized in Income	(203)	(219)	(332)	(471)
Cash flow hedges | Interest rate swaps
Derivative Instruments, Gain (Loss)
Gain (Loss) Recognized in OCI on Derivatives (Effective Portion) during period		202		(211)
Original notional value	$ 72,500		72,500
Cash flow hedges | Interest rate swaps | Interest expense
Derivative Instruments, Gain (Loss)
Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) during period		$ (64)	$ 1,808	$ (191)

Balance Sheet Details (Details)

Balance Sheet Details (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Inventories
Work in progress	$ 53,366	$ 40,755
Finished goods	19,529	18,823
Total inventories	$ 72,895	$ 59,578

Acquisitions (Details)

Acquisitions (Details) - Zentri $ in Millions	Jan. 20, 2017USD ($)
Acquisition
Purchase price of acquisition	$ 18.1
Cash consideration	14.3
Earn-Out, fair value	3.8
Potential maximum contingent consideration that could be paid	10
Purchase price allocation
Intangible assets	6.7
Goodwill tax deductible	12.5
Other net liabilities	$ 1.1

Debt - Convertible Senior Notes

Debt - Convertible Senior Notes (Details)	Mar. 06, 2017USD ($)item$ / shares	Sep. 30, 2017USD ($)
Amended Credit Agreement
Debt
Repayment of debt	$ 72,500,000
1.375% Convertible Senior Notes
Debt
Principal amount of convertible senior notes sold in private placement	$ 400,000,000	$ 400,000,000
Stated interest rate	1.375%
Conversion rate	10.7744
Principal amount of notes	$ 1,000
Initial conversion price | $ / shares	$ 92.81
Number of trading days within 30 trading day period | item	20
Number of consecutive trading days	30 days
Minimum amount the sales price of the Company's stock exceeds the conversion price (as a percent)	130.00%
Number of consecutive business days after the 10 consecutive trading day period	5 days
Number of consecutive trading days before the five consecutive business days	10 days
Maximum amount the sales price of the Company's stock exceeds the conversion price (as a percent)	98.00%

Debt - Carrying amount of notes

Debt - Carrying amount of notes and interest expense (Details) - 1.375% Convertible Senior Notes - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017	Mar. 06, 2017
Debt
Total Debt issuance costs			$ 10,600
Liability component
Principal	$ 400,000	$ 400,000	$ 400,000
Unamortized debt discount	(53,247)	(53,247)
Unamortized debt issuance costs	(8,036)	(8,036)
Net carrying amount	338,717	338,717
Equity component
Net carrying amount	$ 57,735	$ 57,735
Effective interest rate	4.75%	4.75%
Amortization of debt discount and debt issuance costs		4 years 4 months 24 days
Interest expense related to the Notes
Contractual interest expense	$ 1,360	$ 3,117
Amortization of debt discount	2,674	6,068
Amortization of debt issuance costs	404	916
Interest Expense, Total	$ 4,438	$ 10,101

Debt - Amended Credit Agreement

Debt - Amended Credit Agreement (Details) $ in Millions	Feb. 27, 2017USD ($)	Jul. 24, 2015USD ($)	Jul. 31, 2012USD ($)	Sep. 30, 2017
Credit Agreement
Debt
Maximum borrowing capacity			$ 230
Term of debt instrument			5 years
Amount borrowed under the Amended Credit Agreement		$ 82.5
Revolving Credit Facility
Debt
Maximum borrowing capacity		$ 300	$ 130
Term of debt instrument		5 years
Sublimit on letters of credit	$ 25
Sublimit on swingline loan	10
Additional increase in borrowing capacity of the line of credit available at the entity's option	200
Amended Credit Agreement
Debt
Repayment of credit facility amount	$ 72.5
Maximum leverage ratio				3
Minimum fixed charge coverage ratio				1.25
Revolving credit facility, other than swingline loans | Federal Funds
Debt
Interest rate added to the base rate (as a percent)				0.50%
Revolving credit facility, other than swingline loans | Eurodollar base rate
Debt
Interest rate added to the base rate (as a percent)				1.00%
Revolving credit facility, other than swingline loans | Eurodollar | Low end of range
Debt
Interest rate added to the base rate (as a percent)				1.25%
Revolving credit facility, other than swingline loans | Eurodollar | High end of range
Debt
Interest rate added to the base rate (as a percent)				2.00%
Term loan facility, revolving credit facility, swingline and other loans | Base rate | Low end of range
Debt
Interest rate added to the base rate (as a percent)				0.25%
Term loan facility, revolving credit facility, swingline and other loans | Base rate | High end of range
Debt
Interest rate added to the base rate (as a percent)				1.00%
Term Loan Facility
Debt
Maximum borrowing capacity			$ 100

Stockholders' Equity - Share re

Stockholders' Equity - Share repurchase programs (Details) - USD ($) $ in Thousands, shares in Millions	9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Oct. 31, 2017	Jan. 31, 2017	Aug. 31, 2015
Stockholders' Equity
Number of shares of common stock issued	0.7
Program Amount authorized to repurchase			$ 100,000	$ 100,000	$ 100,000
Repurchase of common stock (in shares)	0	0.9
Repurchase of common stock		$ 40,500

Stockholders' Equity - Reclassi

Stockholders' Equity - Reclassified from AOCI (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Amounts Reclassified from AOCI
Income tax benefit (provision)	$ (2,178)	$ (1,344)	$ (1,469)	$ (3,319)
Net income	$ 19,949	20,018	51,944	41,385
Reclassifications From Accumulated Other Comprehensive Income (Loss)
Amounts Reclassified from AOCI
Income tax benefit (provision)		22	(633)	67
Net income		(42)	1,175	(124)
Unrealized Gain on Cash Flow Hedge | Reclassifications From Accumulated Other Comprehensive Income (Loss)
Amounts Reclassified from AOCI
Interest expense		$ (64)	$ 1,808	$ (191)

Stock-Based Compensation (Detai

Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Stock-based compensation costs
Share based compensation cost	$ 11,355	$ 9,195	$ 33,007	$ 30,057
Income tax benefit	2,674	2,124	11,131	6,630
Share based compensation cost after tax	8,681	7,071	21,876	23,427
Total unrecognized compensation costs related to awards	$ 71,600		71,600
Weighted-average period of recognition of unrecognized compensation costs	2 years 1 month 6 days
Cost of revenues
Stock-based compensation costs
Share based compensation cost	$ 281	272	803	807
Research and development
Stock-based compensation costs
Share based compensation cost	5,411	4,580	16,161	14,695
Selling, general and administrative
Stock-based compensation costs
Share based compensation cost	$ 5,663	$ 4,343	$ 16,043	$ 14,555

Commitments and Contingencies (

Commitments and Contingencies (Details) - Cresta Technology - patent	Jul. 16, 2014	Jan. 28, 2014	Jan. 02, 2016	Jan. 03, 2015
Patent Litigation
Number of patents allegedly infringed	6	3
Number of creditors assuming ownership of Cresta Patents		1
Number of patents with validity challenged			2	2

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Income Taxes
Income tax benefit (provision)		$ (2,178)	$ (1,344)	$ (1,469)	$ (3,319)
Effective income tax rate reconciliation
Effective income tax rate (as a percent)		9.80%	6.30%	2.80%	7.40%
Components of deferred taxes
Gross unrecognized tax benefits		$ 3,300		$ 3,300
Gross unrecognized tax benefits which would affect the effective tax rate if recognized		1,800		1,800
Unrecognized Tax Benefits, Reduction Resulting from Lapse of Applicable Statute of Limitations		500
Amount of estimated decrease in unrecognized tax benefits		$ 1,900		$ 1,900
Norwegian | 2013
Income Taxes
Adjustments to taxable income excluding interest and penalties	$ 33,000