x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Fiscal Year Ended: December 31, 2017 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Israel (State or other jurisdiction of incorporation or organization) | 98-0233400 (I.R.S. Employer Identification Number) |
Title of Each Class: | Name of Each Exchange on Which Registered: | |
Ordinary shares, nominal value NIS 0.0175 per share | The NASDAQ Stock Market, Inc. |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o | |||
Emerging growth company o |
Page No. | ||
• | the impact of worldwide economic conditions on us, our customers and our vendors; |
• | the impact of any acquisitions or investments in other companies; |
• | our ability to resume and maintain adequate revenue growth; |
• | market adoption of our Ethernet and InfiniBand solutions; |
• | our ability to accurately forecast customer demand; |
• | our dependence on a relatively small number of customers; |
• | competition and competitive factors; |
• | our ability to successfully introduce new products and enhance existing products; |
• | our dependence on third-party subcontractors; |
• | our ability to carefully manage the use of "open source" software in our products; |
• | a potential proxy contest for the election of directors at our annual meeting, which could distract our management, divert our resources and, the outcome of which may significantly impact the strategic direction of the Company and the Company's financial performance; and |
• | other risk factors included under "Risk Factors" in this report. |
• | processor and accelerator vendors such as AMD, ARM, IBM, Intel, Nvidia, Oracle, and Qualcomm; |
• | operating system vendors such as Microsoft and Red Hat; and |
• | software applications vendors such as Oracle, IBM and VMware. |
• | Transition to clustered computing and storage using connections among multiple standard components; |
• | Transition to multiple and multi-core processors in servers; |
• | Use of solid state Flash memory drives for data storage; |
• | Increasing deployments of software defined scale out storage; |
• | Enterprise data center infrastructure consolidation; |
• | Increasing deployments of mission critical, latency, or response time sensitive applications; |
• | Increasing deployments of converged and hyperconverged infrastructure; |
• | Increasing deployment of virtualized computing and virtualized networking resources to improve server utilization; |
• | Requirements by cloud providers to perform system provisioning, workload migrations and support multiple users' requests faster and more efficiently; |
• | Requirements by Web 2.0 data centers to increase their hardware utilization and to instantly scale up to large capacities; |
• | Big Data Analytics requirements for faster data access and processing to analyze increasingly large datasets and to provide real-time analysis; and |
• | Increasing deployment of artificial intelligence and machine learning applications that utilize massive amounts of data and compute resources and often require generating real-time results. |
• | Performance limitations. In clustered computing, cloud computing and storage environments, high bandwidth and low latency are key requirements to capture the full performance capabilities of a cluster. With the usage of multiple multi-core processors in server, storage and embedded systems, I/O bandwidth has not been able to keep pace with processor advances, creating performance bottlenecks. Fast data access has become a critical requirement to take advantage of the increased compute power of microprocessors. In addition, interconnect latency has become a limiting factor in a cluster's overall performance. |
• | Increasing complexity. The increasing usage of clustered servers and storage systems as a critical IT tool has led to an increase in complexity of interconnect configurations. The number of configurations and connections has also proliferated in EDC, making systems increasingly complicated to manage and expensive to operate. Additionally, managing multiple software applications utilizing disparate interconnect infrastructures has become increasingly complex. |
• | Interconnect inefficiency. The deployment of clustered computing and storage has created additional interconnect implementation challenges. As additional computing and storage systems, or nodes, are added to a cluster, the interconnect must be able to scale in order to provide the expected increase in cluster performance. Additionally, increased attention on data center energy efficiency is causing IT managers to look for ways to adopt more energy-efficient implementations. |
• | Limited reliability and stability of connections. Most interconnect solutions are not designed to provide reliable connections when utilized in a large clustered environment, causing data transmission interruption. As more applications in EDCs share the same interconnect, advanced traffic management and application partitioning become necessary to maintain stability and reduce system down time. Such capabilities are not offered by most interconnect solutions. |
• | Poor price/performance economics. In order to provide the required system bandwidth and efficiency, most high-performance interconnects are implemented with complex, multi-chip semiconductor solutions. These implementations have traditionally been extremely expensive. |
• | Proprietary interconnect solutions have been designed for use in supercomputer applications by supporting low latency and increased reliability. These solutions are only supported by a single vendor for product and software support, and there is no standard organization maintaining and facilitating improvements and changes to the technology. The number of supercomputers that use proprietary interconnect solutions has been declining largely due to the required use of proprietary software solutions, a lack of compatible storage systems and the availability of industry standards-based interconnects that offer superior price/performance. |
• | Fibre Channel is an industry standard interconnect solution limited to storage applications. The majority of Fibre Channel deployments support 2, 4, 8 and 16Gb/s. Fibre Channel lacks a standard software interface, does not provide server cluster capabilities and remains more expensive relative to other standards-based interconnects. There have been industry efforts to support the Fibre Channel data transmission protocol over interconnect technologies including Ethernet (Fibre Channel over Ethernet) and InfiniBand (Fibre Channel over InfiniBand). The Fibre Channel market is declining as legacy storage area network moves to more modern Web 2.0 and cloud architectures based on converged, software defined, and scale out storage. |
• | Ethernet is an industry-standard interconnect solution that was initially designed to enable basic connectivity between a local area network of computers or over a wide area network, where latency, connection reliability and performance limitations due to communication processing are non-critical. While Ethernet has a broad installed base at 1/10Gb/s and lower data rates, its overall efficiency, scalability and reliability have been less optimal than other interconnect solutions in high-performance computing, storage and communication applications. An increase to 25/40/50/100Gb/s bandwidth, a significant reduction in application latency and more efficient software solutions have improved Ethernet's capabilities to address specific high-performance applications that do not demand the highest performance or scalability. |
• | Superior performance. Compared to other interconnect technologies that were architected to have a heavy reliance on communication processing, InfiniBand was designed for implementation in an IC that relieves the CPU of communication processing functions. InfiniBand is able to provide superior bandwidth and latency relative to other existing interconnect technologies and has maintained this advantage with each successive generation of products. For example, our current InfiniBand adapters and switches provide bandwidth up to 100Gb/s, with end-to-end latency lower than a microsecond. In addition, InfiniBand fully leverages the I/O capabilities of PCI Express, a high-speed system bus interface standard. |
Proprietary | Fibre Channel | Ethernet | InfiniBand | ||||
Supported bandwidth of available solutions | 2Gb/s - 100Gb/s | 2Gb/s - 16Gb/s | 1Gb/s - 100Gb/s | 10Gb/s - 100Gb/s |
• | Reduced complexity. While other interconnects require use of separate cables to connect servers, storage and communications infrastructure equipment, InfiniBand allows for the consolidation of multiple I/Os on a single cable or backplane interconnect, which is critical for blade servers and embedded systems. InfiniBand also consolidates the transmission of clustering, communications, storage and management data types over a single connection. |
• | Highest interconnect efficiency. InfiniBand was developed to provide efficient scalability of multiple systems. InfiniBand provides communication processing functions in hardware, relieving the CPU of this task, and enables the full resource utilization of each node added to the cluster. |
• | Reliable and stable connections. InfiniBand is one of the only industry standard high-performance interconnect solutions which provides reliable end-to-end data connections within the silicon hardware. In addition, InfiniBand facilitates the deployment of virtualization solutions, which allow multiple applications to run on the same interconnect with dedicated application partitions. As a result, multiple applications run concurrently over stable connections, thereby minimizing down time. |
• | Superior price/performance economics. In addition to providing superior performance and capabilities, standards-based InfiniBand solutions are generally available at a lower cost than other high-performance interconnects. |
• | We have expertise in developing high-performance interconnect solutions. We were founded by a team with an extensive background in designing and marketing semiconductor solutions. Since our founding, we have been focused on high-performance interconnect and have successfully launched several generations of Ethernet and InfiniBand products. We believe we have developed strong competencies in integrating mixed-signal design and developing complex ICs. We also consider our software development capability as a key strength, and we believe that our software allows us to offer complete solutions. We have developed a significant portfolio of intellectual property ("IP"), and have 487 issued patents and pending design applications. We believe our experience, competencies and IP will enable us to remain a leading supplier of high-performance interconnect solutions. |
• | We have expertise in developing high speed analog and optical components. We have unique design expertise and manufacturing capabilities required to build state of the art optical components, modules, and cable assemblies. We have developed significant know-how related to building advanced electrical and electro-optical components and sub-assemblies which combine electrical and optical components. In addition, we have design expertise to enable advanced transceiver chipsets for driving and receiving multimode optical signals and interfacing to low cost lasers and optical sensor technologies. We have developed significant manufacturing know how and automated assembly techniques to combine these optical and electrical components and build complete optical module and cables that are high performance, cost effective, high quality, and offer high reliability. |
• | We believe we are the leading merchant supplier of InfiniBand ICs. We have gained in-depth knowledge of the InfiniBand standard through active participation in its development. We were first to market with InfiniBand products (in 2001) and InfiniBand products that support the standard PCI Express interface (in 2004), PCI Express 2.0 interface (in 2007) and PCI Express 3.0 (in 2011). We have sustained our leadership position through the introduction of several generations of products. Because of our market leadership, vendors have developed and continue to optimize their software products based on our semiconductor solutions. We believe that this places us in an advantageous position to benefit from continuing market adoption of our InfiniBand products. |
• | We believe we are a leading merchant supplier of end to end Ethernet solutions and the leading merchant supplier of high performance Ethernet Adapters. We have gained significant expertise in Ethernet adapters and are the leading supplier of adapters with speeds of 25Gb/s and above with over 60% market share of adapters with speeds greater than 10Gb/s. We have developed significant expertise in Ethernet switches hardware and software and are gaining market share with our top of rack switch products and optical and copper cables and transceivers. Nine out of the top ten hyperscale, cloud and Web 2.0 data centers are using our products. Our engagement with these customers through several generations of designs has allowed us to understand the challenges faced by large scale deployments, and to develop features that solve these problems. We are the first to market with a complete end-to-end product portfolio of adapters, switches, and cables for the latest 25, 50, and 100Gb/s speeds of Ethernet. Our leading time to market, customer engagements, advanced feature set, and rapid development cadence provides a significant competitive advantage over other vendors. We believe that this places us in an advantageous position to benefit from continuing market adoption of our Ethernet products. |
• | We have a comprehensive set of technical capabilities to deliver innovative and reliable products. In addition to designing our ICs, we design standard and customized adapter card products, switch products, and optical cables and transceivers - providing us a deep understanding of the associated circuitry and component characteristics. We believe |
• | We have extensive relationships with our key original equipment manufacturers ("OEM") and hyperscale customers and many end users. Since our inception we have worked closely with major hyperscale customers and OEMs, including leading server, storage, communications infrastructure equipment and embedded systems vendors, to develop products that accelerate market adoption of our Ethernet and InfiniBand products. During this process, we have obtained valuable insight into the challenges and objectives of our customers, and gained visibility into their product development plans. We also have established end-user relationships with influential IT executives who allow us access to firsthand information about evolving market trends. We believe that our OEM customer and end-user relationships allow us to stay at the forefront of developments and improve our ability to provide compelling solutions to address their needs. |
• | Continue to develop leading, high-performance interconnect products. We will continue to expand our technical expertise and customer relationships to develop leading interconnect products. We are focused on extending our leadership position in high-performance interconnect technology and pursuing a product development plan that addresses emerging customer and end-user demands and industry standards. Our unified software strategy is to use a single software stack to support connectivity to Ethernet and InfiniBand with the same VPI enabled hardware adapter device. |
• | Capture Ethernet market share with our adapter, switch, and cable products. We believe we are the market leader in Ethernet adapters with performance greater than 10Gb/s and the only provider of end-to-end solutions of adapters, switches, and cables at the latest 25, 40, 50, and 100Gb/s speeds. We plan to capture Ethernet market share as data centers transition from 10Gb/s to 25/40/50 or 100Gb/s. We believe we will be able to leverage our strength in the Ethernet adapter business to grow our Ethernet switch and cable business during the market transition to these advanced speeds. |
• | Facilitate and increase the continued adoption of InfiniBand. We will facilitate and increase the continued adoption of InfiniBand in the high-performance interconnect marketplace by expanding our partnerships with key vendors that drive high-performance interconnect adoption, such as suppliers of processors, operating systems and other associated software. In conjunction with our OEM customers, we will expand our efforts to promote the benefits of InfiniBand and VPI directly to end users to increase demand for high-performance interconnect solutions. |
• | Expand our presence with existing server OEM customers. We believe the leading server vendors are influential drivers of high-performance interconnect technologies to end users. We plan to continue working with and expanding our relationships with server OEMs to increase our presence in their current and future product platforms. |
• | Broaden our customer base with storage, communications infrastructure and embedded systems OEMs. We believe there is a significant opportunity to expand our global customer base with storage, communications infrastructure and embedded systems OEMs. In storage solutions specifically, we believe our products are well suited to replace existing technologies such as Fibre Channel. We believe our adapter, SOC, and switch products are the basis of superior interconnect fabrics for unifying disparate storage interconnects, including back-end, clustering and front-end connections, primarily due to their ability to be a unified fabric and superior price/performance economics. |
• | Leverage our fabless business model to deliver strong financial performance. We intend to continue operating as a fabless semiconductor company and consider outsourced manufacturing of our ICs, adapter cards, switches and cables to be a key element of our strategy. Our fabless business model offers flexibility to meet market demand and allows us to focus on delivering innovative solutions to our customers. We plan to continue to leverage the flexibility and efficiency offered by our business. |
• | assuming leadership roles within IBTA, OFA and other industry trade organizations; |
• | participating in tradeshows, press and analyst briefings, conference presentations and seminars for end-user education; and |
• | building and maintaining active partnerships with industry leaders whose products are important in driving Ethernet and InfiniBand adoption, including vendors of processors, operating systems and software applications. |
• | price/performance; |
• | time to market; |
• | features and capabilities; |
• | wide availability of complementary software solutions; |
• | reliability; |
• | power consumption and latency; |
• | customer and application support; |
• | product roadmap; |
• | intellectual property; and |
• | reputation. |
• | increasing our vulnerability to adverse general economic and industry conditions; |
• | requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts, the execution of our business strategy, acquisitions and other general corporate purposes; |
• | making it more difficult to borrow additional funds in the future to fund growth, acquisitions, working capital, capital expenditures and other purposes. |
• | difficulties in integrating the operations, systems, technologies, products, and personnel of the acquired companies, particularly companies with large and widespread operations and/or complex products; |
• | the diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions; |
• | possible disruption to the continued expansion of our product lines; |
• | potential changes in our customer base and changes to the total available market for our products; |
• | reduced demand for our products; |
• | potential difficulties in completing projects associated with in-process research and development intangibles; |
• | the use of a substantial portion of our cash resources and incurrence of significant amounts of debt; |
• | significantly increase our interest expense, leverage and debt service requirements as a result of incurring debt; |
• | the impact of any such acquisition on our financial results; |
• | internal controls may become more complex and may require significantly more resources to ensure they remain effective; |
• | negative customer reaction to any such acquisition; and |
• | assuming the liabilities of the acquired company. |
• | reduced control over product cost, delivery schedules and product quality; |
• | potential price increases; |
• | inability to achieve sufficient production, increase production or test capacity and achieve acceptable yields on a timely basis; |
• | increased exposure to potential misappropriation of our intellectual property; |
• | shortages of materials used to manufacture products; |
• | capacity shortages; |
• | labor shortages or labor strikes; |
• | political instability in the regions where these subcontractors are located; and |
• | natural disasters impacting these subcontractors. |
• | unpredictable volume and timing of customer orders, which are not fixed by contract but vary on a purchase order basis; |
• | the loss of one or more of our customers, or a significant reduction or postponement of orders from our customers; |
• | our customers' sales outlooks, purchasing patterns and inventory levels based on end-user demands and general economic conditions; |
• | seasonal buying trends; |
• | the timing of new product announcements or introductions by us or by our competitors; |
• | our ability to successfully develop, introduce and sell new or enhanced products in a timely manner; |
• | changes in the relative sales mix of our products; |
• | decreases in the overall average selling prices of our products; |
• | changes in the cost of our finished goods; and |
• | the availability, pricing and timeliness of delivery of other components used in our customers' products. |
• | people may not be deterred from misappropriating our technologies despite the existence of laws or contracts prohibiting it; |
• | policing unauthorized use of our intellectual property may be difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use; and |
• | the laws of other countries in which we market our products, such as some countries in the Asia/Pacific region, may offer little or no protection for our proprietary technologies. |
• | manage and enhance our relationships with customers, distributors, suppliers, end users and other third parties; |
• | implement additional, and enhance existing, administrative, financial and operations systems, procedures and controls; |
• | address capacity shortages; |
• | expand and upgrade our technological capabilities; |
• | manage the challenges of having U.S., Israeli and other foreign operations; and |
• | hire, train, integrate and manage additional qualified engineers for research and development activities as well as additional personnel to strengthen our sales and marketing, financial and IT functions. |
• | reduced protection of intellectual property rights in some countries; |
• | difficulties in staffing and managing foreign operations; |
• | longer sales and payment cycles; |
• | greater difficulties in collecting accounts receivable; |
• | adverse economic conditions; |
• | seasonal reductions in business activity; |
• | potentially adverse tax consequences; |
• | laws and business practices favoring local competition; |
• | costs and difficulties of customizing products for foreign countries; |
• | compliance with a wide variety of complex foreign laws and treaties; |
• | compliance with the United States' Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions; |
• | compliance with export control and regulations; |
• | licenses, tariffs, other trade barriers, transit restrictions and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets; |
• | restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments; |
• | foreign currency exchange risks; |
• | fluctuations in freight rates and transportation disruptions; |
• | political and economic instability; |
• | variance and unexpected changes in local laws and regulations; |
• | natural disasters and public health emergencies; and |
• | trade and travel restrictions. |
• | quarterly variations in our results of operations or those of our competitors; |
• | announcements by us, our competitors, our customers or rumors from sources other than our company related to acquisitions, new products, significant contracts, commercial relationships, capital commitments or changes in the competitive landscape; |
• | our ability to develop and market new and enhanced products on a timely basis; |
• | disruption to our operations; |
• | geopolitical instability; |
• | the emergence of new sales channels in which we are unable to compete effectively; |
• | any major change in our board of directors or management; |
• | changes in financial estimates, including our ability to meet our future revenue and operating profit or loss projections; |
• | changes in governmental regulations or in the status of our regulatory approvals; |
• | general economic conditions and slow or negative growth of related markets; |
• | anticompetitive practices of our competitors; |
• | commencement of, or our involvement in, litigation; |
• | whether our operating results meet our guidance or the expectations of investors or securities analysts; |
• | continuing international conflicts and acts of terrorism; and |
• | changes in accounting rules. |
• | no cumulative voting; |
• | a requirement for any merger involving the Company shall require the approval of the shareholders of at least a majority of the voting power of the Company; |
• | a requirement for the approval of at least 75% of the voting power represented at the general meeting of the shareholders for the removal of any director from office, and election of any director instead of the director so removed; and |
• | an advance notice requirement for shareholder proposals and nominations. |
Israel | United States | Other | Total | ||||
Leased facilities (in thousands of square feet) | 1,002 | 120 | 63 | 1,185 |
2017 | High | Low | |||||
First quarter | $ | 52.80 | $ | 40.70 | |||
Second quarter | $ | 52.65 | $ | 41.55 | |||
Third quarter | $ | 47.95 | $ | 42.05 | |||
Fourth quarter | $ | 65.90 | $ | 42.25 | |||
2016 | High | Low | |||||
First quarter | $ | 55.80 | $ | 37.54 | |||
Second quarter | $ | 55.45 | $ | 40.54 | |||
Third quarter | $ | 52.15 | $ | 39.53 | |||
Fourth quarter | $ | 46.20 | $ | 38.75 |
12/31/2012 * | 12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | ||||||||||||
Mellanox Technologies | 100.00 | 67.31 | 71.96 | 70.97 | 68.88 | 108.96 | |||||||||||
NASDAQ Composite Index | 100.00 | 138.32 | 156.85 | 165.84 | 178.28 | 228.63 | |||||||||||
Philadelphia Semiconductor Index | 100.00 | 139.31 | 178.84 | 172.75 | 236.02 | 326.26 |
Year ended December 31, | |||||||||||||||||||
2017 | 2016 (1) | 2015 | 2014 | 2013 | |||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||
Consolidated Statement of Operations Data: | |||||||||||||||||||
Total revenues | $ | 863,893 | $ | 857,498 | $ | 658,140 | $ | 463,649 | $ | 390,436 | |||||||||
Cost of revenues | 300,450 | 301,986 | 189,209 | 148,672 | 134,282 | ||||||||||||||
Gross profit | 563,443 | 555,512 | 468,931 | 314,977 | 256,154 | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Research and development | 365,878 | 322,620 | 252,175 | 208,877 | 169,382 | ||||||||||||||
Sales and marketing | 150,457 | 133,780 | 97,438 | 76,860 | 70,544 | ||||||||||||||
General and administrative | 52,170 | 68,522 | 44,212 | 36,431 | 37,046 | ||||||||||||||
Impairment of long-lived assets | 12,019 | — | — | — | — | ||||||||||||||
Total operating expenses | 580,524 | 524,922 | 393,825 | 322,168 | 276,972 | ||||||||||||||
Income (loss) from operations | (17,081 | ) | 30,590 | 75,106 | (7,191 | ) | (20,818 | ) | |||||||||||
Interest expense | (7,937 | ) | (7,352 | ) | — | — | — | ||||||||||||
Other income (loss), net | 3,115 | 1,090 | (524 | ) | 1,449 | 1,228 | |||||||||||||
Interest and other, net | (4,822 | ) | (6,262 | ) | (524 | ) | 1,449 | 1,228 | |||||||||||
Income (loss) before taxes on income | (21,903 | ) | 24,328 | 74,582 | (5,742 | ) | (19,590 | ) | |||||||||||
Provision for (benefit from) taxes on income | (2,478 | ) | 5,810 | (18,312 | ) | 18,267 | 3,752 | ||||||||||||
Net income (loss) | $ | (19,425 | ) | $ | 18,518 | $ | 92,894 | $ | (24,009 | ) | $ | (23,342 | ) | ||||||
Net income (loss) per share — basic | $ | (0.39 | ) | $ | 0.38 | $ | 2.00 | $ | (0.54 | ) | $ | (0.54 | ) | ||||||
Net income (loss) per share — diluted | $ | (0.39 | ) | $ | 0.37 | $ | 1.94 | $ | (0.54 | ) | $ | (0.54 | ) | ||||||
Shares used in computing net income (loss) per share: | |||||||||||||||||||
Basic | 50,310 | 48,145 | 46,365 | 44,831 | 43,421 | ||||||||||||||
Diluted | 50,310 | 49,526 | 47,778 | 44,831 | 43,421 |
December 31, | |||||||||||||||||||
2017 | 2016 (1) | 2015 | 2014 (2) | 2013 (2) | |||||||||||||||
(In thousands) | |||||||||||||||||||
Consolidated Balance Sheet Data: | |||||||||||||||||||
Cash and cash equivalents | $ | 62,473 | $ | 56,780 | $ | 263,199 | $ | 51,326 | $ | 63,164 | |||||||||
Short-term investments | 211,281 | 271,661 | 247,314 | 334,038 | 263,528 | ||||||||||||||
Working capital | 310,286 | 340,511 | 540,108 | 396,591 | 344,825 | ||||||||||||||
Long-term assets | 895,015 | 920,427 | 376,144 | 348,982 | 363,939 | ||||||||||||||
Total assets | 1,401,934 | 1,473,505 | 1,053,382 | 863,218 | 806,826 | ||||||||||||||
Current liabilities | 196,633 | 212,567 | 137,130 | 117,645 | 98,062 | ||||||||||||||
Long-term liabilities | 147,853 | 285,208 | 49,571 | 43,821 | 41,953 | ||||||||||||||
Total liabilities | 344,486 | 497,775 | 186,701 | 161,466 | 140,015 | ||||||||||||||
Total shareholders' equity | $ | 1,057,448 | $ | 975,730 | $ | 866,681 | $ | 701,752 | $ | 666,811 |
Year ended December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
Working capital decrease | $ | (2,271 | ) | $ | (7,336 | ) | |
Long-term assets increase | 2,271 | 7,336 |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Total revenues | 100 | % | 100 | % | 100 | % | |||||
Cost of revenues | (35 | ) | (35 | ) | (29 | ) | |||||
Gross profit | 65 | 65 | 71 | ||||||||
Operating expenses: | |||||||||||
Research and development | 42 | 38 | 38 | ||||||||
Sales and marketing | 17 | 16 | 15 | ||||||||
General and administrative | 6 | 7 | 7 | ||||||||
Impairment of long-lived assets | 2 | — | — | ||||||||
Total operating expenses | 67 | 61 | 60 | ||||||||
Income (loss) from operations | (2 | ) | 4 | 11 | |||||||
Interest expense | (1 | ) | (1 | ) | — | ||||||
Other income (loss), net | — | — | — | ||||||||
Interest and other, net | (1 | ) | (1 | ) | — | ||||||
Income (loss) before taxes on income | (3 | ) | 3 | 11 | |||||||
Provision for (benefit from) taxes on income | (1 | ) | 1 | (3 | ) | ||||||
Net income (loss) | (2 | ) | % | 2 | % | 14 | % |
Year Ended December 31, | |||||||||||||
2017 | % of Revenues | 2016 | % of Revenues | ||||||||||
(In thousands) | (In thousands) | ||||||||||||
ICs | $ | 161,216 | 18.7 | % | $ | 170,641 | 19.9 | % | |||||
Boards | 325,845 | 37.7 | % | 337,304 | 39.3 | % | |||||||
Switch systems | 222,836 | 25.8 | % | 204,083 | 23.8 | % | |||||||
Cables, accessories and other | 153,996 | 17.8 | % | 145,470 | 17.0 | % | |||||||
Total Revenue | $ | 863,893 | 100.0 | % | $ | 857,498 | 100.0 | % |
Year Ended December 31, | |||||||||||||
2017 | % of Revenues | 2016 | % of Revenues | ||||||||||
(In thousands) | (In thousands) | ||||||||||||
InfiniBand: | |||||||||||||
EDR | $ | 194,261 | 22.5 | % | $ | 125,249 | 14.6 | % | |||||
FDR | 181,465 | 21.0 | % | 302,093 | 35.2 | % | |||||||
QDR/DDR/SDR | 31,599 | 3.6 | % | 49,987 | 5.9 | % | |||||||
Total | 407,325 | 47.1 | % | 477,329 | 55.7 | % | |||||||
Ethernet | 401,005 | 46.4 | % | 317,241 | 37.0 | % | |||||||
Other | 55,563 | 6.5 | % | 62,928 | 7.3 | % | |||||||
Total revenue | $ | 863,893 | 100.0 | % | $ | 857,498 | 100.0 | % |
Year Ended December 31, | |||||||||||||
2016 | % of Revenues | 2015 | % of Revenues | ||||||||||
(In thousands) | (In thousands) | ||||||||||||
ICs | $ | 170,641 | 19.9 | % | $ | 92,214 | 14.0 | % | |||||
Boards | 337,304 | 39.3 | % | 265,249 | 40.3 | % | |||||||
Switch systems | 204,083 | 23.8 | % | 179,977 | 27.3 | % | |||||||
Cables, accessories and other | 145,470 | 17.0 | % | 120,700 | 18.4 | % | |||||||
Total Revenue | $ | 857,498 | 100.0 | % | $ | 658,140 | 100.0 | % |
Year Ended December 31, | |||||||||||||
2016 | % of Revenues | 2015 | % of Revenues | ||||||||||
(In thousands) | (In thousands) | ||||||||||||
InfiniBand: | |||||||||||||
EDR | $ | 125,249 | 14.6 | % | $ | 39,009 | 5.9 | % | |||||
FDR | 302,093 | 35.2 | % | 347,760 | 52.8 | % | |||||||
QDR/DDR/SDR | 49,987 | 5.9 | % | 63,745 | 9.8 | % | |||||||
Total | 477,329 | 55.7 | % | 450,514 | 68.5 | % | |||||||
Ethernet | 317,241 | 37.0 | % | 155,221 | 23.6 | % | |||||||
Other | 62,928 | 7.3 | % | 52,405 | 7.9 | % | |||||||
Total revenue | $ | 857,498 | 100.0 | % | $ | 658,140 | 100.0 | % |
Year ended December 31, | ||||||||||||||||||||
2017 | % of Revenues | 2016 | % of Revenues | 2015 | % of Revenues | |||||||||||||||
(In thousands) | (In thousands) | (In thousands) | ||||||||||||||||||
Salaries and benefits | $ | 200,125 | 23.2 | % | $ | 174,462 | 20.3 | % | $ | 130,255 | 19.8 | % | ||||||||
Share-based compensation | 40,278 | 4.7 | % | 40,475 | 4.7 | % | 28,821 | 4.4 | % | |||||||||||
Development and tape-out costs | 39,001 | 4.5 | % | 36,091 | 4.2 | % | 36,305 | 5.5 | % | |||||||||||
Other | 86,474 | 10.0 | % | 71,592 | 8.4 | % | 56,794 | 8.6 | % | |||||||||||
Total Research and development | $ | 365,878 | 42.4 | % | $ | 322,620 | 37.6 | % | $ | 252,175 | 38.3 | % |
Year ended December 31, | ||||||||||||||||||||
2017 | % of Revenues | 2016 | % of Revenues | 2015 | % of Revenues | |||||||||||||||
(In thousands) | (In thousands) | (In thousands) | ||||||||||||||||||
Salaries and benefits | $ | 90,419 | 10.5 | % | $ | 76,774 | 9.0 | % | $ | 58,204 | 8.8 | % | ||||||||
Share-based compensation | 15,693 | 1.8 | % | 15,183 | 1.8 | % | 10,309 | 1.6 | % | |||||||||||
Trade shows and promotions | 19,593 | 2.3 | % | 19,893 | 2.3 | % | 15,996 | 2.4 | % | |||||||||||
Other | 24,752 | 2.8 | % | 21,930 | 2.5 | % | 12,929 | 2.0 | % | |||||||||||
Total Sales and marketing | $ | 150,457 | 17.4 | % | $ | 133,780 | 15.6 | % | $ | 97,438 | 14.8 | % |
Year Ended December 31, | ||||||||||||||||||||
2017 | % of Revenues | 2016 | % of Revenues | 2015 | % of Revenues | |||||||||||||||
(In thousands) | (In thousands) | (In thousands) | ||||||||||||||||||
Salaries and benefits | $ | 21,476 | 2.5 | % | $ | 20,976 | 2.4 | % | $ | 16,050 | 2.4 | % | ||||||||
Share-based compensation | 10,893 | 1.3 | % | 13,085 | 1.5 | % | 9,268 | 1.4 | % | |||||||||||
Professional services | 13,179 | 1.5 | % | 26,602 | 3.1 | % | 12,348 | 1.9 | % | |||||||||||
Other | 6,622 | 0.7 | % | 7,859 | 1.0 | % | 6,546 | 1.0 | % | |||||||||||
Total General and administrative | $ | 52,170 | 6.0 | % | $ | 68,522 | 8.0 | % | $ | 44,212 | 6.7 | % |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(in thousands) | |||||||||||
Cost of goods sold | $ | 2,000 | $ | 2,375 | $ | 2,366 | |||||
Research and development | 40,278 | 40,475 | 28,821 | ||||||||
Sales and marketing | 15,693 | 15,183 | 10,309 | ||||||||
General and administrative | 10,893 | 13,085 | 9,268 | ||||||||
$ | 68,864 | $ | 71,118 | $ | 50,764 |
Year ended December 31, | |||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Cash and cash equivalents | $ | 62,473 | $ | 56,780 | |||
Short-term investments | 211,281 | 271,661 | |||||
Total | $ | 273,754 | $ | 328,441 | |||
Working capital | $ | 310,286 | $ | 340,511 |
Contractual Obligations | |||||||||||||||
Total | Non-cancelable operating lease commitments | Purchase commitments | Term debt including interest | ||||||||||||
(in thousands) | |||||||||||||||
2018 | $ | 178,682 | $ | 23,028 | $ | 153,358 | $ | 2,296 | |||||||
2019 | 95,220 | 18,453 | 2,447 | 74,320 | |||||||||||
2020 | 15,284 | 14,740 | 544 | — | |||||||||||
2021 | 13,492 | 12,950 | 542 | — | |||||||||||
2022 | 10,184 | 9,648 | 536 | — | |||||||||||
Thereafter | 60,091 | 60,091 | — | — | |||||||||||
Total | $ | 372,953 | $ | 138,910 | $ | 157,427 | $ | 76,616 |
Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 (1) | ||||||||||||||||||||||||
2017 | 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | 2016 | ||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||
Total revenues | $ | 237,581 | $ | 225,699 | $ | 211,962 | $ | 188,651 | $ | 221,676 | $ | 224,211 | $ | 214,801 | $ | 196,810 | |||||||||||||||
Cost of revenues | 85,238 | 77,335 | 73,427 | 64,450 | 73,507 | 78,191 | 79,807 | 70,481 | |||||||||||||||||||||||
Gross profit | 152,343 | 148,364 | 138,535 | 124,201 | 148,169 | 146,020 | 134,994 | 126,329 | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||
Research and development | 94,123 | 90,916 | 92,348 | 88,491 | 85,651 | 83,611 | 82,324 | 71,034 | |||||||||||||||||||||||
Sales and marketing | 38,761 | 37,829 | 38,110 | 35,757 | 35,568 | 34,408 | 32,576 | 31,228 | |||||||||||||||||||||||
General and administrative | 14,136 | 13,039 | 12,476 | 12,519 | 13,589 | 13,501 | 13,494 | 27,938 | |||||||||||||||||||||||
Impairment of long-lived assets | 12,019 | — | — | — | — | — | — | — | |||||||||||||||||||||||
Total operating expenses | 159,039 | 141,784 | 142,934 | 136,767 | 134,808 | 131,520 | 128,394 | 130,200 | |||||||||||||||||||||||
Income (loss) from operations | (6,696 | ) | 6,580 | (4,399 | ) | (12,566 | ) | 13,361 | 14,500 | 6,600 | (3,871 | ) | |||||||||||||||||||
Interest expense | (1,932 | ) | (2,016 | ) | (1,996 | ) | (1,993 | ) | (1,944 | ) | (2,195 | ) | (2,215 | ) | (998 | ) | |||||||||||||||
Other income (loss), net | 649 | 956 | 827 | 683 | 108 | 606 | 315 | 61 | |||||||||||||||||||||||
Interest and other, net | (1,283 | ) | (1,060 | ) | (1,169 | ) | (1,310 | ) | (1,836 | ) | (1,589 | ) | (1,900 | ) | (937 | ) | |||||||||||||||
Income (loss) before taxes on income | (7,979 | ) | 5,520 | (5,568 | ) | (13,876 | ) | 11,525 | 12,911 | 4,700 | (4,808 | ) | |||||||||||||||||||
Provision for (benefit from) taxes on income | (5,386 | ) | 2,117 | 2,423 | (1,632 | ) | 2,530 | 874 | 46 | 2,360 | |||||||||||||||||||||
Net income (loss) | $ | (2,593 | ) | $ | 3,403 | $ | (7,991 | ) | $ | (12,244 | ) | $ | 8,995 | $ | 12,037 | $ | 4,654 | $ | (7,168 | ) | |||||||||||
Net income (loss) per share — basic | $ | (0.05 | ) | $ | 0.07 | $ | (0.16 | ) | $ | (0.25 | ) | $ | 0.18 | $ | 0.25 | $ | 0.10 | $ | (0.15 | ) | |||||||||||
Net income (loss) per share — diluted | $ | (0.05 | ) | $ | 0.07 | $ | (0.16 | ) | $ | (0.25 | ) | $ | 0.18 | $ | 0.24 | $ | 0.09 | $ | (0.15 | ) |
Page | |
Exhibit No. | Description of Exhibit | ||||
2.1 | (1) | ||||
2.2 | (2) | ||||
3.1 | (3) | ||||
10.1 | (4) | * | |||
10.2 | (5) | * | |||
10.3 | (6) | * | |||
10.4 | (7) | * | |||
10.5 | (8) | * | |||
10.6 | (9) | * | |||
10.7 | (10) | * | |||
10.8 | (11) | * | |||
10.9 | (12) | * | |||
10.10 | (13) | * | |||
10.11 | (14) | * | |||
10.12 | (15) | * | |||
10.13 | (16) | * | |||
10.14 | (17) | * | |||
10.15 | (18) | * | |||
10.16 | (19) | * | |||
10.17 | (20) | * | |||
10.18 | (21) | ||||
10.19 | (22) | ||||
10.20 | † | ||||
10.21 | † | ||||
21.1 | |||||
23.1 | |||||
23.2 | |||||
24.1 | |||||
31.1 | |||||
31.2 | |||||
32.1 | |||||
32.2 | |||||
101.INS | XBRL Instance Document | ||||
101.SCH | XBRL Taxonomy Extension Schema Document | ||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
(1) | Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K (SEC File No. 001-33299) filed on September 30, 2015. |
(2) | Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (SEC File No. 001-33299) filed on November 17, 2015. |
(3) | Incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q (SEC File No. 001-33299) filed on July 29, 2016. |
(4) | Incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q (SEC File No. 001-33299) filed on May 5, 2017. |
(5) | Incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A (SEC File No. 001-33299) filed on April 19, 2012. |
(6) | Incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q (SEC File No. 001-33299) filed on July 29, 2016. |
(7) | Incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-8 (File No. 333-172093) filed on February 7, 2011. |
(8) | Incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-8 (File No. 333-172093) filed on February 7, 2011. |
(9) | Incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-8 (File No. 333-172093) filed on February 7, 2011. |
(10) | Incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-8 (File No. 333-172093) filed on February 7, 2011. |
(11) | Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 (File No. 333-190631) filed on August 15, 2013. |
(12) | Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 (File No. 333-189720) filed on July 1, 2013. |
(13) | Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (SEC File No. 001-33299) filed on February 7, 2011. |
(14) | Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 (SEC File No.333-209808) filed on February 29, 2016. |
(15) | Incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8 (SEC File No.333-209808) filed on February 29, 2016. |
(16) | Incorporated by reference to Exhibit 4.4 to the Company's Registration Statement on Form S-8 (SEC File No.333-209808) filed on February 29, 2016. |
(17) | Incorporated by reference to Exhibit 4.5 to the Company's Registration Statement on Form S-8 (SEC File No.333-209808) filed on February 29, 2016. |
(18) | Incorporated by reference to Exhibit 4.6 to the Company's Registration Statement on Form S-8 (SEC File No.333-209808) filed on February 29, 2016. |
(19) | Incorporated by reference to Exhibit 10.12 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (SEC File No. 333-137659) filed on November 14, 2006. |
(20) | Incorporated by reference to Exhibit 10.13 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (SEC File No. 333-137659) filed on November 14, 2006. |
(21) | Incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K (SEC File No. 001-33299) filed on March 7, 2011. |
(22) | Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q (SEC File No. 001-33299) filed on May 5, 2017. |
* | Indicates management contract or compensatory plan, contract or arrangement. |
† | Filed herewith. |
KOST FORER GABBAY & KASIERER |
A Member of EY Global |
Tel-Aviv, Israel |
February 16, 2018 |
KOST FORER GABBAY & KASIERER |
A Member of EY Global |
Tel-Aviv, Israel |
February 16, 2018 |
December 31, | |||||||
2017 | 2016 | ||||||
(In thousands, except par value) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 62,473 | $ | 56,780 | |||
Short-term investments | 211,281 | 271,661 | |||||
Accounts receivable, net | 154,213 | 141,768 | |||||
Inventories | 64,657 | 65,523 | |||||
Other current assets | 14,295 | 17,346 | |||||
Total current assets | 506,919 | 553,078 | |||||
Property and equipment, net | 109,919 | 118,585 | |||||
Severance assets | 18,302 | 15,870 | |||||
Intangible assets, net | 228,195 | 278,031 | |||||
Goodwill | 472,437 | 471,228 | |||||
Deferred taxes and other long-term assets | 66,162 | 36,713 | |||||
Total assets | $ | 1,401,934 | $ | 1,473,505 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 59,090 | $ | 59,533 | |||
Accrued liabilities | 114,058 | 105,042 | |||||
Deferred revenue | 23,485 | 24,364 | |||||
Current portion of term debt | — | 23,628 | |||||
Total current liabilities | 196,633 | 212,567 | |||||
Accrued severance | 23,205 | 19,874 | |||||
Deferred revenue | 17,820 | 15,968 | |||||
Term debt | 72,761 | 218,786 | |||||
Other long-term liabilities | 34,067 | 30,580 | |||||
Total liabilities | 344,486 | 497,775 | |||||
Commitments and Contingencies (Note 9) | |||||||
Shareholders’ equity | |||||||
Ordinary shares: NIS 0.0175 par value, 200,000 shares authorized, 51,488 and 49,076 shares issued and outstanding at December 31, 2017 and 2016, respectively | 221 | 209 | |||||
Additional paid-in capital | 873,979 | 774,605 | |||||
Accumulated other comprehensive income (loss) | 1,618 | (928 | ) | ||||
Retained earnings | 181,630 | 201,844 | |||||
Total shareholders’ equity | 1,057,448 | 975,730 | |||||
Total liabilities and shareholders' equity | $ | 1,401,934 | $ | 1,473,505 |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands, except per share data) | |||||||||||
Total revenues | $ | 863,893 | $ | 857,498 | $ | 658,140 | |||||
Cost of revenues | 300,450 | 301,986 | 189,209 | ||||||||
Gross profit | 563,443 | 555,512 | 468,931 | ||||||||
Operating expenses: | |||||||||||
Research and development | 365,878 | 322,620 | 252,175 | ||||||||
Sales and marketing | 150,457 | 133,780 | 97,438 | ||||||||
General and administrative | 52,170 | 68,522 | 44,212 | ||||||||
Impairment of long-lived assets | 12,019 | — | — | ||||||||
Total operating expenses | 580,524 | 524,922 | 393,825 | ||||||||
Income (loss) from operations | (17,081 | ) | 30,590 | 75,106 | |||||||
Interest expense | (7,937 | ) | (7,352 | ) | — | ||||||
Other income (loss), net | 3,115 | 1,090 | (524 | ) | |||||||
Interest and other, net | (4,822 | ) | (6,262 | ) | (524 | ) | |||||
Income (loss) before taxes on income | (21,903 | ) | 24,328 | 74,582 | |||||||
Provision for (benefit from) taxes on income | (2,478 | ) | 5,810 | (18,312 | ) | ||||||
Net income (loss) | $ | (19,425 | ) | $ | 18,518 | $ | 92,894 | ||||
Net income (loss) per share — basic | $ | (0.39 | ) | $ | 0.38 | $ | 2.00 | ||||
Net income (loss) per share — diluted | $ | (0.39 | ) | $ | 0.37 | $ | 1.94 | ||||
Shares used in computing net income (loss) per share: | |||||||||||
Basic | 50,310 | 48,145 | 46,365 | ||||||||
Diluted | 50,310 | 49,526 | 47,778 |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
Net income (loss) | $ | (19,425 | ) | $ | 18,518 | $ | 92,894 | ||||
Other comprehensive income, net of tax: | |||||||||||
Change in unrealized gains/losses on available-for-sale securities, net | 929 | 342 | (204 | ) | |||||||
Change in unrealized gains/losses on derivative contracts, net (net of tax effect of $105, $47, and $97) | 1,617 | 399 | 2,555 | ||||||||
Other comprehensive income | 2,546 | 741 | 2,351 | ||||||||
Total comprehensive income (loss), net of tax | $ | (16,879 | ) | $ | 19,259 | $ | 95,245 |
Accumulated | ||||||||||||||||||||||
Additional | Other | Total | ||||||||||||||||||||
Ordinary Shares | Paid-in | Comprehensive | Retained | Shareholders' | ||||||||||||||||||
Shares | Amount | Capital | Income (Loss) | Earnings | Equity | |||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||
Balance at December 31, 2014 | 45,487,764 | $ | 192 | $ | 615,148 | $ | (4,020 | ) | $ | 90,432 | $ | 701,752 | ||||||||||
Net income | — | — | — | — | 92,894 | 92,894 | ||||||||||||||||
Unrealized losses on available-for-sale securities, net of taxes | — | — | — | (204 | ) | — | (204 | ) | ||||||||||||||
Unrealized gain on derivative contracts, net of taxes | — | — | — | 2,555 | — | 2,555 | ||||||||||||||||
Share-based compensation | — | — | 50,764 | — | — | 50,764 | ||||||||||||||||
Issuances of shares through employee equity incentive plans | 1,267,244 | 6 | 6,043 | — | — | 6,049 | ||||||||||||||||
Issuance of shares through employee share purchase plan | 364,746 | 2 | 12,816 | — | — | 12,818 | ||||||||||||||||
Income tax benefit from share options exercised | — | — | 53 | — | — | 53 | ||||||||||||||||
Balance at December 31, 2015 | 47,119,754 | $ | 200 | $ | 684,824 | $ | (1,669 | ) | $ | 183,326 | $ | 866,681 | ||||||||||
Net income | — | — | — | — | 18,518 | 18,518 | ||||||||||||||||
Unrealized gain on available-for-sale securities, net of taxes | — | — | — | 342 | — | 342 | ||||||||||||||||
Unrealized gains on derivative contracts, net of taxes | — | — | — | 399 | — | 399 | ||||||||||||||||
Share-based compensation | — | — | 66,309 | — | — | 66,309 | ||||||||||||||||
Issuances of shares through employee equity incentive plans | 1,463,884 | 7 | 5,083 | — | — | 5,090 | ||||||||||||||||
Issuance of shares through employee share purchase plan | 491,968 | 2 | 17,463 | — | — | 17,465 | ||||||||||||||||
Income tax benefit from share options exercised | — | — | (46 | ) | — | — | (46 | ) | ||||||||||||||
Fair value of awards attributable to pre-acquisition services | — | — | 972 | — | — | 972 | ||||||||||||||||
Balance at December 31, 2016 | 49,075,606 | $ | 209 | $ | 774,605 | $ | (928 | ) | $ | 201,844 | $ | 975,730 | ||||||||||
Net loss | — | — | — | — | (19,425 | ) | (19,425 | ) | ||||||||||||||
Unrealized gains on available-for-sale securities, net of taxes | — | — | — | 929 | — | 929 | ||||||||||||||||
Unrealized gains on derivative contracts, net of taxes | — | — | — | 1,617 | — | 1,617 | ||||||||||||||||
Share-based compensation | — | — | 68,864 | — | — | 68,864 | ||||||||||||||||
Issuances of shares through employee equity incentive plans | 1,843,168 | 9 | 7,633 | — | — | 7,642 | ||||||||||||||||
Issuance of shares through employee share purchase plan | 568,876 | 3 | 22,088 | — | — | 22,091 | ||||||||||||||||
Effect of adopting ASU 2016-09: Improvements to Employee Share-Based Payment Accounting | — | — | 789 | — | (789 | ) | — | |||||||||||||||
Balance at December 31, 2017 | 51,487,650 | $ | 221 | $ | 873,979 | $ | 1,618 | $ | 181,630 | $ | 1,057,448 |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | (19,425 | ) | $ | 18,518 | $ | 92,894 | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 103,821 | 97,731 | 41,372 | ||||||||
Deferred income taxes | (2,150 | ) | 809 | (22,607 | ) | ||||||
Share-based compensation | 68,864 | 66,309 | 50,764 | ||||||||
Gains on short-term investments, net | (3,460 | ) | (1,774 | ) | (3,000 | ) | |||||
Impairment charges | 12,019 | — | 3,189 | ||||||||
Changes in assets and liabilities, net of effect of acquisitions: | |||||||||||
Accounts receivable, net | (12,175 | ) | (41,331 | ) | (19,351 | ) | |||||
Inventories | (887 | ) | 8,263 | (24,735 | ) | ||||||
Prepaid expenses and other assets | (681 | ) | 6,948 | (2,619 | ) | ||||||
Accounts payable | 170 | 13,330 | 3,750 | ||||||||
Accrued liabilities and other liabilities | 15,216 | 27,261 | 30,884 | ||||||||
Net cash provided by operating activities | 161,312 | 196,064 | 150,541 | ||||||||
Cash flows from investing activities: | |||||||||||
Purchase of severance-related insurance policies | (1,312 | ) | (1,172 | ) | (743 | ) | |||||
Purchase of short-term investments | (188,745 | ) | (300,858 | ) | (219,459 | ) | |||||
Proceeds from sales of short-term investments | 193,082 | 237,764 | 179,700 | ||||||||
Proceeds from maturities of short-term investments | 59,129 | 149,725 | 129,279 | ||||||||
Purchase of property and equipment | (41,376 | ) | (42,976 | ) | (48,601 | ) | |||||
Purchase of intangible assets | (2,843 | ) | (7,962 | ) | (210 | ) | |||||
Purchase of investments in privately-held companies | (15,021 | ) | (4,982 | ) | — | ||||||
Acquisitions, net of cash acquired | (872 | ) | (693,692 | ) | — | ||||||
Net cash provided by (used in) investing activities | 2,042 | (664,153 | ) | 39,966 | |||||||
Cash flows from financing activities: | |||||||||||
Proceeds from term debt | — | 280,000 | — | ||||||||
Principal payments on term debt | (172,000 | ) | (34,000 | ) | — | ||||||
Term debt issuance costs | — | (5,521 | ) | — | |||||||
Principal payments on capital lease and intangible assets obligations | (7,369 | ) | (1,364 | ) | (1,105 | ) | |||||
Proceeds from issuances of ordinary shares through employee equity incentive plans | 29,733 | 22,555 | 18,867 | ||||||||
Net cash provided by (used in) financing activities | (149,636 | ) | 261,670 | 17,762 | |||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 13,718 | (206,419 | ) | 208,269 | |||||||
Cash, cash equivalents, and restricted cash at beginning of period | 56,780 | 263,199 | 54,930 | ||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 70,498 | $ | 56,780 | $ | 263,199 | |||||
Supplemental disclosures of cash flow information | |||||||||||
Interest paid | $ | 5,384 | $ | 5,335 | $ | 27 | |||||
Income taxes paid | $ | 1,218 | $ | 835 | $ | 1,114 | |||||
Supplemental disclosure of non-cash investing and financing activities | |||||||||||
Intangible assets financed with debt | $ | 12,981 | $ | 8,834 | $ | — | |||||
Unpaid property and equipment | $ | 3,962 | $ | 5,425 | $ | 2,228 | |||||
Transfer from inventory to property and equipment | $ | 1,753 | $ | 3,814 | $ | 6,732 |
December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands) | |||||||||||
Cash and cash equivalents, as reported on the balance sheets | $ | 62,473 | $ | 56,780 | $ | 263,199 | |||||
Restricted cash in other long-term assets, as reported on the balance sheets | 8,025 | — | — | ||||||||
Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows | $ | 70,498 | $ | 56,780 | $ | 263,199 |
Year Ended December 31, | ||||||||
2017 | 2016 | 2015 | ||||||
HPE | 13 | % | 16 | % | 14 | % | ||
Dell | 11 | % | * | * | ||||
____________________ | ||||||||
* Less than 10% |
December 31, 2017 | December 31, 2016 | ||||
HPE | 13 | % | 11 | % |
Year Ended December 31, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Balance, beginning of the period | $ | 1,474 | $ | 1,641 | |||
Assumed warranty liability from acquisition | — | 290 | |||||
New warranties issued during the period | 1,459 | 1,727 | |||||
Reversal of warranty reserves | (565 | ) | (856 | ) | |||
Settlements during the period | (1,479 | ) | (1,328 | ) | |||
Balance, end of the period | 889 | 1,474 | |||||
Less: long-term portion of product warranty liability | (183 | ) | (211 | ) | |||
Balance, end of the period | $ | 706 | $ | 1,263 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(In thousands, except per share data) | |||||||||||
Net income (loss) | $ | (19,425 | ) | $ | 18,518 | $ | 92,894 | ||||
Basic and diluted shares: | |||||||||||
Weighted average ordinary shares outstanding | 50,310 | 48,145 | 46,365 | ||||||||
Effect of dilutive shares | — | 1,381 | 1,413 | ||||||||
Shares used to compute diluted net income (loss) per share | 50,310 | 49,526 | 47,778 | ||||||||
Net income (loss) per share—basic | $ | (0.39 | ) | $ | 0.38 | $ | 2.00 | ||||
Net income (loss) per share—diluted | $ | (0.39 | ) | $ | 0.37 | $ | 1.94 |
December 31, 2017 | December 31, 2016 | ||||||
(In thousands) | |||||||
Accounts receivable, net: | |||||||
Accounts receivable | $ | 154,845 | $ | 142,400 | |||
Less: allowance for doubtful accounts | (632 | ) | (632 | ) | |||
$ | 154,213 | $ | 141,768 | ||||
Inventories: | |||||||
Raw materials | $ | 12,656 | $ | 8,243 | |||
Work-in-process | 22,769 | 26,118 | |||||
Finished goods | 29,232 | 31,162 | |||||
$ | 64,657 | $ | 65,523 | ||||
Other current assets: | |||||||
Prepaid expenses | $ | 7,518 | $ | 9,053 | |||
Derivative contracts receivable | 982 | 257 | |||||
VAT receivable | 2,259 | 6,093 | |||||
Other | 3,536 | 1,943 | |||||
$ | 14,295 | $ | 17,346 | ||||
Property and equipment, net: | |||||||
Computer, equipment, and software | $ | 164,707 | $ | 214,719 | |||
Furniture and fixtures | 3,198 | 5,210 | |||||
Leasehold improvements | 47,262 | 46,693 | |||||
215,167 | 266,622 | ||||||
Less: Accumulated depreciation and amortization | (105,248 | ) | (148,037 | ) | |||
$ | 109,919 | $ | 118,585 | ||||
Deferred taxes and other long-term assets: | |||||||
Equity investments in privately-held companies | $ | 29,255 | $ | 12,720 | |||
Deferred taxes | 24,563 | 22,413 | |||||
Long-term restricted cash | 8,025 | — | |||||
Other assets | 4,319 | 1,580 | |||||
$ | 66,162 | $ | 36,713 | ||||
Accrued liabilities: | |||||||
Payroll and related expenses | $ | 71,868 | $ | 62,969 | |||
Accrued expenses | 31,951 | 33,125 | |||||
Derivative contracts payable | 17 | 1,006 | |||||
Product warranty liability | 706 | 1,263 | |||||
Other | 9,516 | 6,679 | |||||
$ | 114,058 | $ | 105,042 | ||||
Other long-term liabilities: | |||||||
Income tax payable | $ | 24,425 | $ | 24,184 | |||
Deferred rent | 2,220 | 2,504 | |||||
Other | 7,422 | 3,892 | |||||
$ | 34,067 | $ | 30,580 |
(in thousands) | ||||
Consideration: | ||||
Cash payment for all outstanding common shares of EZchip at $25.50 per share | $ | 781,237 | ||
Fair value of awards attributable to pre-acquisition services | 972 | |||
Total consideration: | 782,209 | |||
Less: cash acquired | 87,545 | |||
Fair value of total consideration transferred, net of cash acquired | $ | 694,664 |
(in thousands) | ||||
Short-term investments | $ | 108,862 | ||
Other current assets | 34,114 | |||
Other long-term assets | 9,638 | |||
Intangible assets | 288,246 | |||
Goodwill | 270,485 | |||
Total assets | 711,345 | |||
Current liabilities | (10,253 | ) | ||
Long-term liabilities | (6,428 | ) | ||
Total liabilities | (16,681 | ) | ||
Total purchase price allocation | $ | 694,664 |
Fair value | Weighted Average Useful Life | |||||
(in thousands) | (in years) | |||||
Purchased intangible assets: | ||||||
Trade names | $ | 5,600 | 3 | |||
Customer relationships | 56,400 | 9 | ||||
Backlog | 11,300 | 1 | ||||
Developed technology | 181,246 | 4 - 6 | ||||
In-process research and development (1) | 33,700 | - | ||||
Total purchased intangible assets | $ | 288,246 | ||||
(1) IPR&D will not be amortized until the underlying products reach technological feasibility. Upon completion, each IPR&D project will be amortized over its useful life. |
Year Ended December 31, | ||||||||
2016 | 2015 | |||||||
(in thousands, except per share amounts) | ||||||||
Revenues | $ | 867,422 | $ | 769,290 | ||||
Net income | $ | 40,288 | $ | 36,130 | ||||
Net income per share — basic | $ | 0.82 | $ | 0.77 | ||||
Net income per share — diluted | $ | 0.80 | $ | 0.74 |
Level 1 | Level 2 | Total | |||||||||
(in thousands) | |||||||||||
Money market funds | $ | 1,857 | $ | — | $ | 1,857 | |||||
Certificates of deposit | — | 58,003 | 58,003 | ||||||||
U.S. Government and agency securities | — | 43,872 | 43,872 | ||||||||
Commercial paper | — | 27,029 | 27,029 | ||||||||
Corporate bonds | — | 54,447 | 54,447 | ||||||||
Municipal bonds | — | 15,169 | 15,169 | ||||||||
Foreign government bonds | — | 12,761 | 12,761 | ||||||||
1,857 | 211,281 | 213,138 | |||||||||
Long-term restricted cash | — | 8,025 | 8,025 | ||||||||
Derivative contracts | — | 982 | 982 | ||||||||
Total financial assets | $ | 1,857 | $ | 220,288 | $ | 222,145 | |||||
Derivative contracts | $ | — | $ | 17 | $ | 17 | |||||
Total financial liabilities | $ | — | $ | 17 | $ | 17 |
Level 1 | Level 2 | Total | |||||||||
(in thousands) | |||||||||||
Money market funds | $ | 1,833 | $ | — | $ | 1,833 | |||||
Certificates of deposit | — | 78,643 | 78,643 | ||||||||
U.S. Government and agency securities | — | 56,347 | 56,347 | ||||||||
Commercial paper | — | 29,483 | 29,483 | ||||||||
Corporate bonds | — | 94,162 | 94,162 | ||||||||
Municipal bonds | — | 7,706 | 7,706 | ||||||||
Foreign government bonds | — | 5,320 | 5,320 | ||||||||
1,833 | 271,661 | 273,494 | |||||||||
Derivative contracts | — | 257 | 257 | ||||||||
Total financial assets | $ | 1,833 | $ | 271,918 | $ | 273,751 | |||||
Derivative contracts | $ | — | $ | 1,006 | $ | 1,006 | |||||
Total financial liabilities | $ | — | $ | 1,006 | $ | 1,006 |
December 31, 2017 | |||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | ||||||||||||
(in thousands) | |||||||||||||||
Cash | $ | 60,616 | $ | — | $ | — | $ | 60,616 | |||||||
Money market funds | 1,857 | — | — | 1,857 | |||||||||||
Certificates of deposit | 58,039 | — | (36 | ) | 58,003 | ||||||||||
U.S. Government and agency securities | 44,070 | — | (198 | ) | 43,872 | ||||||||||
Commercial paper | 27,073 | 1 | (45 | ) | 27,029 | ||||||||||
Corporate bonds | 54,673 | — | (226 | ) | 54,447 | ||||||||||
Municipal bonds | 15,227 | — | (58 | ) | 15,169 | ||||||||||
Foreign government bonds | 12,809 | — | (48 | ) | 12,761 | ||||||||||
Total | 274,364 | 1 | (611 | ) | 273,754 | ||||||||||
Less amounts classified as cash and cash equivalents | (62,473 | ) | — | — | (62,473 | ) | |||||||||
Short-term investments | $ | 211,891 | $ | 1 | $ | (611 | ) | $ | 211,281 |
December 31, 2016 | |||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | ||||||||||||
(in thousands) | |||||||||||||||
Cash | $ | 54,947 | $ | — | $ | — | $ | 54,947 | |||||||
Money market funds | 1,833 | — | — | 1,833 | |||||||||||
Certificates of deposit | 78,643 | — | — | 78,643 | |||||||||||
U.S. Government and agency securities | 56,431 | 2 | (86 | ) | 56,347 | ||||||||||
Commercial paper | 29,486 | — | (3 | ) | 29,483 | ||||||||||
Corporate bonds | 94,292 | 37 | (167 | ) | 94,162 | ||||||||||
Municipal bonds | 7,718 | — | (12 | ) | 7,706 | ||||||||||
Foreign government bonds | 5,327 | — | (7 | ) | 5,320 | ||||||||||
Total | 328,677 | 39 | (275 | ) | 328,441 | ||||||||||
Less amounts classified as cash and cash equivalents | (56,780 | ) | — | — | (56,780 | ) | |||||||||
Short-term investments | $ | 271,897 | $ | 39 | $ | (275 | ) | $ | 271,661 |
December 31, 2017 | December 31, 2016 | ||||||||||||||
Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | ||||||||||||
(in thousands) | |||||||||||||||
Due in less than one year | $ | 148,232 | $ | 147,921 | $ | 157,270 | $ | 157,163 | |||||||
Due in one to three years | 63,659 | 63,360 | 114,627 | 114,498 | |||||||||||
$ | 211,891 | $ | 211,281 | $ | 271,897 | $ | 271,661 |
(in thousands) | |||
Carrying amount of goodwill at December 31, 2016 | $ | 471,228 | |
Acquisitions | 1,209 | ||
Adjustments | — | ||
Balance as of December 31, 2017 | $ | 472,437 |
Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Useful Life | ||||||||||
(in thousands) | (in years) | ||||||||||||
Licensed technology | $ | 40,407 | $ | (16,478 | ) | $ | 23,929 | 1-8 | |||||
Developed technology | 279,543 | (122,414 | ) | 157,129 | 4-7 | ||||||||
Customer relationships | 69,776 | (24,783 | ) | 44,993 | 4-9 | ||||||||
Trade names | 5,600 | (3,456 | ) | 2,144 | 3 | ||||||||
Total intangible assets | $ | 395,326 | $ | (167,131 | ) | $ | 228,195 |
Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Useful Life | ||||||||||
(in thousands) | (in years) | ||||||||||||
Licensed technology | $ | 24,583 | $ | (6,559 | ) | $ | 18,024 | 1-8 | |||||
Developed technology | 250,043 | (75,591 | ) | 174,452 | 4-7 | ||||||||
Customer relationships | 69,776 | (17,731 | ) | 52,045 | 4-9 | ||||||||
Backlog | 11,300 | (11,300 | ) | — | 1 | ||||||||
Trade names | 5,600 | (1,590 | ) | 4,010 | 3 | ||||||||
Total finite-lived amortizable intangible assets | 361,302 | (112,771 | ) | 248,531 | |||||||||
In-process research and development | 29,500 | — | 29,500 | - | |||||||||
Total intangible assets | $ | 390,802 | $ | (112,771 | ) | $ | 278,031 |
(in thousands) | |||
2018 | $ | 66,718 | |
2019 | 59,344 | ||
2020 | 47,311 | ||
2021 | 30,919 | ||
2022 | 10,355 | ||
Thereafter | 13,548 | ||
Total | $ | 228,195 |
Other current assets | Other accrued liabilities | Other current assets | Other accrued liabilities | ||||||||||||
December 31, 2017 | December 31, 2016 | ||||||||||||||
(in thousands) | |||||||||||||||
Derivatives designated as hedging instruments | |||||||||||||||
Currency forward and option contracts | $ | 980 | $ | — | $ | 257 | $ | 999 | |||||||
Derivatives not designated as hedging instruments | |||||||||||||||
Currency forward and option contracts | 2 | 17 | — | 7 | |||||||||||
Total derivatives | $ | 982 | $ | 17 | $ | 257 | $ | 1,006 |
December 31, | December 31, | ||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Derivatives designated as hedging instruments | |||||||
Currency forward and option contracts | $ | 52,380 | $ | 105,730 | |||
Derivatives not designated as hedging instruments | |||||||
Currency forward and option contracts | $ | 47,015 | $ | 34,330 |
December 31, 2016 | $ | (692 | ) |
Amount of gains recognized in OCI (effective portion) | 8,651 | ||
Amount of gains reclassified from OCI to income (effective portion) | (7,034 | ) | |
December 31, 2017 | $ | 925 |
Derivatives designated as hedging instruments | Derivatives not designated as hedging instruments | ||||||||||||||||||||||
Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Operating income (expenses) | $ | 7,034 | $ | 623 | $ | (3,630 | ) | $ | — | $ | — | $ | — | ||||||||||
Other income | $ | — | $ | — | $ | — | $ | 3,248 | $ | 384 | $ | — |
December 31, | |||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Accrued severance liability | $ | 23,205 | $ | 19,874 | |||
Severance assets | 18,302 | 15,870 | |||||
Unfunded portion | $ | 4,903 | $ | 4,004 |
Year Ended December 31, | Operating Leases | ||
(in thousands) | |||
2018 | $ | 23,028 | |
2019 | 18,453 | ||
2020 | 14,740 | ||
2021 | 12,950 | ||
2022 | 9,648 | ||
Thereafter | 60,091 | ||
Total minimum lease payments | $ | 138,910 |
Year Ended December 31, | Purchase Commitments | ||
(in thousands) | |||
2018 | $ | 153,358 | |
2019 | 2,447 | ||
2020 | 544 | ||
2021 | 542 | ||
2022 | 536 | ||
Thereafter | — | ||
Total purchase commitments | $ | 157,427 |
Options Outstanding | ||||||
Number of Shares | Weighted Average Exercise Price | |||||
Outstanding at December 31, 2015 | 2,028,595 | $ | 30.81 | |||
Options exercised | (349,131 | ) | $ | 14.58 | ||
Options canceled | (44,979 | ) | $ | 84.57 | ||
Outstanding at December 31, 2016 | 1,634,485 | $ | 32.79 | |||
Options exercised | (479,105 | ) | $ | 15.95 | ||
Options canceled | (45,319 | ) | $ | 74.59 | ||
Outstanding at December 31, 2017 | 1,110,061 | $ | 38.35 |
Restricted Share Units Outstanding | ||||||
Number of Shares | Weighted Average Grant Date Fair Value | |||||
Non-vested restricted share units at December 31, 2015 | 2,205,083 | $ | 44.39 | |||
Assumed restricted share units from the EZchip acquisition | 499,894 | $ | 46.40 | |||
Restricted share units granted | 2,056,902 | $ | 48.39 | |||
Restricted share units vested | (1,114,753 | ) | $ | 45.32 | ||
Restricted share units canceled | (322,607 | ) | $ | 46.26 | ||
Non-vested restricted share units at December 31, 2016 | 3,324,519 | $ | 46.67 | |||
Restricted share units granted | 1,844,350 | $ | 49.88 | |||
Restricted share units vested | (1,364,063 | ) | $ | 46.25 | ||
Restricted share units canceled | (390,101 | ) | $ | 47.79 | ||
Non-vested restricted share units at December 31, 2017 | 3,414,705 | $ | 48.45 |
Number of Shares | ||
Share options outstanding | 1,110,061 | |
Restricted share units outstanding | 3,414,705 | |
Shares authorized for future issuance | 757,786 | |
ESPP shares available for future issuance | 3,425,469 | |
Total shares reserved for future issuance as of December 31, 2017 | 8,708,021 |
Employee Share Purchase Plan | |||||||||
Year ended December 31, | |||||||||
2017 | 2016 | 2015 | |||||||
Dividend yield, % | — | — | — | ||||||
Expected volatility | 24.6 | % | 35.8 | % | 33.7 | % | |||
Risk free interest rate | 1.20 | % | 0.45 | % | 0.10 | % | |||
Expected life, years | 0.50 | 0.50 | 0.50 |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(in thousands) | |||||||||||
Share-based compensation expense by caption: | |||||||||||
Cost of goods sold | $ | 2,000 | $ | 2,375 | $ | 2,366 | |||||
Research and development | 40,278 | 40,475 | 28,821 | ||||||||
Sales and marketing | 15,693 | 15,183 | 10,309 | ||||||||
General and administrative | 10,893 | 13,085 | 9,268 | ||||||||
Total share-based compensation expense | $ | 68,864 | $ | 71,118 | $ | 50,764 | |||||
Share-based compensation expense by type of award: | |||||||||||
Share options | $ | 115 | $ | 2,711 | $ | 6,680 | |||||
ESPP | 6,232 | 6,394 | 4,007 | ||||||||
RSU | 62,517 | 62,013 | 40,077 | ||||||||
Total share-based compensation expense | $ | 68,864 | $ | 71,118 | $ | 50,764 |
Unrealized Gains (Losses) on Available-for-Sale Securities | Unrealized Gains (Losses) on Derivatives Designated as Hedging Instruments | Total | |||||||||
(in thousands) | |||||||||||
Balance at December 31, 2016 | $ | (236 | ) | $ | (692 | ) | $ | (928 | ) | ||
Other comprehensive income before reclassifications, net of taxes | 918 | 8,651 | 9,569 | ||||||||
Realized (gains)/losses reclassified from accumulated other comprehensive income | 11 | (7,034 | ) | (7,023 | ) | ||||||
Net current-period other comprehensive income, net of taxes | 929 | 1,617 | 2,546 | ||||||||
Balance at December 31, 2017 | $ | 693 | $ | 925 | $ | 1,618 | |||||
Balance at December 31, 2015 | $ | (578 | ) | $ | (1,091 | ) | $ | (1,669 | ) | ||
Other comprehensive income/(loss) before reclassifications, net of taxes | (144 | ) | 1,022 | 878 | |||||||
Realized (gains)/losses reclassified from accumulated other comprehensive income | 486 | (623 | ) | (137 | ) | ||||||
Net current-period other comprehensive income, net of taxes | 342 | 399 | 741 | ||||||||
Balance at December 31, 2016 | $ | (236 | ) | $ | (692 | ) | $ | (928 | ) |
Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income | Affected Line Item in the Statement of Operations | |||||||||
Year ended December 31, | ||||||||||
2017 | 2016 | |||||||||
(in thousands) | ||||||||||
Realized (gains) on derivatives designated as hedging instruments | $ | (7,034 | ) | $ | (623 | ) | Cost of revenues and Operating expenses: | |||
(347 | ) | (18 | ) | Cost of revenues | ||||||
(635 | ) | (36 | ) | General and administrative | ||||||
(628 | ) | (25 | ) | Sales and marketing | ||||||
(5,424 | ) | (544 | ) | Research and development | ||||||
Realized losses on available-for-sale securities | 11 | 486 | Other income, net | |||||||
Total reclassifications for the period | $ | (7,023 | ) | $ | (137 | ) | Total |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(in thousands) | |||||||||||
United States | $ | (21,528 | ) | $ | (17,969 | ) | $ | (12,539 | ) | ||
Foreign | (375 | ) | 42,297 | 87,121 | |||||||
Income (loss) before taxes on income | $ | (21,903 | ) | $ | 24,328 | $ | 74,582 |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(in thousands) | |||||||||||
Current: | |||||||||||
U.S. federal | $ | (617 | ) | $ | (1,333 | ) | $ | (1,578 | ) | ||
State and local | 632 | 220 | 284 | ||||||||
Foreign | (261 | ) | 6,161 | 5,737 | |||||||
Total current | (246 | ) | 5,048 | 4,443 | |||||||
Deferred: | |||||||||||
Foreign | (2,232 | ) | 762 | (22,755 | ) | ||||||
Total deferred | (2,232 | ) | 762 | (22,755 | ) | ||||||
Provision for (benefit from) taxes on income | $ | (2,478 | ) | $ | 5,810 | $ | (18,312 | ) |
December 31, | |||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Deferred tax assets: | |||||||
Net operating loss and credit carryforwards | $ | 42,820 | $ | 75,350 | |||
Reserves and accruals | 11,305 | 13,841 | |||||
Depreciation and amortization | 2,393 | 358 | |||||
Other | 6,645 | 7,128 | |||||
Gross deferred tax assets | 63,163 | 96,677 | |||||
Valuation allowance | (31,648 | ) | (55,827 | ) | |||
Total deferred tax assets | 31,515 | 40,850 | |||||
Intangible assets | (6,952 | ) | (18,437 | ) | |||
Total deferred tax liabilities | (6,952 | ) | (18,437 | ) | |||
Net deferred tax assets | $ | 24,563 | $ | 22,413 |
December 31, | ||||||||
2017 | 2016 | 2015 | ||||||
Tax at statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||
Tax at rates other than the statutory rate | (4.8 | ) | (84.5 | ) | (42.5 | ) | ||
Valuation allowance | 47.3 | 40.8 | (22.0 | ) | ||||
Net change in tax reserves | 8.0 | 17.1 | 6.0 | |||||
Adjustment of deferred tax balances following changes in tax rates | (71.8 | ) | 10.9 | — | ||||
Other, net | (2.4 | ) | 4.6 | (1.1 | ) | |||
Provision for (benefit from) taxes on income | 11.3 | % | 23.9 | % | (24.6 | )% |
December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(in thousands) | |||||||||||
Gross unrecognized tax benefits, beginning of the period | $ | 41,460 | $ | 25,382 | $ | 18,037 | |||||
Increases in tax positions for prior years | 3,655 | 252 | 1,153 | ||||||||
Decreases in tax positions for prior years | — | — | (131 | ) | |||||||
Increases in tax positions for current year | 8,090 | 8,131 | 7,908 | ||||||||
Increases in tax positions acquired or assumed in a business combination | — | 8,990 | — | ||||||||
Decreases due to lapses of statutes of limitations | (8,051 | ) | (1,295 | ) | (1,585 | ) | |||||
Gross unrecognized tax benefits, end of the period | $ | 45,154 | $ | 41,460 | $ | 25,382 |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(in thousands) | |||||||||||
United States | $ | 327,528 | $ | 386,360 | $ | 300,674 | |||||
China | 172,405 | 192,581 | 152,739 | ||||||||
Europe | 176,937 | 149,855 | 93,666 | ||||||||
Other Americas | 92,449 | 52,447 | 24,692 | ||||||||
Other Asia | 94,574 | 76,255 | 86,369 | ||||||||
Total revenue | $ | 863,893 | $ | 857,498 | $ | 658,140 |
December 31, | |||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Israel | $ | 99,752 | $ | 101,001 | |||
United States | 7,017 | 14,246 | |||||
Other | 3,150 | 3,338 | |||||
Total property and equipment, net | $ | 109,919 | $ | 118,585 |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(in thousands) | |||||||||||
ICs | $ | 161,216 | $ | 170,641 | $ | 92,214 | |||||
Boards | 325,845 | 337,304 | 265,249 | ||||||||
Switch systems | 222,836 | 204,083 | 179,977 | ||||||||
Cables, accessories and other | 153,996 | 145,470 | 120,700 | ||||||||
Total revenue | $ | 863,893 | $ | 857,498 | $ | 658,140 |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(in thousands) | |||||||||||
InfiniBand: | |||||||||||
EDR | $ | 194,261 | $ | 125,249 | $ | 39,009 | |||||
FDR | 181,465 | 302,093 | 347,760 | ||||||||
QDR/DDR/SDR | 31,599 | 49,987 | 63,745 | ||||||||
Total | 407,325 | 477,329 | 450,514 | ||||||||
Ethernet | 401,005 | 317,241 | 155,221 | ||||||||
Other | 55,563 | 62,928 | 52,405 | ||||||||
Total revenue | $ | 863,893 | $ | 857,498 | $ | 658,140 |
Year ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
(in thousands) | |||||||||||
Interest income and gains (losses) on short-term investments, net | $ | 3,748 | $ | 2,244 | $ | 2,998 | |||||
Foreign exchange loss, net | (596 | ) | (840 | ) | (186 | ) | |||||
Impairment of investment in a privately-held company | — | — | (3,189 | ) | |||||||
Other | (37 | ) | (314 | ) | (147 | ) | |||||
Total other income (loss), net | $ | 3,115 | $ | 1,090 | $ | (524 | ) |
(in thousands) | ||||
Term Debt, principal amount | $ | 74,000 | ||
Less unamortized debt issuance costs | 1,239 | |||
Term Debt, principal net of unamortized debt issuance costs | $ | 72,761 | ||
Effective interest rate | 3.8 | % |
(in thousands) | |||
2018 | $ | — | |
2019 | 74,000 | ||
$ | 74,000 |
Description: | Balance at Beginning of Year | Charged to Costs and Expenses | Deductions | Balance at End of Year | |||||||||||
(in thousands) | |||||||||||||||
Year ended December 31, 2017 | |||||||||||||||
Deducted from asset accounts: | |||||||||||||||
Allowance for doubtful accounts | $ | 632 | $ | — | $ | — | $ | 632 | |||||||
Allowance for sales returns and adjustments | — | — | — | — | |||||||||||
Income tax valuation allowance | 55,827 | — | (24,179 | ) | 31,648 | ||||||||||
Total | $ | 56,459 | $ | — | $ | (24,179 | ) | $ | 32,280 | ||||||
Year ended December 31, 2016 | |||||||||||||||
Deducted from asset accounts: | |||||||||||||||
Allowance for doubtful accounts | $ | 621 | $ | 11 | $ | — | $ | 632 | |||||||
Allowance for sales returns and adjustments | — | — | — | ||||||||||||
Income tax valuation allowance | 28,999 | 26,828 | — | 55,827 | |||||||||||
Total | $ | 29,620 | $ | 26,839 | $ | — | $ | 56,459 | |||||||
Year ended December 31, 2015 | |||||||||||||||
Deducted from asset accounts: | |||||||||||||||
Allowance for doubtful accounts | $ | 672 | $ | — | $ | (51 | ) | $ | 621 | ||||||
Allowance for sales returns and adjustments | — | — | — | ||||||||||||
Income tax valuation allowance | 46,220 | — | (17,221 | ) | 28,999 | ||||||||||
Total | $ | 46,892 | $ | — | $ | (17,272 | ) | $ | 29,620 |
MELLANOX TECHNOLOGIES, LTD. | ||
By: | /s/ EYAL WALDMAN | |
Eyal Waldman President and Chief Executive Officer |
Signature | Title | Date | ||
/s/ EYAL WALDMAN | Chief Executive Officer and Director (principal executive officer) | February 16, 2018 | ||
Eyal Waldman | ||||
/s/ JACOB SHULMAN | Chief Financial Officer (principal financial and accounting officer) and Authorized Representative in the United States | February 16, 2018 | ||
Jacob Shulman | ||||
/s/ DOV BAHARAV | Director | February 16, 2018 | ||
Dov Baharav | ||||
/s/ SHAI COHEN | Director | February 16, 2018 | ||
Shai Cohen | ||||
/s/ GLENDA DORCHAK | Director | February 16, 2018 | ||
Glenda Dorchak | ||||
/s/ IRWIN FEDERMAN | Director | February 16, 2018 | ||
Irwin Federman | ||||
/s/ AMAL JOHNSON | Director | February 16, 2018 | ||
Amal Johnson | ||||
/s/ DAVID PERLMUTTER | Director | February 16, 2018 | ||
David Perlmutter | ||||
/s/ THOMAS J. RIORDAN | Director | February 16, 2018 | ||
Thomas J. Riordan | ||||
/s/ C. THOMAS WEATHERFORD | Director | February 16, 2018 | ||
C. Thomas Weatherford |
1.1 | DATE OF LEASE 1 |
1.2 | LANDLORD 1 |
1.3 | TENANT 1 |
1.4 | BUILDING 1 |
1.5 | PREMISES 2 |
1.6 | TERM 2 |
1.7 | RENT COMMENCEMENT DATE 2 |
1.8 | MONTHLY RENT 2 |
1.9 | BASE YEAR EXPENSE STOP 2 |
1.10 | ADDITIONAL RENT 2 |
1.11 | TENANT’S PRO RATA SHARE 2 |
1.12 | USE OF PREMISES 2 |
1.14 | SECURITY DEPOSIT 3 |
1.15 | BROKER 3 |
1.16 | ADDRESS FOR NOTICES AND REPORTS 3 |
1.17 | ADDRESS FOR PAYMENTS 3 |
1.18 | PARKING 3 |
3.1 | BUILDING 4 |
3.2 | PREMISES 4 |
3.3 | TENANT IMPROVEMENT ALLOWANCE 4 |
3.4 | COMMON AREA 5 |
3.5 | EASEMENT 5 |
4.1 | TERM 6 |
4.2 |
4.3 | HOLDING OVER 6 |
4.4 | CONDITION PRECEDENT 6 |
4.5 | FAILURE OF CONDITION 6 |
5.1 | CONDITION OF PREMISES 7 |
5.2 | DELIVERY OF POSSESSION 7 |
6.1 | GENERAL PROVISIONS 8 |
6.2 | MONTHLY RENT 8 |
6.3 | [INTENTIONALLY DELETED.] 8 |
6.4 | ADDITIONAL RENT 8 |
6.5 | OPERATING EXPENSES 8 |
6.6 | REAL ESTATE TAXES 10 |
6.7 | PROPERTY INSURANCE MAINTAINED BY LANDLORD 11 |
6.8 | UTILITY EXPENSES 12 |
6.9 | PAYMENT OF OPERATING EXPENSES 12 |
6.10 | COST SAVINGS CAPITAL IMPROVEMENT 13 |
6.11 | PERSONAL PROPERTY TAXES 13 |
7.1 | SECURITY DEPOSIT 14 |
7.2 | USE OF SECURITY DEPOSIT 14 |
7.3 | SECURITY INTEREST 14 |
7.4 | REFUND AND TRANSFER 15 |
8.1 | MAINTENANCE OF COMMON AREA 15 |
8.2 | TENANT’S USE OF COMMON AREA 16 |
8.3 | COMPLIANCE WITH LANDLORD’S RULES AND REGULATIONS 16 |
8.4 | PARKING 16 |
8.5 | NO OBSTRUCTION 16 |
10.1 | GENERAL INSURANCE 18 |
10.2 | COMMERCIAL GENERAL LIABILITY INSURANCE 19 |
10.3 | WORKERS’ COMPENSATION INSURANCE 19 |
10.4 | PROPERTY AND EXTENDED COVERAGE INSURANCE 19 |
10.5 | WAIVER OF SUBROGATION 20 |
11.1 | PERMITTED USE 20 |
11.2 | COMPLIANCE WITH LAWS; NUISANCE 20 |
11.3 | ENVIRONMENTAL COMPLIANCE 21 |
11.4 | LANDLORD’S RIGHT OF ENTRY 21 |
12.1 | TENANT’S MAINTENANCE OBLIGATIONS 22 |
12.2 | ANTENNAE/LIGHTS 22 |
12.3 | LANDLORD’S CURE 22 |
13.1 | ALTERATIONS 22 |
13.2 | CONSTRUCTION OF ALTERATIONS 24 |
13.3 | TITLE TO ALTERATIONS 24 |
13.4 | SIGNS 24 |
14.1 | TENANT’S PROPERTY 25 |
14.2 | SURRENDER OF PREMISES 26 |
14.3 | LANDLORD’S LIEN 26 |
15.1 | LANDLORD’S DUTY OF REPAIR 26 |
15.2 | REPAIRS BY LANDLORD 26 |
15.3 | TERMINATION OF LEASE 27 |
16.1 | TOTAL OR SUBSTANTIAL TAKING 27 |
16.2 | PARTIAL TAKING 28 |
16.3 | AWARD 28 |
18.1 | EVENTS OF DEFAULT 29 |
18.2 | REMEDIES 30 |
18.3 | LATE CHARGES 32 |
18.4 | INTEREST ON PAST DUE OBLIGATIONS 33 |
18.5 | WAIVER OF REDEMPTION 33 |
18.6 | LANDLORD’S DEFAULT 33 |
18.7 | LANDLORD’S RIGHT TO PERFORM 33 |
18.8 |
19.1 | SUBORDINATION 34 |
19.2 | ATTORNMENT 34 |
19.3 | ESTOPPEL CERTIFICATE 34 |
19.4 | RIGHTS OF LANDLORD’S LENDER AND LANDLORD’S PURCHASER 35 |
19.5 | LIMITATION OF LIABILITY 35 |
21.1 | LANDLORD’S CONSENT 36 |
21.2 | NOTICE OF TRANSFER 36 |
21.3 | LANDLORD’S RIGHTS 37 |
27.1 | GOVERNING LAW 38 |
27.2 | COMPLETE AGREEMENT 38 |
27.3 | AMENDMENT 39 |
27.4 | NO PARTNERSHIP 39 |
27.5 | NO MERGER 39 |
27.6 | SEVERABILITY 39 |
27.7 | CAPTIONS 39 |
27.8 | WORDS 39 |
27.9 | EXHIBITS 39 |
27.10 | NO THIRD PARTY BENEFICIARIES 39 |
29.1 | TIME 40 |
29.2 | SUCCESSORS 40 |
29.3 | RECORDATION 40 |
29.4 | NO RECOURSE 40 |
29.5 | BROKER 40 |
29.6 |
29.7 | NO LIGHT, AIR OR VIEW EASEMENT 40 |
29.8 | ATTORNEYS’ FEES 40 |
29.9 | WAIVER 41 |
29.10 | CERTIFIED ACCESS SPECIALIST 41 |
29.11 | SUBMISSION OF LEASE 41 |
1.1 | DATE OF LEASE | , 2017 | |
1.2 | LANDLORD: | Oakmead Parkway Properties Partnership, a California general partnership | |
1.3 | TENANT: | Mellanox Technologies, Inc., a California corporation | |
1.4 | BUILDING: | Address: 350 Oakmead Parkway Sunnyvale, California 94085-5407 The Building, situated upon that certain real property (“Land”), more particularly described in Exhibit “A,” attached hereto. The parties hereto acknowledge that the Rentable Square Feet of the Building, for multi-tenant occupancy, is Fifty Thousand One Hundred Thirteen square feet (50,133 s.f.). | (§ 3.1) |
1.5 | PREMISES: | The Premises is located on the first and second floors of the Building and, for the first six (6) months of the term, consists of approximately 36,628 Rentable Square Feet, as depicted in Exhibit “B-1” attached hereto, and, upon delivery of possession of the remaining 13,505 Rentable Square Feet in the Building (the “Former MLS Space”) at the beginning of the seventh (7th) month during the term (the “Former MLS Space Delivery Date”), shall consist of approximately 50,133 Rentable Square Feet, as depicted in Exhibit “B-2” (“Rentable Area”). The Rentable Area of the Premises has been measured by Landlord’s Architect. | (§ 3.2) |
1.6 | TERM: | The term (“Term”) of this Lease shall commence on January 1, 2018, and continue for eighty-four (84) full calendar months. | (§ 4.1) |
1.7 | RENT COMMENCEMENT DATE: | The Rent Commencement Date shall be the date the Term commences. | (§ 6.1) |
1.8 | MONTHLY RENT | Months of Term Monthly Rent 01-03 $-0- 04-12 $ 86,075.00 13-24 $121,322.00 25-36 $124,831.00 37-48 $128,841.00 49-60 $132,852.00 61-72 $136,863.00 73-84 $140,874.00 | (§6.2) |
1.9 | BASE YEAR EXPENSE STOP: | The “Base Year Expense Stop” shall be Tenant’s Pro Rata Share of the actual Operating Expenses for the calendar year 2018. | (§6.9) |
1.10 | ADDITIONAL RENT: | “Additional Rent” shall be the amount equal to Tenant’s Pro Rata Share of Operating Expenses in excess of the Base Year Expense Stop and other costs identified in Section 6.4. | (§§ 6.4, 6.5; 6.6; 6.7; 6.8; 6.9) |
1.11 | TENANT’S PRO RATA SHARE: | One hundred percent (100%) upon Landlord’s delivery of possession of the former MLS Space. | (§ 6.9 B) |
1.12 | USE OF PREMISES: | The Premises shall be used for general office, administrative, IT development, server lab, client server and other related legal uses for businesses acceptable to Landlord reasonable discretion. The | (§ 11.1) |
Premises shall be used solely for the use stated above and for no other use or purpose which is incompatible with a first-class office building without the prior express written consent of Landlord, which consent may be withheld in Landlord’s reasonable discretion. | |||
1.14 | SECURITY DEPOSIT | Tenant shall pay to Landlord·$78,343.00 to increase the existing security deposit of $62,531.00 to $140,874.00 (“Security Deposit”) as a security deposit. | (Art. VII) |
1.15 | BROKER | Cushman & Wakefield represents Landlord and S5Advisory, Inc. represents Tenant with respect to the subject Lease. Brokers to be paid a leasing commission pursuant to separate agreement between Landlord and Cushman & Wakefield. | (§ 29.5) |
1.16 | ADDRESS FOR NOTICES AND REPORTS: | ||
LANDLORD: | Oakmead Parkway Properties Partnership c/o Mac Millan Properties 333 W. Santa Clara Street, Suite 280 San Jose, California 95113 Attention: Donald H. Mac Millan | ||
TENANT: | The Premises: 350 Oakmead Parkway, Suite 100 Sunnyvale, California 94085-5407 Attention: Jacob Shulman, CFO Legal_Notices@mellanox.com | ||
1.17 | ADDRESS FOR PAYMENTS: | (§6.1) | |
LANDLORD: | Oakmead Parkway Properties Partnership c/o Mac Millan Properties 333 W. Santa Clara Street, Suite 280 San Jose, California 95113 Attention: Donald H. Mac Millan | ||
1.18 | PARKING | Subject to the terms and conditions set forth in Section 8.4 hereof, Tenant shall have the right to use at no cost to Tenant, up to 121 parking spaces on a nonexclusive basis, until Landlord delivers possession of the Former MLS Space, at which time Tenant shall have the right to use up to 165 parking spaces on an exclusive basis. | (§ 8.4) |
4.3.4 | Intentionally deleted. |
1. | No sign, placard, picture, advertisement, name or notice shall be installed or displayed on any part of the outside or inside of the Building without the prior written consent of Landlord. Landlord shall have the right to remove, at Tenant’s expense and without notice, any sign installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by a person chosen by Landlord. |
2. | If Landlord objects in writing to any curtains, blinds, shades, screens or hanging plants or other similar objects attached to or used in connection with any window or door of the Premises, Tenant shall immediately discontinue such use. No awning shall be permitted on any part of the Premises, Tenant shall not place anything against or near glass partitions or doors or windows which may appear unsightly from outside the Premises. |
3. | Tenant shall not obstruct any sidewalks, halls, passages, exits, entrances, elevators or stairways of the Building. The halls, passages, exits, entrances, shopping malls, elevators and stairways are not open to the general public. Landlord shall in all cases retain the right to control and prevent access thereto of all persons whose presence in the judgment of Landlord would be prejudicial to the safety, character, reputation and interest of the Building and its tenants; provided that nothing herein contained shall be construed to prevent such access to persons with whom any tenant normally deals in the ordinary course of its business, unless such persons are engaged in illegal activities. No tenant and no employee or invitee of any tenant shall go upon the roof of the Building. |
4. | The monument signage outside of the Building will be provided exclusively for the display of the name and location of tenants only, and Landlord reserves the right to exclude any other names therefrom. |
5. | All cleaning and janitorial services for the Building and the Premises shall be provided exclusively through Landlord, at Tenant’s expense, and except with the written consent of Landlord, no person or persons other than those approved by Landlord shall be permitted to enter the Building for the purpose of cleaning the same. Tenant shall not cause any unnecessary labor by carelessness or indifference to the good order and cleanliness of the Premises. Landlord shall not in any way be responsible to any Tenant for any loss of property on the Premises, however occurring, or for any damage to any Tenant’s property by the janitor or any other employee or any other person. |
6. | Landlord will furnish Tenant, at Tenant’s cost (unless such cost is paid from any tenant improvement allowance, if applicable, available to Tenant by Landlord), with two keys to each exterior door lock in the Premises. Landlord may make a reasonable charge for any additional keys. Tenant shall not make or have made additional keys, and Tenant shall .not alter any lock or install a new additional lock or bolt on any door of its |
7. | If Tenant requires telegraphic, telephonic, burglar alarm or similar services, it shall first obtain, and comply with, Landlord’s instructions in their installation. |
8. | The elevator shall be available for use by all tenants in the Building, subject to such reasonable scheduling as Landlord in its discretion shall deem appropriate. No equipment, materials, furniture, packages, supplies, merchandise or other property will be received in the Building or carried in the elevator except between such hours as may be designated by Landlord. |
9. | Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. Landlord shall have the right to prescribe the weight, size and position of all equipment, materials, furniture or other property brought into the Building. Heavy objects shall, if considered necessary by Landlord, stand on such platforms as determined by Landlord to be necessary to properly distribute the weight. Business machines and mechanical equipment belonging to Tenant, which cause noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to Landlord or to any tenants in the Building, shall be placed and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration. The persons employed to move such equipment in or out of the Building must be acceptable to Landlord. Landlord will not be responsible for loss of, or damage to, any such equipment or other property from any cause, and all damage done to the Building by maintaining or moving such equipment or other property shall be repaired at the expense of Tenant. Tenant shall require all persons employed by Tenant to move equipment or other articles in or out of the Building or Premises (collectively, “movers”) to, prior to commencing any moving, furnish Landlord with original certificates of insurance evidencing that such movers carry (i) workers compensation insurance in such amounts as may be required by law; (ii) commercial general liability insurance (including owned and non-owned automobile liability), on an occurrence basis, with limits of no less than $2,000,000 per occurrence and no less than $3,000,000 in the annual aggregate; and (iii) employers liability insurance with limits of at least $1,000,000. All such liability policies shall (i) name Landlord and its managing agent as additional insureds; (ii) be primary to and non-contributory with any insurance policies carried by Landlord or such managing agent; and (iii) contain contractual liability and cross-liability endorsements in favor of Landlord and such managing agent. |
10. | Tenant shall not use or keep in the Premises any kerosene, gasoline or other inflammable or combustible fluid or material other than those limited quantities necessary for the operation or maintenance of office equipment. Tenant shall not use or permit to be used in the Premises any foul or noxious gas or substance, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to |
11. | Tenant shall not use any method of heating or air-conditioning other than that supplied by Landlord. |
12. | Tenant shall not waste electricity; water or air-conditioning and agrees to cooperate fully with Landlord to assure the most effective operation of the Building's heating and air conditioning and to comply with any governmental energy-saving rules, laws or regulations of which Tenant has actual notice, and shall refrain from adjusting controls. Tenant shall keep corridor doors closed, and shall close window coverings at the end of each business day. |
13. | Landlord reserves the right, exercisable without notice and without liability to Tenant, to change the name and street address of the Building. |
14. | Landlord reserves the right to exclude from the Building between the hours of 6 p.m. and 7 a.m. the following day, or such other hours as may be established from time to time by Landlord, and on Sundays and legal holidays, any person unless that person is known to be person or employee in charge of the Building and has a pass or is properly identified. Tenant shall be responsible for all persons for whom it requests passes and shall be liable to Landlord for all acts of such persons. Landlord shall not be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. Landlord reserves the right to prevent access to the Building in case of invasion, mob, riot, public excitement or other commotion by closing the doors or by other appropriate action. |
15. | Tenant shall close and lock the doors of its Premises and entirely shut off all water faucets or other water apparatus, and electricity, gas or air outlets before tenant and its employees leave the Premises. Tenant shall be responsible for any damage or injuries sustained by other tenants or occupants of the Building or by Landlord for noncompliance with this rule. |
16. | Tenant shall not obtain for use on the Premises food, beverage, towel, car washing or detailing or other similar services or accept barbering, boot blacking or car washing or detailing service upon the Premises, except at such hours and under such regulations as may be fixed by Landlord. |
17. | The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused it. |
18. | Tenant shall not sell, or permit the sale at retail, of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise to the general public in or on the |
19. | Tenant shall not install any radio or television antenna, loudspeaker or other device on the roof or exterior walls of the Building, without Landlord’s approval. Tenant shall not interfere with radio or television broadcasting or reception from or in the Building or elsewhere. |
20. | Tenant shall not mark, drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof. Landlord reserves the right to direct electricians as to where and how telephone and telegraph wires are to be introduced to the Premises. Tenant shall not cut or bore holes for wires. Tenant shall not affix any floor covering to the floor of the Premises in any manner except as approved by Landlord. Tenant shall repair any damage resulting from noncompliance with this rule. |
21. | Tenant shall not install maintain or operate upon the Premises any vending machine without the written consent of Landlord. |
22. | Canvassing, soliciting and distribution of handbills or any other written material, and peddling in the Building are prohibited, and each tenant shall cooperate to prevent same. |
23. | Landlord reserves the right to exclude or expel from the Building any person who, in Landlord’s judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the Rules and Regulations of the Building. |
24. | Tenant shall store all its trash and garbage within its Premises. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage disposal shall be made in accordance with the directions issued from time to time by Landlord. |
25. | The Premises shall not be used for the storage of merchandise held for sale to the general public, or for lodging or for manufacturing of any kind, nor shall the Premises be used for any improper, immoral or objectionable purpose. No cooking shall be done or permitted by any tenant on the premises except that use by Tenant of Underwriters’ Laboratory-approved equipment for brewing coffee, tea, hot chocolate, and similar beverages shall be permitted, provided that such equipment and use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations. |
26. | Tenant shall not use in any space or in the public halls of the Building any hand trucks except those equipped with rubber tires and side guards or such other material handling equipment as Landlord may approve. Tenant shall not bring vehicles or bicycles of any kind into the Building. |
27. | Without the written consent of Landlord, Tenant shall not use the name of the Building in connection with or in promoting or advertising the business of Tenant except as Tenant’s address. |
28. | Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any other governmental agency. |
29. | Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed. |
30. | The requirements of Tenant will be attended to only upon appropriate application to the office of the Building by an authorized individual. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under specific instruction by Landlord. |
31. | Tenant shall not park its vehicles in any parking areas designated by the Landlord as areas for parking by visitors to the Building. Tenant shall not leave vehicles in the Building parking areas overnight nor park any vehicles in the Building parking areas other than automobiles, motorcycles, motor driven or non-motor driven bicycles or four wheeled trucks. |
32. | Landlord may waive any one or more of these Rules and Regulations for the benefit of Tenant or any other tenant, but no such waiver by Landlord shall be construed as a continuous waiver of such Rules and Regulations in favor of Tenant or any other tenant, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the tenants of the Building. |
33. | These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of premises in the Building. |
34. | Landlord reserves the right to make such other reasonable Rules and Regulations as, in its judgment, may from time to time be needed for safety and security, for care and cleanliness of the Building and for the preservation of good order therein. Tenant agrees to abide by all such Rules and Regulations hereinabove stated and for any additional rules and regulations which are adopted. |
35. | Tenant shall be responsible for the observance of all foregoing rules by Tenant’s employees, agents, clients, customers, invitees and guests. |
36. | Tenant shall not install, operate or maintain in the Premises or in any other area of the Building, electrical equipment that would overload the electrical system beyond its capacity for proper, efficient and safe operation as determined solely by Landlord. Tenant shall not furnish cooling or heating to the Premises, including, without |
a. | Parking areas shall be used only for parking by vehicles no longer than full size, passenger automobiles herein called “Permitted Size Vehicles.” Vehicles other than Permitted Size Vehicles are herein referred to as “Oversized Vehicles.” |
b. | Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant’s employees, suppliers, shippers, customers or invitees to be loaded, unloaded, or parked in areas other than those designated by Landlord for such activities. |
c. | Parking stickers or identification devices, if any, shall be the property of Landlord and be returned to Landlord by the holder thereof upon termination of the holder’s parking privileges. Tenant will pay such replacement charge as is reasonably established by Landlord for the loss of such devices. |
d. | If provided, Landlord reserves the right to refuse the sale of monthly identification devices to any person or entity that willfully refuses to comply with the applicable rules, regulations, laws and/or agreements. |
e. | Users of the parking area will obey all posted signs and park only in the areas designated for vehicle parking. |
f. | Unless otherwise instructed, every person using the parking area is required to park and lock his own vehicle. Landlord will not be responsible for any damage to vehicles, injury to persons or loss of property, all of which risks are assumed by the party using the parking area. |
g. | Validation, if established, will be permissible only by such method or methods as Landlord and/its licensee may establish at rates generally applicable to visitor parking. |
h. | Except as otherwise approved by the Landlord, the maintenance, washing, waxing or cleaning of vehicles in the parking structure or Common Areas is prohibited. |
i. | Tenant shall be responsible for seeing that all of its employees, agents and invitees comply with the applicable parking rules, regulations, laws and agreements. |
j. | Landlord reserves the right to modify these rules and/or adopt such other reasonable and non-discriminatory rules and regulations as it may deem necessary for the proper operation of the parking area. |
k. | Such parking use as is herein provided is intended merely as a license only and no bailment is intended or shall be created thereby. |
1. | Negotiations, execution, delivery and performance of agreements on behalf of the Company and any subsidiary thereof (a “Subsidiary”) including, inter alia, any claim or demand made by a customer, supplier, contractor or other third party transacting any form of business with the Company, its Subsidiaries or affiliates relating to the negotiations or performance of such transactions, representations or inducements provided in connection thereto or otherwise. |
2. | Any claim or demand made in connection with any transaction which is not within the ordinary course of business of either the Company, its subsidiaries or affiliates, including the sale, lease or purchase of any assets or businesses. |
3. | Anti-competitive acts and acts of commercial wrongdoing. |
4. | Acts in regard of invasion of privacy including with respect to databases and acts in regard of slander. |
5. | Any claim or demand made for actual or alleged infringement, misappropriation or misuse of any third party’s intellectual property rights including, but not limited to confidential information, patents, copyrights, design rights, service marks, trade secrets, copyrights, misappropriation of ideas by the Company, its Subsidiaries or affiliates. |
6. | Actions taken in connection with the intellectual property of the Company and any Subsidiary and its protection, including the registration or assertion of rights to intellectual property and the defense of claims relating thereof. |
7. | Participation and/or non-participation at the Company’s board meetings, bona fide expression of opinion and/or voting and/or abstention from voting at the Company’s board meetings. |
8. | Approval of corporate actions including the approval of the acts of the Company’s management, their guidance and their supervision. |
9. | Claims of failure to exercise business judgement and a reasonable level of proficiency, expertise and care in regard of the Company’s business. |
10. | Violations of securities laws of any jurisdiction, including without limitation, fraudulent disclosure claims, failure to comply with SEC and/or the Israeli Securities Authority and/or any stock exchange disclosure or other rules and any other claims relating to relationships with investors, shareholders and the investment community and any claims related to the Sarbanes-Oxley Act of 2002, as amended from time to time. |
11. | Any claim or demand made under any securities laws or by reference thereto, or related to the failure to disclose any information in the manner or time such information is required to be disclosed pursuant to such laws, or related to inadequate or improper disclosure of information to shareholders, or prospective shareholders, or related to the purchasing, holding or disposition of securities of the Company or any other investment activity involving or affected by such securities, including any actions relating to an offer or issuance of securities of the Company or of its Subsidiaries and/or affiliates to the public by prospectus or privately by private placement, in Israel or abroad, including the details that shall be set forth in the documents in connection with execution thereof. |
12. | Violations of laws requiring the Company to obtain regulatory and governmental licenses, permits and authorizations or laws related to any governmental grants in any jurisdiction. |
13. | Claims in connection with publishing or providing any information, including any filings with any governmental authorities, on behalf of the Company in the circumstances required under any applicable laws. |
14. | Any claim or demand made by employees, consultants, agents or other individuals or entities employed by or providing services to the Company relating to compensation owed to them or damages or liabilities suffered by them in connection with such employment or service. |
15. | Resolutions and/or actions relating to employment matters of the Company and/or its Subsidiaries and/or affiliates. |
16. | Events, pertaining to the employment conditions of employees and to the employer – employee relations, including the promotion of workers, handling pension arrangements, insurance and saving funds, options and other benefits. |
17. | Any claim or demand made by any lenders or other creditors or for moneys borrowed by, or other indebtedness of, the Company, its Subsidiaries or affiliates. |
18. | Any claim or demand made by any third party suffering any personal injury and/or bodily injury and/or property damage to business or personal property through any act or omission attributed to the Company, its Subsidiaries or affiliates, or their respective employees, agents or other persons acting or allegedly acting on their behalf. |
19. | Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company or any Subsidiary or affiliate thereof, or their respective directors, officers and employees, to pay, report, keep applicable records or otherwise, of any foreign, federal, state, country, local, municipal or city taxes or other compulsory payments of any nature whatsoever, including without limitation, income, sales, use, transfer, excise, value added, registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not. |
20. | Any claim or demand made by purchasers, holders, lessors or other users of products or assets of the Company, or individuals treated with such products, for damages or losses related to such use or treatment, and actions in connection with the testing of products developed by the Company and/or its Subsidiaries or in connection with the distribution, sale, license or use of such products. |
21. | Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations proceedings or notices of noncompliance or violation by any governmental entity or other person alleging potential responsibility or liability (including potential responsibility or liability for costs of enforcement, investigation, cleanup, governmental response, removal or remediation, for natural resources damages, property damage, personal injuries, or penalties or contribution, indemnification, cost recovery, compensation, or injunctive relief) arising out of, based on or related to (a) the presence of, release spill, emission, leaking, dumping, pouring, deposit, disposal, discharge, leaching or migration into the environment (each a “Release”) or threatened Release of, or exposure to, any hazardous, toxic, explosive or radioactive substance, wastes or other substances or wastes of any nature regulated pursuant to any environmental law, at any location, whether or not owned, operated, leased or managed by the Company or any of its Subsidiaries, or (b) circumstances forming the basis of any violation of any environmental law, environmental permit, license, registration or other authorization required under applicable environmental and/or public health law. |
22. | Actions in connection with the Company’s development, use, sale, licensing, distribution, marketing or offer of products and/or services. |
23. | Resolutions and/or actions relating to a merger of the company and/or of its Subsidiaries and/or affiliates, the issuance of shares or securities exercisable into shares of the Company, changing the share capital of the Company, formation of subsidiaries, reorganization, winding up or sale of all or part of the business, operations or shares the Company. |
24. | Resolutions and/or actions relating to investments in the Company and/or its Subsidiaries and/or affiliated companies and/or the purchase or sale of assets, including the purchase or sale of companies and/or businesses, and/or investments in corporate or other entities and/or investments in traded securities and/or any other form of investment. |
25. | Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging the failure to comply with any statute, law, ordinance, rule, regulation, order or decree of any of its Subsidiaries and/or affiliates, or any of their respective business operations. |
26. | Actions relating to the operations and management of the Company and/or its Subsidiaries. |
27. | Actions taken in connection with the approval and execution of financial reports and business reports and the representations made in connection therewith. |
28. | Any claim or demand, not covered by any of the categories of events described above, which, pursuant to any applicable law, a director or officer of the Company may be held liable to any government or agency thereof, or any person or entity, in connection with actions taken by such director or officer in such capacity. |
By: | /s/ EYAL WALDMAN | ||||
Name: | Eyal Waldman | ||||
Title: | President and Chief Executive Officer (Principal Executive Officer) |
By: | /s/ JACOB SHULMAN | ||||
Name: | Jacob Shulman | ||||
Title: | Chief Financial Officer (Principal Financial Officer) |
By: | /s/ EYAL WALDMAN | ||||||
Name: | Eyal Waldman | ||||||
Title: | President and Chief Executive Officer (Principal Executive Officer) |
By: | /s/ JACOB SHULMAN | |||||
Name: | Jacob Shulman | |||||
Title: | Chief Financial Officer (Principal Financial Officer) |
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Document and Entity Information - USD ($) $ in Billions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Feb. 09, 2018 |
Jun. 30, 2017 |
|
Document and Entity Information | |||
Entity Registrant Name | Mellanox Technologies, Ltd. | ||
Trading Symbol | MLNX | ||
Entity Central Index Key | 0001356104 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 2.2 | ||
Entity Common Stock, Shares Outstanding | 51,781,340 | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS (Parenthetical) |
Dec. 31, 2017
₪ / shares
|
Dec. 31, 2017
USD ($)
shares
|
Dec. 31, 2016
₪ / shares
|
Dec. 31, 2016
USD ($)
shares
|
---|---|---|---|---|
Statement of Financial Position [Abstract] | ||||
Common stock, par value (in NIS per share) | ₪ / shares | ₪ 0.0175 | ₪ 0.0175 | ||
Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 | ||
Common stock, shares issued (in shares) | 51,488,000 | 49,076,000 | ||
Common stock, shares outstanding (in shares) | 51,488,000 | 49,076,000 | ||
Commitments and Contingencies (Note 9) | $ |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | |||
Net income (loss) | $ (19,425) | $ 18,518 | $ 92,894 |
Other comprehensive income, net of tax: | |||
Change in unrealized gains/losses on available-for-sale securities, net | 929 | 342 | (204) |
Change in unrealized gains/losses on derivative contracts, net (net of tax effect of $105, $47, and $97) | 1,617 | 399 | 2,555 |
Other comprehensive income | 2,546 | 741 | 2,351 |
Total comprehensive income (loss), net of tax | $ (16,879) | $ 19,259 | $ 95,245 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | |||
Change in unrealized gains/losses on derivative contracts, tax effect | $ 105 | $ 47 | $ 97 |
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Company Mellanox Technologies, Ltd., an Israeli corporation (the "Company" or "Mellanox"), was incorporated and commenced operations in March 1999. Mellanox is a supplier of high-performance interconnect products for computing, storage and communications applications. Principles of presentation The consolidated financial statements include the Company's accounts as well as those of its wholly owned subsidiaries after the elimination of all intercompany balances and transactions. On February 23, 2016, the Company completed its acquisition of EZchip Semiconductor, Ltd. ("EZchip"), a public company formed under the laws of the State of Israel and specializing in network-processing semiconductors. Upon the consummation of the acquisition, EZchip became a wholly owned subsidiary of the Company. The consolidated financial statements include the results of operations of EZchip commencing as of the acquisition date. Certain prior year amounts have been reclassified to conform to the 2017 presentation. Risks and uncertainties The Company is subject to all of the risks inherent in a company which operates in the dynamic and competitive semiconductor industry. Significant changes in any of the following areas could have a material adverse impact on the Company's financial position and results of operations; unpredictable volume or timing of customer orders; ordered product mix; the sales outlook and purchasing patterns of the Company's customers based on consumer demands and general economic conditions; loss of one or more of the Company's customers; decreases in the average selling prices of products or increases in the average cost of finished goods; the availability, pricing and timeliness of delivery of components used in the Company's products; reliance on a limited number of subcontractors to manufacture, assemble, package and production test the Company's products; the Company's ability to successfully develop, introduce and sell new or enhanced products in a timely manner; product obsolescence and the Company's ability to manage product transitions; the timing of announcements or introductions of new products by the Company's competitors, and the Company's ability to successfully integrate acquired businesses. Use of estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, allowances for price adjustments, investment valuation, warranty reserves, inventory reserves, share-based compensation expense, long-term asset valuations, useful lives of property, equipment, and intangibles, accounting for business combinations, goodwill and purchased intangible asset valuation, investments in privately-held companies, accounting and fair value of financial instruments and derivatives, deferred income tax asset valuation, uncertain tax positions, litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results that the Company experiences may differ materially and adversely from the Company's original estimates. To the extent there are material differences between the estimates and actual results, the Company's future results of operations will be affected. Cash and cash equivalents The Company considers all highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds. Restricted cash The Company maintains certain cash amounts that are restricted as to withdrawal or use over the long-term. The cash is securing bank guarantees primarily issued against long-term tenancy agreements. The long-term restricted cash balance of $8.0 million was reported in other long-term assets on the balance sheet as of December 31, 2017, and was included in the ending balance of cash, cash equivalents and restricted cash in the statement of cash flows for the year ended December 31, 2017. There was no restricted cash as of December 31, 2016 and 2015. The following table provides a reconciliation of the cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported in the statements of cash flows:
Short-term investments The Company's short-term investments are classified as available-for-sale securities and are reported at fair value. Unrealized gains or losses are recorded in shareholders' equity and included in other comprehensive income ("OCI"). The Company views its available-for-sale portfolio as available for use in its current operations. Accordingly, the Company has classified all investments in available for sale securities with readily available markets as short-term, even though the stated maturity date may be one year or more beyond the current balance sheet date, because of the intent and ability to sell these securities prior to maturity to meet liquidity needs or as part of a risk management program. The Company regularly reviews its investment portfolio and charges unrealized losses against net income when a decline in fair value is determined to be other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include but are not limited to: (1) the length of time a security is in an unrealized loss position, (2) the extent to which fair value is less than cost, (3) the financial condition and near term prospects of the issuer and (4) our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. Fair value of financial instruments The Company's financial instruments consist of cash equivalents, restricted cash, short-term investments and foreign currency derivative contracts. The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants. When there is no readily available market data, fair value estimates may be made by the Company, which may not necessarily represent the amounts that could be realized in a current or future sale of these assets. Derivatives The Company enters into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks, mainly the exposure to changes in the exchange rate of the NIS against the U.S. dollar that are associated with forecasted future cash flows and existing assets and liabilities. The Company's primary objective in entering into these arrangements is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. The program is not designated for trading or speculative purposes. The Company's derivative instruments expose the Company to credit risk to the extent that the counter-parties may be unable to meet the terms of the agreement. The Company seeks to mitigate such risk by limiting its counter-parties to major financial institutions and by spreading the risk across a number of major financial institutions. In addition, the potential risk of loss with any one counter-party resulting from this type of credit risk is monitored on an ongoing basis. The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated as cash flow hedges, the effective portion of the unrealized gains or losses on the derivative instruments is reported as a component of accumulated other comprehensive income ("AOCI") in shareholders’ equity and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of the gains or losses on the derivative instruments, if any, is recognized in earnings in the current period. The derivative instruments that hedge the exposure to variability in the fair value of assets or liabilities are not currently designated as hedges for financial reporting purposes, and thus the gains or losses on such derivative instruments are recognized in earnings in the current period. Concentration of credit risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, restricted cash, short-term investments and accounts receivable. Cash, cash equivalents, restricted cash and short-term investment balances are maintained with high quality financial institutions, the composition and maturities of which are regularly monitored by management. The Company's accounts receivable are derived from revenue earned from customers primarily located in North America, Europe and Asia. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. The Company maintains an allowance for doubtful accounts receivable based upon the expected collectability of accounts receivable. The Company reviews its allowance for doubtful accounts quarterly by assessing individual accounts receivable over a specific aging and amount, and all other balances based on historical collection experience and an economic risk assessment. If the Company determines that a specific customer is unable to meet its financial obligations to the Company, the Company provides an allowance for credit losses to reduce the receivable to the amount management reasonably believes will be collected. The following table summarizes the revenues from customers (including original equipment manufacturers) in excess of 10% of the total revenues:
The following table summarizes accounts receivable balances in excess of 10% of total accounts receivable:
Inventory Inventory includes finished goods, work-in-process and raw materials. Inventory is stated at the lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or net realizable value. Reserves for potentially excess and obsolete inventory are made based on management's analysis of inventory levels, future sales forecasts and market conditions. Once established, the original cost of the Company's inventory less the related inventory reserve represents the new cost basis of such products. Property and equipment Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is generally calculated using the straight-line method over the estimated useful lives of the related assets, which is three years for computer equipment and software, seven years for lab equipment, and seven years for office furniture and fixtures. Leasehold improvements and assets acquired under capital leases are amortized on a straight-line basis over the term of the lease, or the useful lives of the assets, whichever is shorter. Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in the results of operations in the period realized. During the fourth quarter of 2017, the Company retired fully depreciated assets that were no longer in use. As a result, $72.8 million of cost and accumulated depreciation was removed from the accounts. No gain or loss was recognized. The Company capitalizes certain costs incurred in connection with internal use of inventory items in the Company's data centers and laboratories. Capitalized inventory costs are included in Property and equipment, net and amortized on a straight-line basis over the estimated useful life of the asset. Business combinations The Company accounts for business combinations using the acquisition method of accounting. The Company determines the recognition of intangible assets based on the following criteria: (i) the intangible asset arises from contractual or other rights; or (ii) the intangible asset is separable or divisible from the acquired entity and capable of being sold, transferred, licensed, returned or exchanged. The Company allocates the purchase price of business combinations to the tangible assets, liabilities and intangible assets acquired, including in-process research and development ("IPR&D"), based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The process of estimating the fair values requires significant estimates, especially with respect to intangible assets. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer contracts, customer lists and distribution agreements, acquired developed technologies, expected costs to develop IPR&D into commercially viable products, estimated cash flows from projects when completed and discount rates. The Company estimates fair value based upon assumptions that are believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Goodwill and intangible assets Goodwill represents the excess of the cost of acquired businesses over the fair market value of their identifiable net assets. The Company conducts a goodwill impairment qualitative assessment during the fourth quarter of each fiscal year or more frequently if facts and circumstances indicate that goodwill may be impaired. The goodwill impairment qualitative assessment requires the Company to perform an assessment to determine if it is more likely than not that the fair value of the business is less than its carrying amount. The qualitative assessment considers various factors, including the macroeconomic environment, industry and market specific conditions, market capitalization, stock price, financial performance, earnings multiples, budgeted-to-actual revenue performance from prior year, gross margin and cash flow from operating activities and issues or events specific to the business. If adverse qualitative trends are identified that could negatively impact the fair value of the business, the Company performs a "two step" goodwill impairment test. "Step one" is the identification of potential impairment. This involves comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount including goodwill. If the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is considered not impaired and "Step two" of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, "Step two" is performed. This involves comparing the carrying amount of goodwill to its implied fair value, which is determined to be the excess of the reporting unit's fair value over the fair value of its identifiable net assets other than goodwill. If the carrying amount of goodwill exceeds its implied fair value, an impairment exists and is recorded. As of December 31, 2017, the Company's qualitative assessment of goodwill impairment indicated that goodwill was not impaired. Intangible assets represent acquired intangible assets including developed technology, customer relationships and IPR&D, as well as licensed technology. The Company amortizes its finite lived intangible assets over their useful lives using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used, or, if that pattern cannot be reliably determined, using a straight-line amortization method. The Company capitalizes IPR&D projects acquired as part of a business combination as intangible assets with indefinite lives. On completion of each project, IPR&D assets are reclassified to developed technology and amortized over their estimated useful lives. If any of the IPR&D projects are abandoned, the Company would impair the related IPR&D asset. Indefinite-lived intangible assets are tested for impairment annually or more frequently when indicators of impairment exist. The Company first assesses qualitative factors to determine if it is more likely than not that an indefinite-lived intangible asset is impaired and whether it is necessary to perform a quantitative impairment test. The qualitative assessment considers various factors, including reductions in demand, the abandonment of IPR&D projects or significant economic slowdowns in the semiconductor industry and macroeconomic environment. If adverse qualitative trends are identified that could negatively impact the fair value of the asset, then quantitative impairment tests are performed to compare the carrying value of the asset to its undiscounted expected future cash flows. If this test indicates that there is impairment, the impaired asset is written down to fair value, which is typically calculated using: (i) quoted market prices or (ii) discounted expected future cash flows utilizing an appropriate discount rate. Impairment is based on the excess of the carrying amount over the fair value of those assets. The Company performed an impairment test on the IPR&D during the fourth quarter of 2017 when the project reached technological feasibility and was transferred to developed technology, and concluded that the asset was not impaired. Intangible assets with finite lives are tested for impairment in accordance with our policy for long-lived assets. Equity investments in privately-held companies The Company has equity investments in privately-held companies. These investments are recorded at cost reduced by any impairment write-downs because the Company does not have the ability to exercise significant influence over the operating and financial policies of the company. The investments are included in other long-term assets on the accompanying balance sheets. The Company monitors the investments and if facts and circumstances indicate an investment may be impaired, then it conducts an impairment test of its investment. To determine if the investment is recoverable, it reviews the privately-held company's revenue and earnings trends relative to pre-defined milestones and overall business prospects, the general market conditions in its industry and other factors related to its ability to remain in business, such as liquidity and receipt of additional funding. Impairment of long-lived assets Long-lived assets include equipment and furniture and fixtures and finite-lived intangible assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. If the sum of the expected future cash flows (undiscounted and without interest charges) from the long-lived assets is less than the carrying amount of such assets, an impairment loss would be recognized, and the assets would be written down to their estimated fair values. The Company reviews for possible impairment on a regular basis. While performing the review for impairment for the fourth quarter of 2017, the Company noted an impairment indicator associated with the potential sale or discontinuation of the 1550nm silicon photonics line of business. As a result, the Company recorded impairment charges totaling $12.0 million in the fourth quarter of 2017, of which $7.7 million were related to property and equipment and $4.3 million were related to intangible assets. See Note 16 for more details about the impairment charges. Revenue recognition The Company recognizes revenue from the sales of products when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the price is fixed or determinable; and (4) collection is reasonably assured. The Company uses a binding purchase order or a signed agreement as evidence of an arrangement. Delivery occurs when goods are shipped and title and risk of loss transfer to the customer. The Company's standard arrangement with its customers typically includes freight-on-board shipping point, no right of return and no customer acceptance provisions. The revenues from fixed-price support or maintenance contracts, including extended warranty contracts and software post-contract customer support agreements, are recognized ratably over the contract period and the costs associated with these contracts are recognized as incurred. The customer's obligation to pay and the payment terms are set at the time of shipment and are not dependent on the subsequent resale of the product. The Company determines whether collectability is reasonably assured on a customer-by-customer basis. When assessing the probability of collection, the Company considers the number of years the customer has been in business and the history of the Company's collections. Customers are subject to a credit review process that evaluates the customers' financial positions and ultimately their ability to pay. If it is determined at the outset of an arrangement that collection is not reasonably assured, no product is shipped and no revenue is recognized unless cash is received in advance. The Company maintains inventory, or hub arrangements with certain customers. Pursuant to these arrangements the Company delivers products to a customer or a designated third party warehouse based upon the customer's projected needs, but does not recognize product revenue unless and until the customer reports it has removed the Company's product from the warehouse to be incorporated into its end products. Multiple Element Arrangements For revenue arrangements that contain multiple deliverables, judgment is required to properly identify the accounting units of the transactions and to determine the manner in which revenue should be allocated among the accounting units. Moreover, judgment is used in interpreting the commercial terms and determining when all criteria of revenue recognition have been met for each deliverable in order for revenue recognition to occur in the appropriate accounting period. While changes in the allocation of the arrangement consideration between the units of accounting will not affect the amount of total revenue recognized for a particular sales arrangement, any material changes in these allocations could impact the timing of revenue recognition, which could affect our results of operations. For multiple element arrangements that include a combination of hardware, services, such as post-contract customer support, and software, the arrangement consideration is first allocated among the accounting units before revenue recognition criteria are applied. The allocation is derived based on vendor specific objective evidence ("VSOE"). When VSOE or third party evidence is unavailable, we use management's best estimate of selling price. Distributor Revenue A portion of the Company's sales are made to distributors under agreements which contain price protection provisions. Currently, the Company recognizes revenues from sales to distributors based on the sell-through method using inventory and point of sale information provided by the distributors, net of estimated allowances for price adjustments. Upon the adoption of the new revenue standards effective January 1, 2018, the Company will recognize revenues from sales to distributors upon shipment and transfer of control (known as “sell-in” revenue recognition), net of the estimated allowances for price adjustments. Deferred Revenue and Income The Company defers revenue and income when advance payments are received from customers before performance obligations have been completed and/or services have been performed. Shipping and Handling Costs incurred for shipping and handling expenses to customers are recorded as cost of revenues. To the extent these amounts are billed to the customer in a sales transaction, the Company records the shipping and handling fees as revenue. Product warranty The Company typically offers a limited warranty for its products for periods up to three years. The Company accrues for estimated returns of defective products at the time revenue is recognized based on historical activity. The determination of these accruals requires the Company to make estimates of the frequency and extent of warranty activity and estimated future costs to either replace or repair the products under warranty. If the actual warranty activity and/or repair and replacement costs differ significantly from these estimates, adjustments to record additional cost of revenues may be required in future periods. Changes in the Company's liability for product warranty were as follows:
Research and development Costs incurred in research and development are charged to operations as incurred. The Company expenses all costs for internally developed patents as incurred. Advertising Costs related to advertising and promotion of products are charged to sales and marketing expense as incurred. Advertising expense was approximately $2.9 million, $2.1 million and $2.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. Share-based compensation The Company accounts for share-based compensation expense based on the estimated fair value of the equity awards as of the grant dates. The fair value of restricted stock units ("RSUs"), is based on the closing market price of our ordinary shares on the date of grant. The Company estimates the fair value of share options and the Employee Share Purchase Plan ("ESPP") using the Black-Scholes option valuation model, which requires the input of subjective assumptions including the expected share price volatility and the calculation of expected term, as well as the fair value of the underlying ordinary share on the date of grant, among other inputs. The Company bases its estimate of expected volatility on the historical volatility of the Company's shares. The Company did not grant share options in 2017, 2016, and 2015. Share-based compensation expense is recognized on a straight-line basis over each recipient's requisite service period, which is generally the vesting period. Share-based compensation expense is recorded in full during the vesting period, and the effect of forfeitures will be recorded as they actually occur. Comprehensive income (loss) Accumulated other comprehensive income (loss), net of tax on the consolidated balance sheets at December 31, 2017 and 2016, represents the accumulated unrealized gains (losses) on available-for-sale securities, and the accumulated unrealized gains (losses) related to derivative instruments accounted for as cash flow hedges. The amount of income tax expense allocated to unrealized gains (losses) on available-for-sale securities and derivative instruments was immaterial at December 31, 2017 and 2016. Foreign currency translation and remeasurement The Company uses the U.S. dollar as its functional currency. Foreign currency assets and liabilities are remeasured into U.S. dollars at the end-of-period exchange rates except for non-monetary assets and liabilities, which are remeasured at historical exchange rates. The Company derives all revenues in U.S. dollars. Expenses are remeasured at the exchange rate in effect on the day the transaction occurred, except for those expenses related to non-monetary assets and liabilities, which are remeasured at historical exchange rates. Gains or losses from foreign currency transactions are included in the Consolidated Statements of Operations as part of "Other income (loss), net." Net income (loss) per share Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of ordinary shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of ordinary shares outstanding during the period increased to include the number of additional shares that would have been outstanding if the potentially dilutive shares had been issued. Potentially dilutive shares include unvested RSUs, outstanding stock options, and shares to be purchased by employees under the Company’s employee stock purchase plan. The dilutive effect of potentially dilutive shares is reflected in diluted net income (loss) per share by application of the treasury stock method. The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated:
The Company excluded 4.5 million potentially dilutive share options and RSUs from the computation of diluted net loss per share for the year ended December 31, 2017, 0.5 million and 0.5 million potentially dilutive shares from the computation of diluted net income per share for the years ended December 31, 2016 and 2015, respectively, because including them would have had an anti-dilutive effect. Segment reporting The Company has one reportable segment: the development, manufacturing, marketing and sales of interconnect products. Income taxes To prepare the Company's consolidated financial statements, the Company estimates its income taxes in each of the jurisdictions in which it operates. This process involves estimating the Company's actual tax exposure together with assessing temporary differences resulting from the differing treatment of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are calculated using tax rates expected to be in effect during the period these temporary differences would reverse, and are included within the Company's consolidated balance sheet. The Company must also make judgments regarding the realizability of deferred tax assets. The carrying value of the Company's net deferred tax assets is based on its belief that it is more likely than not that the Company will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. A valuation allowance has been established for deferred tax assets which the Company does not believe meet the "more likely than not" criteria. The Company's judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If the Company's assumptions and consequently its estimates change in the future, the valuation allowances it has established may be increased or decreased, resulting in a respective increase or decrease in income tax expense. The Company's effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, the tax regulations and tax holidays in each geographic region, the availability of tax credits and carryforwards, and the effectiveness of its tax planning strategies. The Company uses a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with the guidance on judgments regarding the realizability of deferred taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within the consolidated statements of income as income tax expense. Adoption of new accounting principles In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718); Improvements to Employee Share-Based Payment Accounting. The Company adopted ASU No. 2016-09 during the quarter ended March 31, 2017. The standard requires, among other things, excess tax benefits to be recognized in the statement of operations as an income tax benefit as opposed to additional paid-in capital. This change was adopted prospectively and did not have a material effect on the Company's condensed consolidated financial statements. The standard also requires, among other things, excess tax benefits to be included in operating activities in the statement of cash flows as opposed to in financing activities. This change was adopted retrospectively and did not have a material effect on the Company's condensed consolidated financial statements. The standard further requires excess tax benefits to be recognized when they arise, instead of when they actually reduce taxes payable under the prior guidance. This change was adopted using a modified retrospective method through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The impact of the adoption was to increase deferred tax assets by $4.6 million, which in turn was offset by an increase in the valuation allowance in the same amount, resulting in no change in net deferred tax assets and retained earnings as of January 1, 2017. The standard also establishes an alternative practical expedient for estimating the effects of forfeitures of an award by recognizing such effects in compensation cost when the forfeitures occur. Adoption of the alternative practical expedient was applied using a modified retrospective method through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The impact of the adoption was to reduce retained earnings and to increase additional paid-in capital by $0.8 million as of January 1, 2017. In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires, among other things, an explanation of the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The standard is effective for fiscal years beginning after December 15, 2017. We early adopted ASU 2016-18 retrospectively during the fourth quarter of 2017. The Company has long-term restricted cash in the amount of $8.0 million as of December 31, 2017. This amount was reported in other long-term assets in the balance sheet as of December 31, 2017, and was included in the ending balance of cash, cash equivalents and restricted cash in the statement of cash flows for the year ended December 31, 2017. There was no restricted cash as of December 31, 2016 and 2015. Recent accounting pronouncements In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands the activities that qualify for hedge accounting and simplifies the rules for reporting hedging transactions. The standard is effective for the Company beginning January 1, 2019. Early adoption is permitted. The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard becomes effective for the Company beginning January 1, 2019. Early adoption of the standard is allowed. The Company is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amends various aspects of the recognition, measurement, presentation, and disclosure of financial instruments, and is effective for the Company beginning January 1, 2018. One aspect that may have a material impact on the Company's consolidated financial statements relates to the measurement of its equity investments in privately-held companies whose fair values are not readily determinable. With the election to use the measurement alternative (as opposed to fair value), these equity investments will be measured at cost, less impairments, adjusted by observable price changes. The Company believes that the adoption of ASU 2016-01 may increase the volatility of its other income (expense), net, as a result of the remeasurement of its equity investments in privately-held companies upon the occurrence of observable price changes and impairments. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and may be applied retrospectively to each prior period presented, or applied using a modified retrospective method with the cumulative effect recognized in the beginning retained earnings during the period of initial application. Subsequently, the FASB has issued several additional ASUs related to ASU No. 2014-09, collectively they are referred to as the “new revenue standards,” which become effective for the Company beginning January 1, 2018. The Company expects to adopt the new revenue standards using the modified retrospective method. Under the current guidance, the Company defers the recognition of revenue and the cost of revenue from distributor sales until the distributors report that they have sold the products to their customers (known as “sell-through” revenue recognition). Upon the adoption of the new revenue standards, the Company will recognize revenue on sales to distributors upon shipment and transfer of control (known as “sell-in” revenue recognition), net of the estimated allowances for price adjustments. The deferred “sell-through” revenue, net of the deferred cost of revenue, was approximately $4.5 million as of December 31, 2017, which will be recognized and recorded as an increase to beginning retained earnings during the first quarter of 2018. The Company does not expect any other material effects on its consolidated financial statements. |
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BUSINESS COMBINATION |
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BUSINESS COMBINATION | BUSINESS COMBINATION: On February 23, 2016, the Company completed its acquisition of EZchip Semiconductor Ltd. ("EZchip"). Under the terms of the Agreement of Merger dated as of September 30, 2015 (as amended on November 17, 2015), by and among the Company, Mondial Europe Sub Ltd. and EZchip (the "Merger Agreement"), the total consideration was $782.2 million, including $1.0 million attributable to assumed RSUs. The net cash purchase price of $693.7 million consisted of a $781.2 million cash payment for all outstanding common shares of EZchip at the price of $25.50 per share and net of $87.5 million cash acquired. The Company also assumed 891,822 EZchip RSUs and converted them to 499,894 equivalent Company RSU awards. The fair value of the converted RSUs was determined based on the per share value of the underlying Mellanox ordinary shares of $46.40 per share as of the acquisition date. The 499,894 RSUs had a total aggregate value of $23.2 million, of which $1.0 million was recorded as a component of the purchase price for service rendered prior to the acquisition date and $22.2 million will be recognized as share-based compensation expense over the remaining required service period of up to 2.25 years from the acquisition date. In connection with the acquisition, the Company entered into a $280.0 million variable interest rate Term Debt maturing February 21, 2019. See Note 15 for additional information. The Company accounted for the transaction using the acquisition method, which requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their respective estimated fair values as of the acquisition date. The following summarizes consideration paid for EZchip at the acquisition date:
The following summarizes the Company's allocation of the total purchase price, net of cash acquired for the EZchip acquisition after consultation with third party valuation specialists:
Acquisition-related expenses for the EZchip acquisition for the year ended December 31, 2017 were $0.3 million and primarily consisted of employee-related expenses. Acquisition-related expenses for the EZchip acquisition for the year ended December 31, 2016 were $8.3 million and primarily consisted of investment banking, consulting, and other professional fees. Identifiable finite-lived intangible assets
Trade name represents the fair values of brand and name recognition associated with the marketing of EZchip’s products and services. The Company used the income approach and utilized a discount rate of 10.0% to determine the fair value of trade name assets. Customer relationships represent the fair value of future projected revenues that will be derived from the sale of products to existing customers of EZchip. The Company used the comparative method ("with/without") of the income approach to determine the fair value of this intangible asset and utilized a discount rate of 10.0%. Backlog represents the fair value of sales order backlog as of the valuation date. The Company used the income approach to determine the fair value of this intangible asset and utilized a discount rate of 8.0%. Developed technology represents completed technology that has passed technological feasibility and/or is currently offered for sale to customers. The Company used the income approach to value the developed technology. Under the income approach, the expected future cash flows from each technology are estimated and discounted to their net present values at an appropriate risk-adjusted rate of return. Significant factors considered in the calculation of the rate of return are the weighted average cost of capital and the return on assets. The Company applied a discount rate of 9.0% to value the developed technology assets taking into consideration market rates of return on debt and equity capital and the risk associated with achieving forecasted revenues related to these assets. The IPR&D intangible asset represents the value assigned to an acquired research and development project that, as of the acquisition date, had not established technological feasibility. The fair value of IPR&D was determined using a discount rate of 12.0%. This intangible asset will be capitalized on the balance sheet and evaluated periodically for impairment until the project is completed, at which time it will be transferred to developed technology and become subject to amortization over its useful life. IPR&D consists of one project related to the development of two network processors. The estimated remaining costs to complete the IPR&D project was $22.3 million as of the acquisition date, which will be charged to operating expense in the condensed consolidated statements of operations as incurred. During the three months ended September 30, 2016, one component of the IPR&D project reached technological feasibility and $4.2 million was transferred to developed technology. During the three months ended December 31, 2017, the remaining IPR&D project reached technological feasibility and $29.5 million was transferred to developed technology. The total developed technology balance at December 31, 2017 will be amortized over seven years. Goodwill Goodwill arising from the acquisition represents the value of the skilled assembled workforce and projected growth in overall revenues. The EZchip acquisition is a step in the Company's strategy to become a leading broad-line supplier of intelligent interconnect solutions for data centers. The addition of EZchip’s products and expertise in network processing is expected to enhance the Company's leadership position, and ability to deliver complete end-to-end, intelligent interconnect and processing solutions for advanced data center and edge platforms. The combined company has diverse and robust solutions to enable customers to meet the growing demands of data-intensive applications used in high-performance computing, Web 2.0, cloud, secure data center, enterprise, telecom, database, financial services, and storage environments. These significant factors were the basis for the recognition of goodwill. Goodwill is not expected to be deductible for tax purposes. Goodwill will not be amortized but instead will be tested for impairment annually or more frequently if certain indicators are present. Supplemental pro forma data The following unaudited pro forma data have been prepared as if the EZchip acquisition had occurred on January 1, 2015, and include adjustments for amortization of intangible assets acquired, the effect of purchase accounting adjustments including the step-up of inventory, share-based compensation expense, and interest on the Term Debt incurred to partially finance the acquisition. Pro forma results are not indicative of what would have occurred had the acquisition occurred as of January 1, 2015 or of results that may occur in the future.
Material non-recurring adjustments included in the unaudited pro forma net income for the year ended December 31, 2016 for the effect of purchase accounting adjustments include: a reduction of acquisition-related costs of $15.3 million, composed of acquisition cost of $8.3 million incurred by the Company and $7.0 million incurred by EZchip; a reduction of amortization expense related to the acquired intangible assets and the step-up of inventory of $13.0 million; and a reduction of the share-based compensation expense related to accelerated RSUs of $4.8 million. Material non-recurring adjustments included in the unaudited pro forma net income for the year ended December 31, 2015 for the effect of purchase accounting adjustments include: additional amortization expense related to the acquired intangible assets and the step-up of inventory of $56.2 million; an increase of acquisition-related costs of $15.3 million; and the interest expense of term debt, including the amortization of issuance costs, of $7.6 million. The Company immediately integrated EZchip into its ongoing operations. As a result, it is impracticable to determine EZchip's effect on revenue and earnings in the consolidated statement of operations for the reporting period. |
FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS: Fair value hierarchy: The Company measures its cash equivalents, restricted cash, and marketable securities at fair value. The Company’s cash equivalents are classified within Level 1. Cash equivalents are valued primarily using quoted market prices utilizing market observable inputs. The Company's restricted cash and investments in debt securities and certificates of deposits are classified within Level 2 as the market inputs to value these instruments consist of market yields, reported trades and broker/dealer quotes. In addition, foreign currency contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. The Level 3 valuation inputs include the Company's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument's valuation. As of December 31, 2017 and December 31, 2016, the Company did not have any assets or liabilities valued based on Level 3 valuations. Financial Liabilities Measured at Fair Value on a Nonrecurring Basis: As of December 31, 2017, the remaining principal of $74.0 million on the Company's $280.0 million Term Debt is classified as a Level 2 fair value measurement in the fair value hierarchy. The Company calculated a fair value amount of $74.9 million at December 31, 2017 based on a discounted cash flow model using observable market inputs and taking into consideration variables such as interest rate changes, comparable instruments, and long-term credit ratings. Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis: The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017.
The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2016.
There were no transfers between Level 1 and Level 2 securities during the years ended December 31, 2017 and 2016. |
INVESTMENTS |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS | INVESTMENTS: Cash, cash equivalents and short-term investments: At December 31, 2017 and 2016, the Company held cash, cash equivalents and short-term investments classified as available-for-sale securities as follows:
Interest income and gains (losses) on short-term investments, net were $3.7 million and $2.2 million for the years ended December 31, 2017 and 2016, respectively. At December 31, 2017, gross unrealized losses on investments that were in a gross unrealized loss position for greater than 12 months were immaterial. These investments were not deemed to be other-than-temporarily impaired and the gross unrealized losses were recorded in OCI. The contractual maturities of short-term investments at December 31, 2017 and 2016 were as follows:
Equity investments in privately-held companies: As of December 31, 2017 and 2016, the Company held a total of $29.3 million and $12.7 million in equity investments in privately-held companies, which were reported using the cost method. On April 27, 2015, the Company was informed that one of the privately-held companies intended to discontinue its operations. As a result, the Company concluded that its investment of $3.2 million in this privately-held company was fully impaired and the impairment of this investment was other than temporary. The impairment loss was included in other loss, net, on the consolidated statements of operations for the year ended December 31, 2015. During the years ended December 31, 2017 and 2016, there was no impairment of equity investments in privately-held companies. |
GOODWILL AND INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS: The following table represents changes in the carrying amount of goodwill:
The carrying amounts of intangible assets as of December 31, 2017 were as follows:
The carrying amounts of intangible assets as of December 31, 2016 were as follows:
Amortization expense of intangible assets totaled approximately $61.3 million, $59.2 million and $10.1 million for the years ended December 31, 2017, 2016 and 2015, respectively. An impairment charge of $4.3 million was recorded in the fourth quarter of 2017 to write-off the intangible assets related to the 1550nm silicon photonics development activities. See Note 16 for more details about the impairment charge. The estimated future amortization expense from amortizable intangible assets is as follows:
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DERIVATIVES AND HEDGING ACTIVITIES |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVES AND HEDGING ACTIVITIES | DERIVATIVES AND HEDGING ACTIVITIES: Fair Value of Derivative Contracts The fair value of derivative contracts as of December 31, 2017 and 2016 was as follows:
The gross notional amounts of derivative contracts were NIS denominated. The notional amounts of outstanding derivative contracts in U.S. dollar at December 31, 2017 and 2016 were as follows:
Effect of Derivatives Designated as Hedging Instruments on Accumulated Other Comprehensive Income (Loss) The following table represents the unrealized gains of derivatives designated as hedging instruments, net of tax effects, that were recorded in accumulated other comprehensive income (loss) as of December 31, 2017 and 2016, and their effect on OCI for the year ended December 31, 2017 (in thousands):
Foreign exchange contracts designated as hedging instruments primarily relate to operating expenses and the associated gains and losses are expected to be recorded in operating expenses when reclassified out of OCI. See Note 11 for the amounts recorded in each operating expense account. The Company expects to realize the accumulated OCI balance related to foreign exchange contracts within the next twelve months. Effect of Derivative Contracts on the Consolidated Statement of Operations The effect of derivative contracts on the consolidated statement of operations in the years ended December 31, 2017, 2016, and 2015 was as follows:
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EMPLOYEE BENEFIT PLANS |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANS: The Company has established a pretax savings plan under Section 401(k) of the Internal Revenue Code. The 401(k) Plan allows eligible employees in the United States to voluntarily contribute a portion of their pre-tax or after-tax salary, subject to a maximum limit specified in the Internal Revenue Code. The Company matches employee contributions of up to 4% of their annual base salaries. The total expenses for these contributions were $2.2 million, $1.9 million and $1.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Under Israeli law, the Company is required to make severance payments to certain of its retired or dismissed Israeli employees. For employees hired prior to January 1, 2007 the severance pay liability is calculated based on the last monthly salary of each employee multiplied by the number of years of such employee's employment and is presented in the Company's balance sheet in long-term liabilities, as if it was payable at each balance sheet date on an undiscounted basis. This liability is partially funded by the purchase of insurance policies or pension funds in the name of the employees. The surrender value of the insurance policies or pension funds is presented in long-term assets. The severance pay detail is as follows:
For other Israeli employees, the Company's contributions for severance pay replace its severance obligation. When the Company makes the monthly contribution equal to 8.3% of the employee's monthly salary to an insurance policy or pension fund, no additional calculations shall be conducted between the parties regarding the matter of severance pay and no additional payments will be made by the Company to the employee. Further, the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid. Severance expenses for the years ended December 31, 2017, 2016 and 2015 were $12.6 million, $11.0 million and $7.6 million, respectively. In addition, the Company has established a pension contribution plan with respect to its employees in Israel. Under the plan, for the period from January 1 to June 30, 2016, the Company contributed up to 6.0% of employee monthly salary toward the plan. Effective July 1, 2016 the contribution percentage was increased to 6.25%, and was further increased to 6.5% effective January 1, 2017. Employees are entitled to amounts accumulated in the plan upon reaching retirement age, subject to any applicable law. Defined contribution pension plan expenses were $10.4 million, $8.0 million and $5.7 million in the years ended December 31, 2017, 2016 and 2015, respectively. |
COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES: Leases The Company leases office space and motor vehicles under operating leases with various expiration dates through 2026. Expenses related to office space and motor vehicle leases were approximately $21.3 million, $18.9 million and $14.3 million for the years ended December 31, 2017, 2016 and 2015, respectively. The terms of the facility leases provide for rental payments on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid. At December 31, 2017, future minimum payments under non-cancelable operating leases are as follows:
Purchase commitments At December 31, 2017, the Company had the following non-cancelable purchase commitments:
Term Debt See Note 15 for more information about the Term Debt. Other Commitments Operating lease On May 3, 2016, the Company entered into a lease agreement for additional office space expected to be built in Yokneam, Israel. The Company is not involved in the construction, and will not be exposed to any risk during the construction period. The lease term expires 10 years after lease inception with no options to extend the lease term. The Company's occupancy of the additional office space and its obligation under the lease agreement are contingent on the lessor's attainment of stated milestones in the lease agreement. As such, the Company cannot make a reliable estimate as to the timing of cash payments under the lease. At December 31, 2017, the estimated total future lease obligation is approximately $30.7 million. Over a twelve month period, the estimated rental expense will be approximately $3.1 million. Royalty-bearing grants We are obliged to pay royalties to the Israeli National Authority for Technological Innovation or the OCS for research and development efforts partially funded through grants from the OCS and under approved plans in accordance with the Israeli Law for Encouragement of Research and Development in the Industry, 1984 (the "R&D Law"). Royalties are payable to the Israeli government at the rate of 4.5% on the revenues of the Company's products incorporating OCS funded know-hows, and up to the amount of the grants received. The Company's obligation to pay these royalties is contingent on actual sales of the products, at which time a liability is recorded. In the absence of such sales, we cannot make a reliable estimate as to the timing of cash settlement of the royalties. At December 31, 2017, the Company estimated a total future royalty obligation of approximately $36.4 million, and if recognized, would increase the Company's cost of revenues in its consolidated statement of operations. Unrecognized tax benefits Due to the inherent uncertainty with respect to the timing of future cash outflows associated with the Company's unrecognized tax benefits, it is unable to reliably estimate the timing of cash settlement with the respective taxing authorities. As of December 31, 2017, the Company's unrecognized tax benefits totaled $45.2 million, out of which an amount of $24.6 million would reduce the Company's income tax expense and effective tax rate, if recognized. Contingencies Legal proceedings The Company is involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of its business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, securities, personal injuries and other matters. The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on the Company’s condensed consolidated financial position or results of operations. The Company records a liability when it believes that it is both probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount of a loss or potential loss. The Company may be unable to reasonably estimate the reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others: (i) if the damages sought are indeterminate; (ii) if proceedings are in the early stages; (iii) if there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) if there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) if there are significant factual issues to be determined or resolved; (vi) if the proceedings involve a large number of parties; (vii) if relevant law is unsettled or novel or untested legal theories are presented; or (viii) if the proceedings are taking place in jurisdictions where the laws are complex or unclear. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any. |
SHARE INCENTIVE PLANS |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE INCENTIVE PLANS | SHARE INCENTIVE PLANS: Stock option plans During the 2016 annual shareholder meeting, the Company's shareholders approved the Mellanox Technologies, Ltd. Amended and Restated Global Share Incentive Plan (2006) (the "First Restated 2006 Plan"), which constitutes an amendment and restatement of the Mellanox Technologies, Ltd. Global Share Incentive Plan (2006) and its appendices (the "2006 Plan"). The Restated 2006 Plan became effective on March 14, 2016 ("Effective Date"). The approval of the First Restated 2006 Plan extended the term to February 2026. The First Restated 2006 Plan reserves 750,000 ordinary shares for issuance under new equity awards and reduces to zero the shares available for issuance under all of the Company's other equity incentive plans in effect, including the Voltaire Ltd. 2007 Incentive Compensation Plan, the Voltaire Ltd. 2003 Section 102 Stock Option/Stock Purchase Plan, the Voltaire Ltd. 2001 Section 102 Stock Option/Stock Purchase Plan, the Voltaire Ltd. 2001 Stock Option Plan, the Kotura, Inc. Second Amended and Restated 2003 Stock Plan, the IPtronics, Inc. 2013 Restricted Stock Unit Plan, the Global Share Incentive Assumption Plan (2010), the EZchip Semiconductor Ltd. 2003 Amended and Restated Equity Incentive Plan, the EZchip Semiconductor Ltd. 2007 U.S. Equity Incentive Plan, and the Amended and Restated EZchip Semiconductor Ltd. 2009 Equity Incentive Plan (collectively, the "Prior Plans"). As of the Effective Date of the First Restated 2006 Plan, the Company ceased granting awards under the Prior Plans, and will grant new awards only from the First Restated 2006 Plan. Any shares subject to issued and outstanding awards under the Prior Plans that expire, are canceled or otherwise terminate after the Effective Date of the First Restated 2006 Plan will be added back to share reserves under the First Restated 2006 Plan. The share reserve of the 2006 Plan will no longer be available for issuance under the First Restated 2006 Plan. In addition, the First Restated 2006 Plan implements additional amendments to reflect compensation and governance best practices. On April 25, 2017, the Company's shareholders approved the Mellanox Technologies, Ltd. Second Amended and Restated Global Share Incentive Plan (2006) (the “Second Restated 2006 Plan”), which constitutes a second amendment and restatement of the 2006 Plan, as amended and restated by the First Restated 2006 Plan. The Second Restated 2006 Plan became effective on February 14, 2017. The Second Restated 2006 Plan increases the ordinary shares reserved for issuance under the First Restated 2006 Plan by 1,640,000 shares to 2,390,000 shares plus any shares subject to issued and outstanding awards under the other equity incentive plans that existed prior to the First Restated 2006 Plan that expire, are cancelled or otherwise terminated after the effective date of the First Restated 2006 Plan. The Second Restated Plan also extends the term of the First Restated 2006 Plan to February 14, 2027. In addition, the Second Restated Plan implements additional amendments to reflect compensation and governance best practices. Assumed EZchip restricted stock units In connection with the acquisition of EZchip, the Company assumed 891,822 unvested EZchip RSUs and converted them into 499,894 Mellanox RSUs using an exchange ratio of 0.56. The aggregate value of the 499,894 Mellanox RSUs was $23.2 million of which $1.0 million related to service prior to the acquisition date and was included in the EZchip purchase price consideration. The remaining fair value of $22.2 million represents post-acquisition share-based compensation expense that will be recognized over the requisite service period of approximately 2.25 years from the date of acquisition. The assumed RSUs retained all applicable terms and vesting periods. Share option activity The following table summarizes the share option activity under all equity incentive plans:
There were no options granted in 2017, 2016 and 2015. The total pretax intrinsic value of options exercised in 2017 was $16.9 million. This intrinsic value represents the difference between the fair market value of the Company's ordinary shares on the date of exercise and the exercise price of each option. Based on the most recently available closing price of the Company's ordinary shares of $64.70 prior to December 31, 2017, the total pretax intrinsic value of all outstanding options was $35.5 million. The total pretax intrinsic value of exercisable options at December 31, 2017 was $35.4 million. The total pretax intrinsic value of options exercised in 2016 was $11.1 million. Based on the most recently available closing price of the Company's ordinary shares of $40.90 prior to December 31, 2016, the total pretax intrinsic value of all outstanding options was $29.0 million. The total pretax intrinsic value of exercisable options at December 31, 2016 was $28.9 million. The weighted average remaining contractual life of options outstanding at December 31, 2017 was 3.0 years. There were 1,107,712 options exercisable at December 31, 2017 with a weighted average exercise price $38.36 per share. Restricted share unit activity The following table summarizes the restricted share unit activity under all equity incentive plans:
The weighted average fair value of restricted share units granted was $49.88, $48.39 and $45.98 for the years ended December 31, 2017, 2016 and 2015, respectively. The total intrinsic value of all outstanding restricted share units was $220.9 million as of December 31, 2017. Employee stock purchase plan activity The ESPP is designed to allow eligible employees to purchase the Company's ordinary shares, at semi-annual intervals, with their accumulated payroll deductions. A participant may contribute up to 15% of his or her base compensation through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on the purchase date, which is the last trading day of the offering period. The purchase price per share will be equal to 85% of the fair market value per share on the start date of the offering period in which the participant is enrolled or, if lower, 85% of the fair market value per share on the purchase date. In May 2016 the shareholders approved an increase of 4,000,000 additional shares under the ESPP for a total of 6,585,712 shares reserved for issuance. No participant in the ESPP may be issued or transferred more than $25,000 worth of ordinary shares pursuant to purchase rights under the ESPP per calendar year. During the years ended December 31, 2017, 2016 and 2015, 568,876, 491,968, and 364,746 shares, respectively, were issued under the ESPP at weighted average per share prices of $38.83, $35.50 and $35.15, respectively. Shares reserved for future issuance The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of December 31, 2017:
Share-based compensation The Company accounts for share-based compensation expense for share option awards and ESPP based on the estimated fair value of the instruments as of the grant dates. There were no employee share options granted in 2017, 2016 and 2015. The following weighted average assumptions were used in the valuation of the ESPP for the years ended December 31, 2017, 2016 and 2015:
The following table summarizes the distribution of total share-based compensation expense in the Consolidated Statements of Operations:
Share-based compensation expense during the year ended December 31, 2016 included cash payments of $4.8 million for the settlement of accelerated RSUs for individuals terminated on the Closing Date of the EZchip acquisition. At December 31, 2017, there was $142.2 million of total unrecognized share-based compensation costs related to non-vested share-based compensation arrangements. The costs are expected to be recognized over a weighted average period of approximately 2.7 years. |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
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Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): The following table summarizes the changes in accumulated other comprehensive income (loss) for the years ended December 31, 2017 and 2016:
The following table provides details about the realized (gains)/losses reclassified from accumulated other comprehensive income for the years ended December 31, 2017 and 2016:
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INCOME TAXES |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES: The components of income (loss) before taxes on income are as follows:
The components of the provision for (benefit from) income taxes are as follows:
At December 31, 2017 and 2016, significant deferred tax assets and liabilities are as follows:
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. As of each reporting date, management considers new evidence, both positive and negative, that could impact management’s view with regards to the future realization of deferred tax assets for each jurisdiction. As of December 31, 2015, management determined that sufficient positive evidence existed to conclude that it was more likely than not that $22.4 million of deferred tax assets of one of the Company’s Israeli subsidiaries were realizable, and therefore, reduced the valuation allowance accordingly. After weighing all positive and negative evidence, including historical results and projections of future taxable income, the Company determined that it remained more likely than not that $24.6 million and $22.4 million of deferred tax assets would be realized as of December 31, 2017 and 2016, respectively. The Company continued to provide valuation allowances against a significant portion of the remaining deferred tax assets on the consolidated balance sheet as of December 31, 2017 due to uncertainty concerning realization of these deferred tax assets. On December 22, 2017, the Tax Cuts and Jobs Acts was enacted into law. The new legislation contains several key tax provisions that will impact the Company. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, a one-time repatriation tax on accumulated foreign earnings, a limitation on the tax deductibility of interest expense, an acceleration of business asset expensing, and a reduction in the amount of executive pay that could qualify as a tax deduction. The lower corporate income tax rate will require the Company to remeasure its U.S. deferred tax assets and liabilities as well as reassess the realizability of its deferred tax assets and liabilities. ASC 740 requires the Company to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff has issued SAB 118 which will allow the Company to record provisional amounts during a measurement period. The Company has concluded that a reasonable estimate could be developed for the effects of the tax reform. However, due to the short time frame between the enactment of the reform and the year end, its fundamental changes, the accounting complexity, and the expected ongoing guidance and accounting interpretations over the next 12 months, the Company considers the accounting of the deferred tax remeasurement and other items to be incomplete. These effects have been included in the consolidated financial statements for the year ended December 31, 2017 as provisional amounts, which had no effect on the benefit from taxes on income due to the valuation allowance. During the measurement period, the Company might need to reflect adjustments to the provisional amounts upon obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts. The measurement period will end when the Company obtains, prepares, and analyzes the information needed in order to complete the accounting requirements under ASC Topic 740 or on December 22, 2018, whichever is earlier. The Company expects to complete its analysis within the measurement period in accordance with SAB 118. On January 4, 2016, the Israeli Government legislated a reduction in corporate income tax rates from 26.5% to 25.0%, effective in 2016. Deferred tax assets and liabilities at December 31, 2015 were measured using the 26.5% tax rate. Deferred tax assets and liabilities as of January 1, 2016 were remeasured using the 25.0% tax rate. The change in the corporate income tax rate from 26.5% to 25.0% resulted in a reduction of approximately $1.3 million to the Company's deferred tax assets and a corresponding increase in the Company's income tax expense during the first quarter of 2016. On December 29, 2016, the Israeli Government legislated a reduction in corporate income tax rates from 25.0% to 24.0% in 2017 and to 23.0% in 2018 and thereafter. This change in the corporate income tax rates from 25.0% to 24.0% and 23.0% resulted in a reduction of approximately $1.4 million to the Company's deferred tax assets as of December 31, 2016, and a corresponding increase in the Company's income tax expense during the fourth quarter of 2016. At December 31, 2017, the Company had net operating loss carryforwards ("NOLs") of approximately $168.9 million in Israel, $86.2 million in the United States ("U.S.") for federal tax purposes, $37.2 million in the U.S. for state tax purposes and $7.2 million in Denmark. The U.S. NOLs for federal tax purposes will expire from 2024 to 2027, and the U.S. NOLs for state tax purposes will expire from 2018 to 2037. The non-U.S. NOLs have no expiration date. The Company has not provided for Israeli income and foreign withholding taxes on $2.6 million of its non-Israeli subsidiaries' undistributed earnings as of December 31, 2017. The Company currently has no plans to repatriate those funds and intends to indefinitely reinvest them in its non-Israeli operations. The amount of the unrecognized deferred tax liability for temporary differences related to investments in non-Israeli subsidiaries that were essentially permanent in duration as of December 31, 2017 was less than $1 million. The reconciliation of the statutory federal income tax rate to the Company's effective tax rate is as follows:
The Company's operations in Israel were granted "Approved Enterprise" status by the Investment Center in the Israeli Ministry of Economy and Industry (formerly, the Ministry of Industry Trade and Labor) and "Beneficiary Enterprise" status from the Israeli Income Tax Authority, which makes the Company eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959. Under the terms of the Approved and Beneficiary Enterprise programs, income that is attributable to the Company's operations in Yokneam, Israel, is exempt from income tax commencing fiscal year 2011 through 2021. Income that is attributable to the Company's operations in Tel Aviv, Israel is subject to a reduced income tax rate (generally between 10% and the current corporate tax rate, depending on the percentage of foreign investment in the Company) commencing fiscal year 2013 through 2021. The tax holiday has resulted in a cash tax savings of approximately $11.6 million, $37.3 million and $33.0 million in 2017, 2016, and 2015, respectively, increasing diluted earnings per share by approximately $0.23, $0.75 and $0.69 in the years ended December 31, 2017, 2016, and 2015, respectively. The following summarizes the activity related to the Company's unrecognized tax benefits:
As of December 31, 2017, 2016 and 2015, the total amount of gross unrecognized tax benefits was $45.2 million, $41.5 million, and $25.4 million, respectively. Of these amounts as of December 31, 2017, 2016 and 2015, $24.6 million, $23.4 million, and $18.9 million, respectively, would reduce our income tax expense and effective tax rate, if recognized. On June 14, 2017, the Israeli government legislated new regulations regarding the "Preferred Technological Enterprise" regime, under which a company that complies with the terms may be entitled to certain tax benefits. The Company expects that its operation in Israel will comply with the terms of the Preferred Technological Enterprise regime. Therefore, the Company may utilize the tax benefits under this regime after the end of the benefit period of its Approved and Beneficiary Enterprise statuses (i.e., from fiscal year 2022 onwards). Under the new legislation, the majority of the Company’s income from its operations in Yokneam, Israel, will be subject to a corporate rate of 7.5%, while the majority of the income from its operations in Tel-Aviv, Israel, will be subject to a corporate rate of 12%. As a result of the lower tax rates mentioned above, the Company recorded a decrease of approximately $0.2 million in deferred tax assets and a corresponding increase in tax expense during the second quarter of 2017. It is the Company's policy to classify accrued interest and penalties as part of the accrued unrecognized tax benefits liability and record the expense in the provision for income taxes. As of December 31, 2017, 2016 and 2015, the amount of accrued interest and penalties related to unrecognized tax benefits totaled $2.9 million, $1.8 million, and $1.2 million, respectively. For unrecognized tax benefits that existed at December 31, 2017, the Company does not anticipate any significant changes within the next twelve months. As a multinational corporation, the Company conducts business in many countries and is subject to taxation in many jurisdictions. The taxation of the Company's business is subject to the application of multiple and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against the Company that could materially impact its tax liability and/or its effective income tax rate. As of December 31, 2017, the 2014 through 2016 tax years are open and may be subject to potential examinations in the United States. The Company has net operating losses in the United States from prior tax periods beginning in 2003 which may be subject to examination upon utilization in future tax periods. As of December 31, 2017, the 2013 through 2016 tax years are open and may be subject to potential examinations in Denmark and Israel. As of December 31, 2017 the income tax returns of the Company and one of its subsidiaries in Israel are under examination by the Israeli Tax Authority for certain years from 2013 to 2015. |
GEOGRAPHIC INFORMATION AND REVENUES BY PRODUCT GROUP |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GEOGRAPHIC INFORMATION AND REVENUES BY PRODUCT GROUP | GEOGRAPHIC INFORMATION AND REVENUES BY PRODUCT GROUP: The Company operates in one reportable segment, the development, manufacturing, marketing and sales of interconnect products. The Company's chief operating decision maker is the chief executive officer. Since the Company operates in one segment, all financial segment information can be found in the accompanying Consolidated Financial Statements. Revenues by geographic region are as follows:
Revenues are attributed to countries based on the geographic location of the customers. Intercompany sales between geographic areas have been eliminated. Property and equipment, net by geographic location are as follows:
Property and equipment, net is attributed to the geographic location in which it is located. Revenues by product type and interconnect protocol are as follows:
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OTHER INCOME (LOSS), NET |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER INCOME (LOSS), NET | OTHER INCOME (LOSS), NET: Other income (loss), net, is summarized in the following table:
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TERM DEBT |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TERM DEBT | TERM DEBT: In connection with the Company’s acquisition of EZchip, on February 22, 2016, the Company and its wholly owned subsidiary, Mellanox Technologies, Inc., entered into a $280.0 million variable interest rate Term Debt note maturing February 21, 2019. Debt issuance costs of $5.5 million on the Term Debt are being amortized to interest expense at the effective interest rate over the contractual term of the Term Debt. The Term Debt provides for an additional term loan borrowing under certain conditions. The following table presents the Term Debt at December 31, 2017:
Principal on the Term Debt is paid in quarterly installments. Principal payments are made at a rate of (i) 2.50% of the original principal amount beginning on June 30, 2016 and ending on March 31, 2017, (ii) 3.75% of the original principal amount beginning on June 30, 2017 and ending on March 31, 2018 and (iii) 6.25% of the original principal amount beginning on June 30, 2018 and ending on December 31, 2018, with the balance due on February 21, 2019. During the year ended December 31, 2017, the Company made principal payments of $172.0 million, including prepayments of $146.5 million which were applied to future payment requirements. The Company is also required to make mandatory prepayments of loans under the Term Debt, subject to specified exceptions, with the proceeds of asset sales, debt issuances and specified other events. At December 31, 2017, future scheduled principal payments on the Company's Term Debt are summarized as follows:
The Term Debt bears interest through maturity at a variable rate based upon, at the Company’s option, either (a) the LIBOR rate for Eurocurrency borrowing or (b) an Alternate Base Rate (“ABR”), which is the highest of (i) the administrative agent’s prime rate, (ii) one-half of 1.00% in excess of the overnight U.S. Federal Funds rate, and (iii) 1.00% in excess of the one-month LIBOR), plus in each case, an applicable margin. The applicable margin for Eurocurrency loans ranges, based on the applicable total net leverage ratio, from 1.25% to 2.00% per annum and the applicable margin for ABR loans ranges, based on the applicable total net leverage ratio, from 0.25% to 1.00% per annum. The Company’s obligations under the Term Debt are guaranteed by all of its domestic and foreign subsidiaries, subject to certain agreed upon exceptions. The obligations under the Term Debt are also, subject to certain agreed upon exceptions, secured by a lien on substantially all of the Company's and certain of its subsidiaries tangible and intangible property, including 100% of the Company's and certain of its subsidiaries’ equity interests in shares of its domestic and certain foreign subsidiaries. The Term Debt contains a number of covenants and restrictions that among other things, and subject to certain agreed upon exceptions, require the Company and its subsidiaries to satisfy certain financial covenants and restricts the ability of the Company and its subsidiaries to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, declare dividends or redeem or repurchase capital stock, prepay, redeem or purchase subordinated debt and amend or otherwise alter debt agreements, in each case, subject to certain agreed upon exceptions. A failure to comply with these covenants could permit the lenders under the Term Debt to declare all amounts borrowed under the Term Debt, together with accrued interest and fees, to be immediately due and payable. At December 31, 2017, the Company was in compliance with the covenants for the Term Debt. |
IMPAIRMENT OF LONG-LIVED ASSETS |
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Property, Plant and Equipment [Abstract] | |
IMPAIRMENT OF LONG-LIVED ASSETS | IMPAIRMENT OF LONG-LIVED ASSETS: While performing the review for impairment for the fourth quarter of 2017, the Company noted an impairment indicator associated with the potential sale or discontinuation of the 1550nm silicon photonics line of business. As a result, the Company recorded impairment charges totaling $12.0 million in the fourth quarter of 2017, of which $7.7 million were related to property and equipment and $4.3 million were related to intangible assets. The impairment charges were calculated based on the differences between the net book values of the related assets and their estimated fair values. The Company primarily used the market approach to determine the estimated fair values of the property and equipment. Under this approach we considered various factors, including secondary market comparables, replacement costs, age and condition of the assets and estimated selling costs. The impaired intangible assets represent obsolete technologies that were deemed to have no value, and therefore were fully written off. |
SUBSEQUENT EVENT |
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Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | SUBSEQUENT EVENT: On January 9, 2018, the Company announced that it discontinued its 1550nm silicon photonics development activities. The discontinuation of the 1550nm silicon photonics development activities is expected to result in restructuring charges of approximately $9.0 million to $12.0 million primarily related to employee termination and severance costs, facility related costs and contract cancellation charges. The Company expects to recognize most of the restructuring charges in the first quarter of 2018. |
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS |
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Valuation and Qualifying Accounts [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS |
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THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of presentation | Principles of presentation The consolidated financial statements include the Company's accounts as well as those of its wholly owned subsidiaries after the elimination of all intercompany balances and transactions. On February 23, 2016, the Company completed its acquisition of EZchip Semiconductor, Ltd. ("EZchip"), a public company formed under the laws of the State of Israel and specializing in network-processing semiconductors. Upon the consummation of the acquisition, EZchip became a wholly owned subsidiary of the Company. The consolidated financial statements include the results of operations of EZchip commencing as of the acquisition date. Certain prior year amounts have been reclassified to conform to the 2017 presentation. |
Risks and uncertainties | Risks and uncertainties The Company is subject to all of the risks inherent in a company which operates in the dynamic and competitive semiconductor industry. Significant changes in any of the following areas could have a material adverse impact on the Company's financial position and results of operations; unpredictable volume or timing of customer orders; ordered product mix; the sales outlook and purchasing patterns of the Company's customers based on consumer demands and general economic conditions; loss of one or more of the Company's customers; decreases in the average selling prices of products or increases in the average cost of finished goods; the availability, pricing and timeliness of delivery of components used in the Company's products; reliance on a limited number of subcontractors to manufacture, assemble, package and production test the Company's products; the Company's ability to successfully develop, introduce and sell new or enhanced products in a timely manner; product obsolescence and the Company's ability to manage product transitions; the timing of announcements or introductions of new products by the Company's competitors, and the Company's ability to successfully integrate acquired businesses. |
Use of estimates | Use of estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, allowances for price adjustments, investment valuation, warranty reserves, inventory reserves, share-based compensation expense, long-term asset valuations, useful lives of property, equipment, and intangibles, accounting for business combinations, goodwill and purchased intangible asset valuation, investments in privately-held companies, accounting and fair value of financial instruments and derivatives, deferred income tax asset valuation, uncertain tax positions, litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results that the Company experiences may differ materially and adversely from the Company's original estimates. To the extent there are material differences between the estimates and actual results, the Company's future results of operations will be affected. |
Cash and cash equivalents | Cash and cash equivalents The Company considers all highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds. |
Short-term investments | Short-term investments The Company's short-term investments are classified as available-for-sale securities and are reported at fair value. Unrealized gains or losses are recorded in shareholders' equity and included in other comprehensive income ("OCI"). The Company views its available-for-sale portfolio as available for use in its current operations. Accordingly, the Company has classified all investments in available for sale securities with readily available markets as short-term, even though the stated maturity date may be one year or more beyond the current balance sheet date, because of the intent and ability to sell these securities prior to maturity to meet liquidity needs or as part of a risk management program. |
Fair value of financial instruments | Fair value of financial instruments The Company's financial instruments consist of cash equivalents, restricted cash, short-term investments and foreign currency derivative contracts. The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants. When there is no readily available market data, fair value estimates may be made by the Company, which may not necessarily represent the amounts that could be realized in a current or future sale of these assets. |
Derivatives | Derivatives The Company enters into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks, mainly the exposure to changes in the exchange rate of the NIS against the U.S. dollar that are associated with forecasted future cash flows and existing assets and liabilities. The Company's primary objective in entering into these arrangements is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. The program is not designated for trading or speculative purposes. The Company's derivative instruments expose the Company to credit risk to the extent that the counter-parties may be unable to meet the terms of the agreement. The Company seeks to mitigate such risk by limiting its counter-parties to major financial institutions and by spreading the risk across a number of major financial institutions. In addition, the potential risk of loss with any one counter-party resulting from this type of credit risk is monitored on an ongoing basis. The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated as cash flow hedges, the effective portion of the unrealized gains or losses on the derivative instruments is reported as a component of accumulated other comprehensive income ("AOCI") in shareholders’ equity and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of the gains or losses on the derivative instruments, if any, is recognized in earnings in the current period. The derivative instruments that hedge the exposure to variability in the fair value of assets or liabilities are not currently designated as hedges for financial reporting purposes, and thus the gains or losses on such derivative instruments are recognized in earnings in the current period. |
Concentration of credit risk | Concentration of credit risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, restricted cash, short-term investments and accounts receivable. Cash, cash equivalents, restricted cash and short-term investment balances are maintained with high quality financial institutions, the composition and maturities of which are regularly monitored by management. The Company's accounts receivable are derived from revenue earned from customers primarily located in North America, Europe and Asia. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. The Company maintains an allowance for doubtful accounts receivable based upon the expected collectability of accounts receivable. The Company reviews its allowance for doubtful accounts quarterly by assessing individual accounts receivable over a specific aging and amount, and all other balances based on historical collection experience and an economic risk assessment. If the Company determines that a specific customer is unable to meet its financial obligations to the Company, the Company provides an allowance for credit losses to reduce the receivable to the amount management reasonably believes will be collected. |
Inventory | Inventory Inventory includes finished goods, work-in-process and raw materials. Inventory is stated at the lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or net realizable value. Reserves for potentially excess and obsolete inventory are made based on management's analysis of inventory levels, future sales forecasts and market conditions. Once established, the original cost of the Company's inventory less the related inventory reserve represents the new cost basis of such products. |
Property and equipment | Property and equipment Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is generally calculated using the straight-line method over the estimated useful lives of the related assets, which is three years for computer equipment and software, seven years for lab equipment, and seven years for office furniture and fixtures. Leasehold improvements and assets acquired under capital leases are amortized on a straight-line basis over the term of the lease, or the useful lives of the assets, whichever is shorter. Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in the results of operations in the period realized. During the fourth quarter of 2017, the Company retired fully depreciated assets that were no longer in use. As a result, $72.8 million of cost and accumulated depreciation was removed from the accounts. No gain or loss was recognized. The Company capitalizes certain costs incurred in connection with internal use of inventory items in the Company's data centers and laboratories. Capitalized inventory costs are included in Property and equipment, net and amortized on a straight-line basis over the estimated useful life of the asset. |
Business combinations | Business combinations The Company accounts for business combinations using the acquisition method of accounting. The Company determines the recognition of intangible assets based on the following criteria: (i) the intangible asset arises from contractual or other rights; or (ii) the intangible asset is separable or divisible from the acquired entity and capable of being sold, transferred, licensed, returned or exchanged. The Company allocates the purchase price of business combinations to the tangible assets, liabilities and intangible assets acquired, including in-process research and development ("IPR&D"), based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The process of estimating the fair values requires significant estimates, especially with respect to intangible assets. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer contracts, customer lists and distribution agreements, acquired developed technologies, expected costs to develop IPR&D into commercially viable products, estimated cash flows from projects when completed and discount rates. The Company estimates fair value based upon assumptions that are believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. |
Goodwill and intangible assets | Goodwill and intangible assets Goodwill represents the excess of the cost of acquired businesses over the fair market value of their identifiable net assets. The Company conducts a goodwill impairment qualitative assessment during the fourth quarter of each fiscal year or more frequently if facts and circumstances indicate that goodwill may be impaired. The goodwill impairment qualitative assessment requires the Company to perform an assessment to determine if it is more likely than not that the fair value of the business is less than its carrying amount. The qualitative assessment considers various factors, including the macroeconomic environment, industry and market specific conditions, market capitalization, stock price, financial performance, earnings multiples, budgeted-to-actual revenue performance from prior year, gross margin and cash flow from operating activities and issues or events specific to the business. If adverse qualitative trends are identified that could negatively impact the fair value of the business, the Company performs a "two step" goodwill impairment test. "Step one" is the identification of potential impairment. This involves comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount including goodwill. If the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is considered not impaired and "Step two" of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, "Step two" is performed. This involves comparing the carrying amount of goodwill to its implied fair value, which is determined to be the excess of the reporting unit's fair value over the fair value of its identifiable net assets other than goodwill. If the carrying amount of goodwill exceeds its implied fair value, an impairment exists and is recorded. As of December 31, 2017, the Company's qualitative assessment of goodwill impairment indicated that goodwill was not impaired. Intangible assets represent acquired intangible assets including developed technology, customer relationships and IPR&D, as well as licensed technology. The Company amortizes its finite lived intangible assets over their useful lives using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used, or, if that pattern cannot be reliably determined, using a straight-line amortization method. The Company capitalizes IPR&D projects acquired as part of a business combination as intangible assets with indefinite lives. On completion of each project, IPR&D assets are reclassified to developed technology and amortized over their estimated useful lives. If any of the IPR&D projects are abandoned, the Company would impair the related IPR&D asset. Indefinite-lived intangible assets are tested for impairment annually or more frequently when indicators of impairment exist. The Company first assesses qualitative factors to determine if it is more likely than not that an indefinite-lived intangible asset is impaired and whether it is necessary to perform a quantitative impairment test. The qualitative assessment considers various factors, including reductions in demand, the abandonment of IPR&D projects or significant economic slowdowns in the semiconductor industry and macroeconomic environment. If adverse qualitative trends are identified that could negatively impact the fair value of the asset, then quantitative impairment tests are performed to compare the carrying value of the asset to its undiscounted expected future cash flows. If this test indicates that there is impairment, the impaired asset is written down to fair value, which is typically calculated using: (i) quoted market prices or (ii) discounted expected future cash flows utilizing an appropriate discount rate. Impairment is based on the excess of the carrying amount over the fair value of those assets. The Company performed an impairment test on the IPR&D during the fourth quarter of 2017 when the project reached technological feasibility and was transferred to developed technology, and concluded that the asset was not impaired. Intangible assets with finite lives are tested for impairment in accordance with our policy for long-lived assets. |
Equity investments in privately-held companies | Equity investments in privately-held companies The Company has equity investments in privately-held companies. These investments are recorded at cost reduced by any impairment write-downs because the Company does not have the ability to exercise significant influence over the operating and financial policies of the company. The investments are included in other long-term assets on the accompanying balance sheets. The Company monitors the investments and if facts and circumstances indicate an investment may be impaired, then it conducts an impairment test of its investment. To determine if the investment is recoverable, it reviews the privately-held company's revenue and earnings trends relative to pre-defined milestones and overall business prospects, the general market conditions in its industry and other factors related to its ability to remain in business, such as liquidity and receipt of additional funding. |
Impairment of long-lived assets | Impairment of long-lived assets Long-lived assets include equipment and furniture and fixtures and finite-lived intangible assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. If the sum of the expected future cash flows (undiscounted and without interest charges) from the long-lived assets is less than the carrying amount of such assets, an impairment loss would be recognized, and the assets would be written down to their estimated fair values. The Company reviews for possible impairment on a regular basis. |
Revenue recognition | Revenue recognition The Company recognizes revenue from the sales of products when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the price is fixed or determinable; and (4) collection is reasonably assured. The Company uses a binding purchase order or a signed agreement as evidence of an arrangement. Delivery occurs when goods are shipped and title and risk of loss transfer to the customer. The Company's standard arrangement with its customers typically includes freight-on-board shipping point, no right of return and no customer acceptance provisions. The revenues from fixed-price support or maintenance contracts, including extended warranty contracts and software post-contract customer support agreements, are recognized ratably over the contract period and the costs associated with these contracts are recognized as incurred. The customer's obligation to pay and the payment terms are set at the time of shipment and are not dependent on the subsequent resale of the product. The Company determines whether collectability is reasonably assured on a customer-by-customer basis. When assessing the probability of collection, the Company considers the number of years the customer has been in business and the history of the Company's collections. Customers are subject to a credit review process that evaluates the customers' financial positions and ultimately their ability to pay. If it is determined at the outset of an arrangement that collection is not reasonably assured, no product is shipped and no revenue is recognized unless cash is received in advance. The Company maintains inventory, or hub arrangements with certain customers. Pursuant to these arrangements the Company delivers products to a customer or a designated third party warehouse based upon the customer's projected needs, but does not recognize product revenue unless and until the customer reports it has removed the Company's product from the warehouse to be incorporated into its end products. Multiple Element Arrangements For revenue arrangements that contain multiple deliverables, judgment is required to properly identify the accounting units of the transactions and to determine the manner in which revenue should be allocated among the accounting units. Moreover, judgment is used in interpreting the commercial terms and determining when all criteria of revenue recognition have been met for each deliverable in order for revenue recognition to occur in the appropriate accounting period. While changes in the allocation of the arrangement consideration between the units of accounting will not affect the amount of total revenue recognized for a particular sales arrangement, any material changes in these allocations could impact the timing of revenue recognition, which could affect our results of operations. For multiple element arrangements that include a combination of hardware, services, such as post-contract customer support, and software, the arrangement consideration is first allocated among the accounting units before revenue recognition criteria are applied. The allocation is derived based on vendor specific objective evidence ("VSOE"). When VSOE or third party evidence is unavailable, we use management's best estimate of selling price. Distributor Revenue A portion of the Company's sales are made to distributors under agreements which contain price protection provisions. Currently, the Company recognizes revenues from sales to distributors based on the sell-through method using inventory and point of sale information provided by the distributors, net of estimated allowances for price adjustments. Upon the adoption of the new revenue standards effective January 1, 2018, the Company will recognize revenues from sales to distributors upon shipment and transfer of control (known as “sell-in” revenue recognition), net of the estimated allowances for price adjustments. Deferred Revenue and Income The Company defers revenue and income when advance payments are received from customers before performance obligations have been completed and/or services have been performed. Shipping and Handling Costs incurred for shipping and handling expenses to customers are recorded as cost of revenues. To the extent these amounts are billed to the customer in a sales transaction, the Company records the shipping and handling fees as revenue. |
Product warranty | Product warranty The Company typically offers a limited warranty for its products for periods up to three years. The Company accrues for estimated returns of defective products at the time revenue is recognized based on historical activity. The determination of these accruals requires the Company to make estimates of the frequency and extent of warranty activity and estimated future costs to either replace or repair the products under warranty. If the actual warranty activity and/or repair and replacement costs differ significantly from these estimates, adjustments to record additional cost of revenues may be required in future periods. |
Research and development | Research and development Costs incurred in research and development are charged to operations as incurred. The Company expenses all costs for internally developed patents as incurred. |
Advertising | Advertising Costs related to advertising and promotion of products are charged to sales and marketing expense as incurred. |
Share-based compensation | Share-based compensation The Company accounts for share-based compensation expense based on the estimated fair value of the equity awards as of the grant dates. The fair value of restricted stock units ("RSUs"), is based on the closing market price of our ordinary shares on the date of grant. The Company estimates the fair value of share options and the Employee Share Purchase Plan ("ESPP") using the Black-Scholes option valuation model, which requires the input of subjective assumptions including the expected share price volatility and the calculation of expected term, as well as the fair value of the underlying ordinary share on the date of grant, among other inputs. The Company bases its estimate of expected volatility on the historical volatility of the Company's shares. The Company did not grant share options in 2017, 2016, and 2015. Share-based compensation expense is recognized on a straight-line basis over each recipient's requisite service period, which is generally the vesting period. Share-based compensation expense is recorded in full during the vesting period, and the effect of forfeitures will be recorded as they actually occur. |
Comprehensive income (loss) | Comprehensive income (loss) Accumulated other comprehensive income (loss), net of tax on the consolidated balance sheets at December 31, 2017 and 2016, represents the accumulated unrealized gains (losses) on available-for-sale securities, and the accumulated unrealized gains (losses) related to derivative instruments accounted for as cash flow hedges. |
Foreign currency translation and remeasurement | Foreign currency translation and remeasurement The Company uses the U.S. dollar as its functional currency. Foreign currency assets and liabilities are remeasured into U.S. dollars at the end-of-period exchange rates except for non-monetary assets and liabilities, which are remeasured at historical exchange rates. The Company derives all revenues in U.S. dollars. Expenses are remeasured at the exchange rate in effect on the day the transaction occurred, except for those expenses related to non-monetary assets and liabilities, which are remeasured at historical exchange rates. Gains or losses from foreign currency transactions are included in the Consolidated Statements of Operations as part of "Other income (loss), net." |
Net income (loss) per share | Net income (loss) per share Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of ordinary shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of ordinary shares outstanding during the period increased to include the number of additional shares that would have been outstanding if the potentially dilutive shares had been issued. Potentially dilutive shares include unvested RSUs, outstanding stock options, and shares to be purchased by employees under the Company’s employee stock purchase plan. The dilutive effect of potentially dilutive shares is reflected in diluted net income (loss) per share by application of the treasury stock method. |
Segment reporting | Segment reporting The Company has one reportable segment: the development, manufacturing, marketing and sales of interconnect products. |
Income taxes | Income taxes To prepare the Company's consolidated financial statements, the Company estimates its income taxes in each of the jurisdictions in which it operates. This process involves estimating the Company's actual tax exposure together with assessing temporary differences resulting from the differing treatment of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are calculated using tax rates expected to be in effect during the period these temporary differences would reverse, and are included within the Company's consolidated balance sheet. The Company must also make judgments regarding the realizability of deferred tax assets. The carrying value of the Company's net deferred tax assets is based on its belief that it is more likely than not that the Company will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. A valuation allowance has been established for deferred tax assets which the Company does not believe meet the "more likely than not" criteria. The Company's judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If the Company's assumptions and consequently its estimates change in the future, the valuation allowances it has established may be increased or decreased, resulting in a respective increase or decrease in income tax expense. The Company's effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, the tax regulations and tax holidays in each geographic region, the availability of tax credits and carryforwards, and the effectiveness of its tax planning strategies. The Company uses a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with the guidance on judgments regarding the realizability of deferred taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within the consolidated statements of income as income tax expense. |
Recent accounting pronouncements | Adoption of new accounting principles In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718); Improvements to Employee Share-Based Payment Accounting. The Company adopted ASU No. 2016-09 during the quarter ended March 31, 2017. The standard requires, among other things, excess tax benefits to be recognized in the statement of operations as an income tax benefit as opposed to additional paid-in capital. This change was adopted prospectively and did not have a material effect on the Company's condensed consolidated financial statements. The standard also requires, among other things, excess tax benefits to be included in operating activities in the statement of cash flows as opposed to in financing activities. This change was adopted retrospectively and did not have a material effect on the Company's condensed consolidated financial statements. The standard further requires excess tax benefits to be recognized when they arise, instead of when they actually reduce taxes payable under the prior guidance. This change was adopted using a modified retrospective method through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The impact of the adoption was to increase deferred tax assets by $4.6 million, which in turn was offset by an increase in the valuation allowance in the same amount, resulting in no change in net deferred tax assets and retained earnings as of January 1, 2017. The standard also establishes an alternative practical expedient for estimating the effects of forfeitures of an award by recognizing such effects in compensation cost when the forfeitures occur. Adoption of the alternative practical expedient was applied using a modified retrospective method through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The impact of the adoption was to reduce retained earnings and to increase additional paid-in capital by $0.8 million as of January 1, 2017. In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires, among other things, an explanation of the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The standard is effective for fiscal years beginning after December 15, 2017. We early adopted ASU 2016-18 retrospectively during the fourth quarter of 2017. The Company has long-term restricted cash in the amount of $8.0 million as of December 31, 2017. This amount was reported in other long-term assets in the balance sheet as of December 31, 2017, and was included in the ending balance of cash, cash equivalents and restricted cash in the statement of cash flows for the year ended December 31, 2017. There was no restricted cash as of December 31, 2016 and 2015. Recent accounting pronouncements In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands the activities that qualify for hedge accounting and simplifies the rules for reporting hedging transactions. The standard is effective for the Company beginning January 1, 2019. Early adoption is permitted. The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard becomes effective for the Company beginning January 1, 2019. Early adoption of the standard is allowed. The Company is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amends various aspects of the recognition, measurement, presentation, and disclosure of financial instruments, and is effective for the Company beginning January 1, 2018. One aspect that may have a material impact on the Company's consolidated financial statements relates to the measurement of its equity investments in privately-held companies whose fair values are not readily determinable. With the election to use the measurement alternative (as opposed to fair value), these equity investments will be measured at cost, less impairments, adjusted by observable price changes. The Company believes that the adoption of ASU 2016-01 may increase the volatility of its other income (expense), net, as a result of the remeasurement of its equity investments in privately-held companies upon the occurrence of observable price changes and impairments. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and may be applied retrospectively to each prior period presented, or applied using a modified retrospective method with the cumulative effect recognized in the beginning retained earnings during the period of initial application. Subsequently, the FASB has issued several additional ASUs related to ASU No. 2014-09, collectively they are referred to as the “new revenue standards,” which become effective for the Company beginning January 1, 2018. The Company expects to adopt the new revenue standards using the modified retrospective method. Under the current guidance, the Company defers the recognition of revenue and the cost of revenue from distributor sales until the distributors report that they have sold the products to their customers (known as “sell-through” revenue recognition). Upon the adoption of the new revenue standards, the Company will recognize revenue on sales to distributors upon shipment and transfer of control (known as “sell-in” revenue recognition), net of the estimated allowances for price adjustments. The deferred “sell-through” revenue, net of the deferred cost of revenue, was approximately $4.5 million as of December 31, 2017, which will be recognized and recorded as an increase to beginning retained earnings during the first quarter of 2018. The Company does not expect any other material effects on its consolidated financial statements. |
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash and Cash Equivalents | The following table provides a reconciliation of the cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported in the statements of cash flows:
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Restrictions on Cash and Cash Equivalents | The following table provides a reconciliation of the cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported in the statements of cash flows:
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Schedule of revenues and accounts receivable from customers | The following table summarizes the revenues from customers (including original equipment manufacturers) in excess of 10% of the total revenues:
The following table summarizes accounts receivable balances in excess of 10% of total accounts receivable:
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Schedule of changes in the entity's liability for product warranty | Changes in the Company's liability for product warranty were as follows:
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Schedule of computation of basic and diluted net income per share | The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated:
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BALANCE SHEET COMPONENTS (Tables) |
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Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of balance sheet components |
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BUSINESS COMBINATION (Tables) |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Combination Consideration Transferred | The following summarizes consideration paid for EZchip at the acquisition date:
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following summarizes the Company's allocation of the total purchase price, net of cash acquired for the EZchip acquisition after consultation with third party valuation specialists:
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Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination | Identifiable finite-lived intangible assets
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Business Acquisition, Pro Forma Information | Pro forma results are not indicative of what would have occurred had the acquisition occurred as of January 1, 2015 or of results that may occur in the future.
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FAIR VALUE MEASUREMENTS (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the fair value hierarchy of the Company's financial assets and liabilities measured at fair value | The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017.
The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2016.
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INVESTMENTS (Tables) |
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of cash, cash equivalents and short-term investments | At December 31, 2017 and 2016, the Company held cash, cash equivalents and short-term investments classified as available-for-sale securities as follows:
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Schedule of contractual maturities of short-term investments | The contractual maturities of short-term investments at December 31, 2017 and 2016 were as follows:
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GOODWILL AND INTANGIBLE ASSETS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The following table represents changes in the carrying amount of goodwill:
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Schedule of carrying amount of intangible assets | The carrying amounts of intangible assets as of December 31, 2017 were as follows:
The carrying amounts of intangible assets as of December 31, 2016 were as follows:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The estimated future amortization expense from amortizable intangible assets is as follows:
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DERIVATIVES AND HEDGING ACTIVITIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of derivative contracts | The fair value of derivative contracts as of December 31, 2017 and 2016 was as follows:
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Schedule of notional amounts of outstanding derivative positions | The gross notional amounts of derivative contracts were NIS denominated. The notional amounts of outstanding derivative contracts in U.S. dollar at December 31, 2017 and 2016 were as follows:
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Schedule of designated derivative contracts as cash flow hedges and their impact on OCI | The following table represents the unrealized gains of derivatives designated as hedging instruments, net of tax effects, that were recorded in accumulated other comprehensive income (loss) as of December 31, 2017 and 2016, and their effect on OCI for the year ended December 31, 2017 (in thousands):
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Effect of derivative contracts on the condensed consolidated statement of operations | The effect of derivative contracts on the consolidated statement of operations in the years ended December 31, 2017, 2016, and 2015 was as follows:
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EMPLOYEE BENEFIT PLANS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of severance pay details | The severance pay detail is as follows:
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COMMITMENTS AND CONTINGENCIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum payments under non-cancelable operating and capital leases | At December 31, 2017, future minimum payments under non-cancelable operating leases are as follows:
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Purchase commitment, excluding long-term commitment | At December 31, 2017, the Company had the following non-cancelable purchase commitments:
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SHARE INCENTIVE PLANS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of share option awards activity under equity incentive plans | The following table summarizes the share option activity under all equity incentive plans:
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Summary of restricted share units activity | The following table summarizes the restricted share unit activity under all equity incentive plans:
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Summary of ordinary shares reserved for future issuance under equity incentive plans | The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of December 31, 2017:
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Schedule of weighted average assumptions used to value share options granted | The following weighted average assumptions were used in the valuation of the ESPP for the years ended December 31, 2017, 2016 and 2015:
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Summary of the distribution of total share-based compensation expense | The following table summarizes the distribution of total share-based compensation expense in the Consolidated Statements of Operations:
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the changes in accumulated balances of other comprehensive income (loss) | The following table summarizes the changes in accumulated other comprehensive income (loss) for the years ended December 31, 2017 and 2016:
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Reclassification out of accumulated other comprehensive income | The following table provides details about the realized (gains)/losses reclassified from accumulated other comprehensive income for the years ended December 31, 2017 and 2016:
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INCOME TAXES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of income (loss) before income taxes | The components of income (loss) before taxes on income are as follows:
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Schedule of the components of the provision for income taxes | The components of the provision for (benefit from) income taxes are as follows:
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Schedule of significant deferred tax assets and liabilities | At December 31, 2017 and 2016, significant deferred tax assets and liabilities are as follows:
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Schedule of reconciliation of the statutory federal income tax rate to the Company's effective tax rate | The reconciliation of the statutory federal income tax rate to the Company's effective tax rate is as follows:
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Schedule of reconciliation of unrecognized tax benefits, excluding penalties and interest | The following summarizes the activity related to the Company's unrecognized tax benefits:
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GEOGRAPHIC INFORMATION AND REVENUES BY PRODUCT GROUP (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of revenues by geographic region | Revenues by geographic region are as follows:
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Schedule of property and equipment, net by geographic location | Property and equipment, net by geographic location are as follows:
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Schedule of revenues by product group and interconnect protocol | Revenues by product type and interconnect protocol are as follows:
|
OTHER INCOME (LOSS), NET (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other income, net | Other income (loss), net, is summarized in the following table:
|
TERM DEBT (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
Schedule of Term debt | The following table presents the Term Debt at December 31, 2017:
|
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Schedule of future scheduled principal payments | At December 31, 2017, future scheduled principal payments on the Company's Term Debt are summarized as follows:
|
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Short-term investments, Restricted cash, Concentration of credit risk (Details) - USD ($) |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Concentration of credit risk | ||||
Cash and cash equivalents, as reported on the balance sheets | $ 62,473,000 | $ 56,780,000 | $ 263,199,000 | |
Long-term restricted cash | 8,025,000 | 0 | 0 | |
Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows | 70,498,000 | 56,780,000 | 263,199,000 | $ 54,930,000 |
Impairment of long-lived assets | $ 12,019,000 | $ 0 | $ 3,189,000 | |
Customer Concentration Risk | Net sales revenue | HPE | ||||
Concentration of credit risk | ||||
Concentration risk | 13.00% | 16.00% | 14.00% | |
Customer Concentration Risk | Net sales revenue | Dell | ||||
Concentration of credit risk | ||||
Concentration risk | 11.00% | |||
Customer Concentration Risk | Accounts receivable | HPE | ||||
Concentration of credit risk | ||||
Concentration risk | 13.00% | 11.00% |
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and equipment (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
| |
Property and equipment, net: | |
Cost and accumulated depreciation, period increase (decrease) | $ 72.8 |
Computer, equipment, and software | |
Property and equipment, net: | |
Property, plant and equipment, useful life | 3 years |
Lab equipment | |
Property and equipment, net: | |
Property, plant and equipment, useful life | 7 years |
Office furnitures and fixtures | |
Property and equipment, net: | |
Property, plant and equipment, useful life | 7 years |
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Impairment of Long-Lived Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Impairment of long-lived assets | $ 12,019 | $ 0 | $ 0 | |
Impairment of long-lived assets | 12,019 | $ 0 | $ 3,189 | |
Tangible asset impairment charges | $ 7,700 | |||
Impairment of intangible assets | $ 4,300 |
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Product warranty, Advertising, AOCI, ESPP (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Product warranty | |||
Warranty period | 3 years | ||
Changes in the entity's liability for product warranty | |||
Balance at the beginning, product warranty accrual | $ 1,474 | $ 1,641 | |
Assumed warranty liability from acquisition | 0 | 290 | |
New warranties issued during the period | 1,459 | 1,727 | |
Reversal of warranty reserves | (565) | (856) | |
Settlements during the period | (1,479) | (1,328) | |
Balance at the end, product warranty accrual | 889 | 1,474 | $ 1,641 |
Less: long-term portion of product warranty liability | (183) | (211) | |
Product warranty liability | 706 | 1,263 | |
Advertising | |||
Advertising expense | $ 2,900 | $ 2,100 | $ 2,000 |
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Adoption of New Accoutning Principles (Details) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|---|
Recognition of deferred revenue | $ 4,500,000 | ||
Deferred taxes | 24,563,000 | $ 22,413,000 | |
Cumulative effect of new accounting principle | 0 | ||
Restricted cash in other long-term assets, as reported on the balance sheets | 8,025,000 | 0 | $ 0 |
Additional Paid-in Capital | |||
Cumulative effect of new accounting principle | 789,000 | ||
Retained Earnings | |||
Cumulative effect of new accounting principle | (789,000) | ||
Accounting Standards Update 2016-09 | |||
Deferred taxes | 4,600,000 | ||
Accounting Standards Update 2016-09 | Additional Paid-in Capital | |||
Cumulative effect of new accounting principle | $ 800,000 | ||
Accounting Standards Update 2016-09 | Retained Earnings | |||
Cumulative effect of new accounting principle | $ 800,000 |
BUSINESS COMBINATION - Fair value of total consideration transferred (Details) - EZchip $ in Thousands |
Feb. 23, 2016
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
Cash payment for all outstanding common shares of EZchip at $25.50 per share | $ 781,237 |
Total consideration: | 782,209 |
Cash acquired | 87,545 |
Fair value of total consideration transferred, net of cash acquired | 694,664 |
Restricted Stock Units (RSUs) | |
Business Acquisition [Line Items] | |
Fair value of awards attributable to pre-acquisition services | $ 972 |
BUSINESS COMBINATION - Allocation of total purchase price, net of cash acquired (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Feb. 23, 2016 |
|
Business Acquisition [Line Items] | |||
Intangible assets | $ 288,246 | ||
Goodwill | $ 472,437 | $ 471,228 | |
EZchip | |||
Business Acquisition [Line Items] | |||
Short-term investments | 108,862 | ||
Other current assets | 34,114 | ||
Other long-term assets | 9,638 | ||
Intangible assets | 288,246 | ||
Goodwill | 270,485 | ||
Total assets | 711,345 | ||
Current liabilities | (10,253) | ||
Long-term liabilities | (6,428) | ||
Total liabilities | 16,681 | ||
Total purchase price allocation | $ 694,664 | ||
Acquisition related costs | $ 300 | $ 8,300 |
INVESTMENTS - Contractual maturities of short-term investments (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Amortized Cost | |||
Due in less than one year | $ 148,232 | $ 157,270 | |
Due in one to three years | 63,659 | 114,627 | |
Amortized Cost | 211,891 | 271,897 | |
Estimated Fair Value | |||
Due in less than one year | 147,921 | 157,163 | |
Due in one to three years | 63,360 | 114,498 | |
Estimated fair value | 211,281 | 271,661 | |
Total Investment in privately-held companies | 29,300 | 12,700 | |
Impairment of investment in a privately-held company | $ 0 | $ 0 | $ 3,189 |
GOODWILL AND INTANGIBLE ASSETS - Schedule of Goodwill (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
| |
Changes in the carrying amount of goodwill | |
Goodwill, beginning balance | $ 471,228 |
Acquisitions | 1,209 |
Adjustments | 0 |
Goodwill, ending balance | $ 472,437 |
GOODWILL AND INTANGIBLE ASSETS - Finite-lived intangible assets maturity (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract] | ||
2018 | $ 66,718 | |
2019 | 59,344 | |
2020 | 47,311 | |
2021 | 30,919 | |
2022 | 10,355 | |
Thereafter | 13,548 | |
Total | $ 228,195 | $ 248,531 |
EMPLOYEE BENEFIT PLANS - Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Jul. 01, 2016 |
Jun. 30, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Severance pay details | |||||
Accrued severance liability | $ 23,205 | $ 19,874 | |||
Severance assets | 18,302 | 15,870 | |||
Unfunded portion | $ 4,903 | 4,004 | |||
Israel | Pension plan | |||||
Defined Benefit Plan Disclosures [Line Items] | |||||
Company's contribution as a percentage of employee monthly salary to insurance policy or pension fund | 8.30% | ||||
Defined pension contribution plan expenses | $ 10,400 | 8,000 | $ 5,700 | ||
Severance pay details | |||||
Severance pay expenses | $ 12,600 | 11,000 | 7,600 | ||
Employer contribution limit per calendar year | 6.25% | 6.00% | 6.50% | ||
Section 401 K Savings Plan | |||||
Defined Benefit Plan Disclosures [Line Items] | |||||
Defined pension contribution plan expenses | $ 2,200 | $ 1,900 | $ 1,200 | ||
Severance pay details | |||||
Employer contribution limit per calendar year | 4.00% |
COMMITMENTS AND CONTINGENCIES - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Leases | ||||
Expenses related to office space and motor vehicle leases | $ 21,300 | $ 18,900 | $ 14,300 | |
Future minimum payments under non-cancelable operating leases | ||||
2018 | 23,028 | |||
2019 | 18,453 | |||
2020 | 14,740 | |||
2021 | 12,950 | |||
2022 | 9,648 | |||
Thereafter | 60,091 | |||
Total minimum lease payments | 138,910 | |||
Purchase commitments | ||||
2018 | 153,358 | |||
2019 | 2,447 | |||
2020 | 544 | |||
2021 | 542 | |||
2022 | 536 | |||
Thereafter | 0 | |||
Total purchase commitments | $ 157,427 | |||
Loss Contingencies [Line Items] | ||||
Royalties payable, percentage | 4.50% | |||
Royalty guarantees, commitments, amount | $ 36,400 | |||
Unrecognized tax benefits | 45,154 | 41,460 | 25,382 | $ 18,037 |
Unrecognized tax benefits that would impact effective tax rate | $ 24,600 | $ 23,400 | $ 18,900 | |
Yokneam | ||||
Loss Contingencies [Line Items] | ||||
Operating lease term | 10 years | |||
Estimated future lease obligation | $ 30,700 | |||
Rental expense | $ 3,100 |
SHARE INCENTIVE PLANS - Employee stock purchase plan activity (Details) - ESPP - USD ($) |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
May 31, 2016 |
|
Share-based compensation | ||||
Maximum employee base compensation contribution | 15.00% | |||
ESPP purchase price percentage of market price | 85.00% | |||
Shares reserved for issuance pursuant to purchase rights under the ESPP | 6,585,712 | 4,000,000 | ||
Maximum value of ordinary shares issued per employee pursuant to purchase rights under the ESPP per calendar year | $ 25,000 | |||
Shares issued in period | 568,876 | 491,968 | 364,746 | |
Weighted-average exercise price, options granted (in USD per share) | $ 38.83 | $ 35.50 | $ 35.15 |
SHARE INCENTIVE PLANS - Shares reserved for future issuance (Details) - shares |
Dec. 31, 2017 |
Dec. 31, 2016 |
Mar. 14, 2016 |
Dec. 31, 2015 |
---|---|---|---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share options outstanding (in shares) | 1,110,061 | |||
Total shares reserved for future issuance (in shares) | 8,708,021 | 0 | ||
Restricted Stock Units (RSUs) | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Restricted share units outstanding (in shares) | 3,414,705 | 3,324,519 | 2,205,083 | |
ESPP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares available for future issuance (in shares) | 3,425,469 | |||
Global Share Incentive Plan 2006 | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares available for future issuance (in shares) | 757,786 |
SHARE INCENTIVE PLANS - Weighted average assumptions used (Details) - Employee Share Purchase Plan |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Weighted average assumptions | |||
Dividend yield, % | 0.00% | 0.00% | 0.00% |
Expected volatility | 24.60% | 35.80% | 33.70% |
Risk free interest rate | 1.20% | 0.45% | 0.10% |
Expected life, years | 6 months | 6 months | 6 months |
INCOME TAXES - INCOME (LOSS) BEFORE INCOME TAXES (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Tax Disclosure [Abstract] | |||
United States | $ (21,528) | $ (17,969) | $ (12,539) |
Foreign | (375) | 42,297 | 87,121 |
Income (loss) before taxes on income | $ (21,903) | $ 24,328 | $ 74,582 |
INCOME TAXES - PROVISION FOR INCOME TAXES (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Current: | |||
U.S. federal | $ (617) | $ (1,333) | $ (1,578) |
State and local | 632 | 220 | 284 |
Foreign | (261) | 6,161 | 5,737 |
Total current | (246) | 5,048 | 4,443 |
Deferred: | |||
Foreign | (2,232) | 762 | (22,755) |
Total deferred | (2,232) | 762 | (22,755) |
Provision for (benefit from) taxes on income | $ (2,478) | $ 5,810 | $ (18,312) |
INCOME TAXES - DEFERRED TAXES AND LIABILITIES (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Deferred tax assets: | ||
Net operating loss and credit carryforwards | $ 42,820 | $ 75,350 |
Reserves and accruals | 11,305 | 13,841 |
Depreciation and amortization | 2,393 | 358 |
Other | 6,645 | 7,128 |
Gross deferred tax assets | 63,163 | 96,677 |
Valuation allowance | (31,648) | (55,827) |
Total deferred tax assets | 31,515 | 40,850 |
Intangible assets | (6,952) | (18,437) |
Total deferred tax liabilities | (6,952) | (18,437) |
Net deferred tax assets | $ 24,563 | $ 22,413 |
INCOME TAXES - EFFECTIVE RATE RECONCILIATION (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Tax Disclosure [Abstract] | |||
Tax at statutory rate | 35.00% | 35.00% | 35.00% |
Tax at rates other than the statutory rate | (4.80%) | (84.50%) | (42.50%) |
Valuation allowance | 47.30% | 40.80% | (22.00%) |
Net change in tax reserves | 8.00% | 17.10% | 6.00% |
Adjustment of deferred tax balances following changes in tax rates | (71.80%) | 10.90% | 0.00% |
Other, net | (2.40%) | 4.60% | (1.10%) |
Provision for (benefit from) taxes on income | 11.30% | 23.90% | (24.60%) |
INCOME TAXES - TAX HOLIDAY (Details) - Israel Tax Authority - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Operating Loss Carryforwards [Line Items] | |||
Income tax holiday, aggregate dollar amount | $ 11.6 | $ 37.3 | $ 33.0 |
Income tax holiday, income tax benefits per share (in USD per share) | $ 0.23 | $ 0.75 | $ 0.69 |
Yokneam | |||
Operating Loss Carryforwards [Line Items] | |||
Tax holiday inception date | 2011 | ||
Tel Aviv | |||
Operating Loss Carryforwards [Line Items] | |||
Tax holiday inception date | 2013 | ||
Income tax holiday reduced income tax rate after second year of tax holiday | 10.00% | ||
Tel Aviv | Maximum | |||
Operating Loss Carryforwards [Line Items] | |||
Income tax holiday, termination date | 2021 |
GEOGRAPHIC INFORMATION AND REVENUES BY PRODUCT GROUP - Revenue by geographic region (Details) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017
USD ($)
segment
|
Dec. 31, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
|
Segment Reporting [Abstract] | |||
Number of reportable segments | segment | 1 | ||
Revenues by geographic region | |||
Total revenue | $ 863,893 | $ 857,498 | $ 658,140 |
United States | |||
Revenues by geographic region | |||
Total revenue | 327,528 | 386,360 | 300,674 |
China | |||
Revenues by geographic region | |||
Total revenue | 172,405 | 192,581 | 152,739 |
Europe | |||
Revenues by geographic region | |||
Total revenue | 176,937 | 149,855 | 93,666 |
Other Americas | |||
Revenues by geographic region | |||
Total revenue | 92,449 | 52,447 | 24,692 |
Other Asia | |||
Revenues by geographic region | |||
Total revenue | $ 94,574 | $ 76,255 | $ 86,369 |
GEOGRAPHIC INFORMATION AND REVENUES BY PRODUCT GROUP - Property and equipment, net by geogaphic location (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Property and equipment, net by geographic location | ||
Total property and equipment, net | $ 109,919 | $ 118,585 |
Israel | ||
Property and equipment, net by geographic location | ||
Total property and equipment, net | 99,752 | 101,001 |
United States | ||
Property and equipment, net by geographic location | ||
Total property and equipment, net | 7,017 | 14,246 |
Other | ||
Property and equipment, net by geographic location | ||
Total property and equipment, net | $ 3,150 | $ 3,338 |
OTHER INCOME (LOSS), NET - Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Other income, net | |||
Interest income and gains (losses) on short-term investments, net | $ 3,748 | $ 2,244 | $ 2,998 |
Foreign exchange loss, net | (596) | (840) | (186) |
Impairment of investment in a privately-held company | 0 | 0 | (3,189) |
Other | (37) | (314) | (147) |
Total other income (loss), net | $ 3,115 | $ 1,090 | $ (524) |
TERM DEBT - Schedule of Debt (Details) $ in Thousands |
Dec. 31, 2017
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
Term Debt, principal amount | $ 74,000 |
Less unamortized debt issuance costs | 1,239 |
Term Debt, principal net of unamortized debt issuance costs | $ 72,761 |
Effective interest rate | 3.80% |
TERM DEBT - Fiscal Year Maturity Schedule (Details) $ in Thousands |
Dec. 31, 2017
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2018 | $ 0 |
2019 | 74,000 |
Total | $ 74,000 |
IMPAIRMENT OF LONG-LIVED ASSETS - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Property, Plant and Equipment [Abstract] | ||||
Impairment of long-lived assets | $ 12,019 | $ 0 | $ 0 | |
Tangible asset impairment charges | $ 7,700 | |||
Impairment of intangible assets | $ 4,300 |
SUBSEQUENT EVENT - Narrative (Details) - Scenario, Forecast - Subsequent Event $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Minimum | |
Subsequent Event [Line Items] | |
Restructuring charges | $ 9.0 |
Maximum | |
Subsequent Event [Line Items] | |
Restructuring charges | $ 12.0 |
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