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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2005
 or
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 Commission file number: 0-19032
 ATMEL CORPORATION
  Delaware
    
    77-0051991(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 
  
  
 
 þ o
 o þ
 þ o
 o
 þ o o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 6. SELECTED CONSOLIDATED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEXHIBIT INDEXEXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2    Table of Contents  
 PART I
 
 ITEM 1. BUSINESS
 FORWARD LOOKING STATEMENTS
 You should read the following discussion in conjunction with our Consolidated Financial
Statements and the related Notes to Consolidated Financial Statements, and Financial Statements
and Supplementary Data included in this Annual Report on Form 10-K . This discussion contains
forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of
1934, particularly statements regarding our outlook for 2006 and our expectations regarding
the effects of exchange rates. Our actual results could differ materially from those projected in
the forward-looking statements as a result of a number of factors, risks and uncertainties,
including the risk factors set forth in this discussion and in Item 1A  Risk Factors, and
elsewhere in this Form 10-K . Generally, the words may, will, could, would, anticipate,
expect, intend, believe, seek, estimate, plan, view, continue, the plural of such
terms, the negatives of such terms, or other comparable terminology and similar expressions
identify forward-looking statements. The information included in this Form 10-K is provided as of
the filing date with the Securities and Exchange Commission and future events or circumstances
could differ significantly from the forward-looking statements included herein. Accordingly, we
caution readers not to place undue reliance on such statements. Atmel undertakes no obligation to
update any forward-looking statements in this Form 10-K .
 BUSINESS
 General
    Products
   
    
    Application specific integrated circuit (ASIC)
segment includes semi-custom, single customer ICs
that serve the telecommunications, consumer and
military markets. In addition, this segment
includes application specific standard products
that are sold to multiple customers, serving the
imaging sensors and processors, as well as the
wireless and wired data communications markets.
This segment also includes smart card ICs that
serve the telecommunication, banking and consumer
markets. Finally, this segment includes
programmable logic devices that serve the
industrial, military and computing markets.
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
    
    Microcontrollerssegment includes a variety of
proprietary and standard microcontrollers, the
majority of which contain embedded nonvolatile
memory, and military and aerospace application
specific products.
    
    Nonvolatile Memoriessegment includes serial and
parallel interface electrically erasable
programmable read only memories (EEPROMs), serial
and parallel interface Flash memories, and erasable
programmable read only memories (EPROMs) for use in
a broad variety of customer applications.
    
    Radio Frequency (RF) and Automotivesegment
includes radio frequency and analog circuits for
the telecommunications, automotive and industrial
markets as well as application specific products
for the automotive industry.
  ASIC
 Custom ASICs.
  Security and Smart Cards.
 ®
  ® ®
 Imaging Sensors.
 Multimedia Products. W
  3




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FPGAs. ®
 PLDs.
 Microcontrollers
    Nonvolatile Memories
 Serial Interface Products
   Flash.
  4




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DataFlash ® ® TM TM
 Parallel-Interface EEPROMs
 EPROMs
 RF and Automotive
     Technology
  5




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Principal Markets and Customers
 Communications ,
  Consumer Electronics
 Computing, Storage and Printing
 Security.
 6




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Automotive
 Military and Aerospace.
 Manufacturing
        7




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Environmental Compliance.
 Marketing and Sales
    8




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Research and Development
   Competition
   
    
    our success in designing and manufacturing new products that implement new technologies and processes
    
    our ability to offer integrated solutions using our advanced nonvolatile memory process with other technologies
    
    the rate at which customers incorporate our products into their systems
    
    product introductions by our competitors
    
    the number and nature of our competitors in a given market
    
    the incumbency of our competitors products, and
    
    general market and economic conditions.
  9




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Patents and Licenses
     Employees
  Backlog
  Geographic Areas
  10




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ITEM 1A. RISK FACTORS
    
    
    the cyclical nature of both the semiconductor industry and the markets addressed by our products
    
    ability to meet our debt obligations
    
    availability of additional financing
    
    fluctuations in currency exchange rates
    
    the extent of utilization of manufacturing capacity
    
    fluctuations in manufacturing yields
    
    the highly competitive nature of our markets
    
    the pace of technological change
    
    natural disasters or terrorist acts
    
    political and economic risks
    
    our ability to maintain good relationships with our customers
    
    integration of new businesses or products
    
    third party intellectual property infringement claims
    
    ability of independent assembly contractors to meet our volume, quality, and delivery objectives
    
    increased dependence on outside foundries and their ability to meet our volume, quality, and delivery objectives
    
    assessment of internal controls over financial reporting
    
    environmental regulations
    
    personnel changes
    
    business interruptions
    
    system integration disruptions, and
    
    changes in accounting rules, such as recording expenses for employee stock option grants.
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
    
    our success in designing and manufacturing new products that implement new technologies and processes
    
    our ability to offer integrated solutions using our advanced nonvolatile memory process with other technologies
    
    the rate at which customers incorporate our products into their systems
    
    product introductions by our competitors
    
    the number and nature of our competitors in a given market
    
    the incumbency of our competitors at potential new customers, and
    
    general market and economic conditions.
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
    
    greater difficulty in protecting intellectual property
    
    reduced flexibility and increased cost of staffing adjustments, particularly in France and Germany
    
    longer collection cycles
    
    potential unexpected changes in regulatory practices, including
export license requirements, trade barriers, tariffs and tax laws,
and
    
    general economic and political conditions in these foreign markets.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  Number ofBuildings
    
    Location
    
    Total Sq Ft
    
    Use1
    
    San Jose, CA
    
    
    291,000
    
    
    Headquarters offices, research and development,
sales and marketing, product design, final product
testing6
    
    Colorado Springs, CO
    
    
    603,000
    
    
    Wafer fabrication, research and development,
marketing, product design, final product testing1
    
    Irving, TX
    
    
    650,000
    
    
    Wafer fabrication, research and development
facility; (Unoccupied and placed on the market)5
    
    Rousset, France
    
    
    815,000
    
    
    Wafer fabrication, research and development,
marketing, product design, final product testing5*
    
    Nantes, France
    
    
    131,000
    
    
    Research and development, marketing, product design2
    
    Grenoble, France
    
    
    196,000
    
    
    Wafer fabrication, research and development,
marketing, product design, assembly and final product testing4
    
    Heilbronn, Germany
    
    
    778,000
    
    
    Wafer fabrication, research and development,
marketing, product design, final product testing
(74% of square footage is leased to other
companies)9
    
    North Tyneside, UK
    
    
    753,000
    
    
    Wafer fabrication, research and development2
    
    Calamba City,
Philippines
    
    
    338,000
    
    
    Final product testing
 
 *
    
    On December 6, 2005, Atmel sold its Nantes, France fabrication facility and the related
foundry activities, to XbyBus SAS,. The facility is comprised of five buildings totaling
131,000 square feet, primarily manufacturing BiCMOS, CMOS and non-volatile technologies. As
of December 31, 2005, Atmel held title to all five buildings. On January 27, 2006, we formally
transferred title on three of the buildings which totaled approximately 92,000 square feet. We
will retain ownership on the remaining two buildings totaling approximately 39,000 square
feet.   20




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ITEM 3. LEGAL PROCEEDINGS
     21




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 .
 Executive Officers of the Registrant
  Name
    
    Age
    
    PositionGeorge Perlegos
    
    
    55
    
    
    Chairman of the Board, President and Chief Executive OfficerGust Perlegos
    
    
    58
    
    
    Executive Vice President, Office of the PresidentTsung-Ching Wu
    
    
    55
    
    
    Executive Vice President, Office of the PresidentRobert Avery
    
    
    57
    
    
    Vice President Finance and Chief Financial OfficerRobert McConnell
    
    
    61
    
    
    Vice President and General Manager, RF and Automotive SegmentBernard Pruniaux
    
    
    64
    
    
    Vice President and General Manager, ASIC SegmentSteve Schumann
    
    
    46
    
    
    Vice President and General Manager, Non-Volatile Memory SegmentGraham Turner
    
    
    46
    
    
    Vice President and General Manager, Microcontroller Segment
         22




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PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  High
    
    LowYear ended December 31, 2004First Quarter
    
    
    7.95
    
    
    
    5.75Second Quarter
    
    
    7.43
    
    
    
    5.30Third Quarter
    
    
    5.91
    
    
    
    3.16Fourth Quarter
    
    
    3.98
    
    
    
    2.98Year ended
December 31, 2005First Quarter
    
    
    4.03
    
    
    
    2.85Second Quarter
    
    
    3.09
    
    
    
    2.05Third Quarter
    
    
    2.85
    
    
    
    1.97Fourth Quarter
    
    
    3.59
    
    
    
    1.99
   
 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 FINANCIAL HIGHLIGHTS
 Year ended December 31,(In thousands, except per share data)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001Net revenues
    
    $
    1,675,715
    
    
    $
    1,649,722
    
    
    $
    1,330,635
    
    
    $
    1,193,814
    
    
    $
    1,472,268Income (loss) before income taxes
    
    
    (40,588
    )
    
    
    25,697
    
    
    
    (104,051
    )
    
    
    (551,567
    )
    
    
    (531,393
    )Net loss
    
    
    (32,898
    )
    
    
    (2,434
    )
    
    
    (117,996
    )
    
    
    (641,796
    )
    
    
    (418,348
    )Basic and diluted net loss per share
    
    
    (0.07
    )
    
    
    (0.01
    )
    
    
    (0.25
    )
    
    
    (1.37
    )
    
    
    (0.90
    )
 As of December 31,2005
    
    2004
    
    2003
    
    2002
    
    2001Cash and cash equivalents
    
    $
    300,323
    
    
    $
    346,350
    
    
    $
    385,887
    
    
    $
    346,371
    
    
    $
    331,131Cash and cash equivalents plus
short term investments
    
    
    348,255
    
    
    
    405,208
    
    
    
    431,054
    
    
    
    445,802
    
    
    
    593,008Fixed assets, net
    
    
    890,948
    
    
    
    1,204,852
    
    
    
    1,121,367
    
    
    
    1,049,031
    
    
    
    1,651,475Total assets
    
    
    1,927,345
    
    
    
    2,329,006
    
    
    
    2,154,690
    
    
    
    2,302,559
    
    
    
    3,024,197Long term debt, net of current portion
    
    
    133,479
    
    
    
    323,950
    
    
    
    358,031
    
    
    
    453,509
    
    
    
    693,212Stockholders equity
    
    
    940,291
    
    
    
    1,111,596
    
    
    
    1,018,117
    
    
    
    969,143
    
    
    
    1,486,527
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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 You should read the following discussion of our financial condition and results of operations
in conjunction with our Consolidated Financial Statements and the related Notes to Consolidated
Financial Statements, and Financial Statement Schedules and Supplementary Financial Data
included in this Annual Report on Form 10-K . This discussion contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, particularly statements
regarding our outlook for 2006 (including intended cost reduction efforts and the impact
associated with the adoption of new accounting standards) and our expectations regarding the
effects of exchange rates. Our actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, risks and uncertainties, including
the risk factors set forth in this discussion, and under the caption ITEM 1A. RISK FACTORS, and
elsewhere in this Form 10-K . Generally, the words may, will, could, would, anticipate,
expect, intend, believe, seek, estimate, plan, view, continue, the plural of such
terms, the negatives of such terms, or other comparable terminology and similar expressions
identify forward-looking statements. The information included in this Form 10-K is provided as of
the filing date with the Securities and Exchange Commission and future events or circumstances
could differ significantly from the forward-looking statements included herein. Accordingly, we
caution readers not to place undue reliance on such statements. Atmel undertakes no obligation to
update any forward-looking statements in this Form 10-K .
 Overview
       24




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RESULTS OF OPERATIONS
 2005
    
    
    2004
    
    
    2003(amounts in millions and as a percent of net revenues)Net revenues
    
    $
    1,675.7
    
    
    
    100.0
    %
    
    $
    1,649.7
    
    
    
    100.0
    %
    
    $
    1,330.6
    
    
    
    100.0
    %Gross profit
    
    
    433.7
    
    
    
    25.9
    %
    
    
    468.0
    
    
    
    28.4
    %
    
    
    306.2
    
    
    
    23.0
    %Research and development expenses
    
    
    276.6
    
    
    
    16.5
    %
    
    
    247.5
    
    
    
    15.0
    %
    
    
    247.6
    
    
    
    18.6
    %Selling, general & administrative expenses
    
    
    192.3
    
    
    
    11.5
    %
    
    
    174.6
    
    
    
    10.6
    %
    
    
    138.8
    
    
    
    10.4
    %Asset impairment charges
    
    
    12.8
    
    
    
    0.8
    %
    
    
    
    
    
    
    
    
    
    
    27.6
    
    
    
    2.1
    %Restructuring charges (credits) and loss on sale
    
    
    18.2
    
    
    
    1.1
    %
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    Income (loss) from operations
    
    $
    (66.2
    )
    
    
    (4.0
    %)
    
    $
    45.9
    
    
    
    2.8
    %
    
    $
    (107.5
    )
    
    
    (8.1
    %)
 Net Revenues
  Net Revenues By Operating Segment
 in thousands
 % of Net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    % of NetSegment
    
    2005

    
    
    Revenues

    
    


    Change

    
    


    % Change
    
    


    2004

    
    

    Revenues

    
    

    Change

    
    

    % Change
    
    

    2003
    
    
    % of Net RevenuesASIC
    
    $
    610,158
    
    
    
    36
    %
    
    $
    20,950
    
    
    
    4
    %
    
    $
    589,208
    
    
    
    36
    %
    
    $
    110,130
    
    
    
    23
    %
    
    $
    479,078
    
    
    
    36
    %Microcontroller
    
    
    315,476
    
    
    
    19
    %
    
    
    (21,608
    )
    
    
    (6
    %)
    
    
    337,084
    
    
    
    20
    %
    
    
    65,408
    
    
    
    24
    %
    
    
    271,676
    
    
    
    20
    %Nonvolatile Memory
    
    
    393,037
    
    
    
    24
    %
    
    
    (52,465
    )
    
    
    (12
    %)
    
    
    445,502
    
    
    
    27
    %
    
    
    90,077
    
    
    
    25
    %
    
    
    355,425
    
    
    
    27
    %RF and Automotive
    
    
    357,044
    
    
    
    21
    %
    
    
    79,116
    
    
    
    28
    %
    
    
    277,928
    
    
    
    17
    %
    
    
    53,472
    
    
    
    24
    %
    
    
    224,456
    
    
    
    17
    %Net revenues
    
    $
    1,675,715
    
    
    
    100
    %
    
    $
    25,993
    
    
    
    2
    %
    
    $
    1,649,722
    
    
    
    100
    %
    
    $
    319,087
    
    
    
    24
    %
    
    $
    1,330,635
    
    
    
    100
    %
 ASIC
  25




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Microcontroller
  Nonvolatile Memory
  RF and Automotive
  Net Revenues By Geographic Area
  (in thousands):Region
    
    2005
    
    
    Change
    
    
    % Change
    
    
    2004
    
    
    Change
    
    
    % Change
    
    
    2003United States
    
    $
    231,719
    
    
    $
    (47,128
    )
    
    
    (17
    %)
    
    $
    278,847
    
    
    $
    42,881
    
    
    
    18
    %
    
    $
    235,966Europe
    
    
    540,723
    
    
    
    1,496
    
    
    

    
    
    
    
    539,227
    
    
    
    141,282
    
    
    
    36
    %
    
    
    397,945Asia
    
    
    882,356
    
    
    
    89,377
    
    
    
    11
    %
    
    
    792,979
    
    
    
    134,378
    
    
    
    20
    %
    
    
    658,601Other *
    
    
    20,917
    
    
    
    (17,752
    )
    
    
    (46
    %)
    
    
    38,669
    
    
    
    546
    
    
    
    1
    %
    
    
    38,123Total Net Revenues
    
    $
    1,675,715
    
    
    $
    25,993
    
    
    
    2
    %
    
    $
    1,649,722
    
    
    $
    319,087
    
    
    
    24
    %
    
    $
    1,330,635
 
 *
    
    Primarily includes the Philippines, South Africa, and Central and South America    26




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Revenues
and Costs  Impact from Changes to Foreign Exchange Rates
     Cost of Revenues and Gross Margin
     27




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Research and Development
     Selling, General and Administrative
    Asset Impairment Charges
  28




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Irving, Texas Facility
  Colorado Springs, Colorado Construction-In-Progress
  Restructuring Charges and Loss on Sale
  
    
    one-time involuntary termination severance benefits costs related to the termination of
196 employees primarily in manufacturing, research and development, and administration,
    
    the write-down of building improvements removed from operations to zero following the
relocation of certain manufacturing activities to Asia, and
    
    a loss incurred as a result of the sale of our Nantes fabrication facility, including
the cost of transferring 319 employees to XbyBus SAS, a French corporation (XbyBus SAS)
    29




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Legal Awards and Settlements
   Interest and Other Expenses, Net
   Provision for Income Taxes
       30




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Liquidity and Capital Resources
  Operating Activities
      31




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Investing
Activities
 Financing Activities
     Contractual Obligations
  (In thousands)
    
    Payments due by periodContractual Obligations
    
    Up to 1 year
    
    
    2-3 years
    
    
    4-5 years
    
    
    After 5 years
    
    
    TotalNotes payable
    
    $
    43,462
    
    
    $
    52,212
    
    
    $
    
    
    
    $
    1,396
    
    
    $
    97,070Capital leases
    
    
    53,645
    
    
    
    40,867
    
    
    
    8,939
    
    
    
    4,770
    
    
    
    108,221Convertible notes(a)
    
    
    142,401
    
    
    
    295
    
    
    
    
    
    
    
    
    
    
    
    142,696Line of credit
    
    
    15,000
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    40,000Total debt obligations
    
    
    254,508
    
    
    
    118,374
    
    
    
    8,939
    
    
    
    6,166
    
    
    
    387,987Capital purchase commitments
    
    
    7,507
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,507Long-term supplier contract
    
    
    25,489
    
    
    
    33,288
    
    
    
    
    
    
    
    
    
    
    
    58,777Termination payments on supplier contract
    
    
    952
    
    
    
    2,115
    
    
    
    2,432
    
    
    
    4,335
    
    
    
    9,834Operating leases
    
    
    25,923
    
    
    
    41,803
    
    
    
    9,805
    
    
    
    9,619
    
    
    
    87,150Other long-term obligations
    
    
    14,000
    
    
    
    28,000
    
    
    
    20,000
    
    
    
    40,412
    
    
    
    102,412Total other commitments
    
    
    73,871
    
    
    
    105,206
    
    
    
    32,237
    
    
    
    54,366
    
    
    
    265,680Add: interest
    
    
    11,024
    
    
    
    6,159
    
    
    
    1,736
    
    
    
    663
    
    
    
    19,582Total
    
    $
    339,403
    
    
    $
    229,739
    
    
    $
    42,912
    
    
    $
    61,195
    
    
    $
    673,249
 
 (a)
    
    Zero coupon convertible debt issued in May 2001 is redeemable for cash, at our option, at
any time on or after May 23, 2006 in whole or in part at redemption prices equal to the issue price
plus accrued original issue discount. At the option of the holders on May 23, 2006, 2011 and 2016,
we may be required to redeem the debt at prices equal to the issue price plus accrued original
issue discount through date of repurchase. If redeemed at the option of the holder, we may elect to
pay the repurchase price in cash, in shares of Common Stock or in any combination of the two. In
December 2005, Atmel repurchased a portion of these notes. At
the time of purchase, the notes had an accreted value of $81 million. As of December 31, 2005, the
accreted value of all outstanding 2021 Notes was $142 million. We estimate that the redemption
value of these notes in May 2006 will be $145 million. (See Notes 1 and 6 of Notes to Consolidated
Financial Statements). 32




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Off Balance Sheet Arrangements
   Recent Accounting Pronouncements
 SFAS No. 123R
    33




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##### Table of Contents



FSP Nos. FAS 115-1 and FAS 124-1
  SFAS No. 154
  34




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##### Table of Contents



SFAS No. 153
  FIN 47
  SFAS No. 151
  Critical Accounting Policies and Estimates
  Revenue recognition
   35




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##### Table of Contents



Allowance for Doubtful Accounts and Sales Returns
    Accounting for income taxes
    Valuation of inventory
   36




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##### Table of Contents



Product and process technology
  Fixed Assets
     Litigation
  37




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
    TotalVariable-rateDebtOutstanding atPayments due by year
    
    December 31,2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter
    
    200530 day USD LIBOR weighted average
interest rate basis (1) Capital Leases
    
    $
    5,207
    
    
    $
    3,056
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    8,263Total of 30 day USD LIBOR rate debt
    
    $
    5,207
    
    
    $
    3,056
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    8,26360 day USD LIBOR weighted average
interest rate basis (1) Revolving Line
of Credit Due 2008
    
    $
    
    
    
    $
    
    
    
    $
    25,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    25,000Total of 60 day USD LIBOR rate debt
    
    $
    
    
    
    $
    
    
    
    $
    25,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    25,00090 day USD LIBOR weighted average
interest rate basis (1) Capital Leases
    
    $
    997
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    997Total of 90 day USD LIBOR rate debt
    
    $
    997
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    997360 day USD LIBOR weighted average
interest rate basis (1) Senior Secured
Term Loan Due 2008
    
    $
    5,000
    
    
    $
    5,000
    
    
    $
    3,750
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    13,750Total of 360 day USD LIBOR rate debt
    
    $
    5,000
    
    
    $
    5,000
    
    
    $
    3,750
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    13,75090 day EURIBOR weighted average
interest rate basis (1) Capital Leases
    
    $
    21,010
    
    
    $
    20,379
    
    
    $
    8,071
    
    
    $
    3,816
    
    
    $
    
    
    
    $
    8,585
    
    
    $
    61,861Total of 90 day EURIBOR rate debt
    
    $
    21,010
    
    
    $
    20,379
    
    
    $
    8,071
    
    
    $
    3,816
    
    
    $
    
    
    
    $
    8,585
    
    
    $
    61,86130/60/90 day EURIBOR interest rate
basis (1) Senior Secured Term Loan Due
2007
    
    $
    5,941
    
    
    $
    5,941
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,882Total of 30/60/90 day EURIBOR debt rate
    
    $
    5,941
    
    
    $
    5,941
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,8822-year USD LIBOR interest rate basis
(1) (2)
    
    $
    12,873
    
    
    $
    11,214
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    24,087Total of 2-year USD LIBOR rate debt
    
    $
    12,873
    
    
    $
    11,214
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    24,087Total variable-rate debt
    
    $
    51,028
    
    
    $
    45,590
    
    
    $
    36,821
    
    
    $
    3,816
    
    
    $
    
    
    
    $
    8,585
    
    
    $
    145,840
 
 (1)
    
    Actual interest rates include a spread over the basis amount.(2)
    
    Rate is fixed over three-year term. 38




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##### Table of Contents



Interestexpense withInterest expense given an interest rate
    
    no change in
    
    Interest expense given an interest ratedecreaseby X basis points
    
    interest rate
    
    increaseby X basis points150 BPS
    
    100 BPS
    
    50 BPS
    
    
    
    
    
    50 BPS
    
    100 BPS
    
    150 BPSInterest Expense
    
    $
    27,406
    
    
    $
    28,136
    
    
    $
    28,865
    
    
    $
    29,594
    
    
    $
    30,323
    
    
    $
    31,052
    
    
    $
    31,782
  Interestexpense withInterest expense given an interest rate
    
    no change in
    
    Interest expense given an interest ratedecreaseby X basis points
    
    interest rate
    
    increaseby X basis points150 BPS
    
    100 BPS
    
    50 BPS
    
    
    
    
    
    50 BPS
    
    100 BPS
    
    150 BPSInterest Expense
    
    $
    6,121
    
    
    $
    6,851
    
    
    $
    7,580
    
    
    $
    8,309
    
    
    $
    9,038
    
    
    $
    9,767
    
    
    $
    10,497
  Valuation withValuation of borrowing given an interest
    
    no change in
    
    Valuation of borrowing given an interest raterate decreaseby X basis points
    
    interest rate
    
    increaseby X basis points150 BPS
    
    100 BPS
    
    50 BPS
    
    
    
    
    
    50 BPS
    
    100 BPS
    
    150 BPSConvertible notes
    
    $
    144,130
    
    
    $
    143,420
    
    
    $
    142,710
    
    
    $
    142,000
    
    
    $
    141,290
    
    
    $
    140,580
    
    
    $
    139,870
 39




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##### Table of Contents



Market Risk Sensitive Instruments
    Foreign Currency Risk
       40




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##### Table of Contents



41




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##### Table of Contents



ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageConsolidated Financial Statements of Atmel CorporationConsolidated Statements of Operations for each of the three years in the period ended December 31, 2005
    
    43Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    44Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2005
    
    45Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss) for each of the three
years in the period ended December 31, 2005
    
    46Notes to Consolidated Financial Statements
    
    47Report of Independent Registered Public Accounting Firm
    
    75Financial Statement SchedulesThe following Financial Statement Schedules for the years ended December 31, 2005, 2004 and 2003
should be read in conjunction with the Consolidated Financial Statements, and related notes thereto:Schedule II Valuation and Qualifying Accounts
    
    76Schedules not listed above have been omitted because they are not applicable or are not required
or the information required to be set forth therein is included in the Consolidated Financial
Statements or notes thereto.Supplementary Financial DataSelected Quarterly Financial Data (unaudited) for the two years ended December 31, 2005
    
    77
 42




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##### Table of Contents



Atmel Corporation
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years ended December 31,(In thousands, except per share data)
    
    2005
    
    
    2004
    
    
    2003Net revenues
    
    $
    1,675,715
    
    
    $
    1,649,722
    
    
    $
    1,330,635Operating expensesCost of revenues
    
    
    1,241,970
    
    
    
    1,181,746
    
    
    
    1,024,399Research and development
    
    
    276,608
    
    
    
    247,447
    
    
    
    247,636Selling, general and administrative
    
    
    192,327
    
    
    
    174,598
    
    
    
    138,804Asset impairment charges
    
    
    12,757
    
    
    
    
    
    
    
    27,632Restructuring charges (credits) and loss on sale
    
    
    18,209
    
    
    
    
    
    
    
    (360
    )Total operating expenses
    
    
    1,741,871
    
    
    
    1,603,791
    
    
    
    1,438,111Income (loss) from operations
    
    
    (66,156
    )
    
    
    45,931
    
    
    
    (107,476
    )Legal awards and settlements
    
    
    44,369
    
    
    
    
    
    
    
    37,850Interest and other expenses, net
    
    
    (18,801
    )
    
    
    (20,234
    )
    
    
    (34,425
    )Income (loss) before income taxes
    
    
    (40,588
    )
    
    
    25,697
    
    
    
    (104,051
    )Benefit from (provision for) income taxes
    
    
    7,690
    
    
    
    (28,131
    )
    
    
    (13,945
    )Net loss
    
    $
    (32,898
    )
    
    $
    (2,434
    )
    
    $
    (117,996
    )Basic and diluted net loss per share
    
    $
    (0.07
    )
    
    $
    (0.01
    )
    
    $
    (0.25
    )Shares used in basic and diluted net loss per share calculations
    
    
    481,534
    
    
    
    476,063
    
    
    
    469,869
 The accompanying notes are an integral part of these Consolidated Financial Statements.
 43




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##### Table of Contents



Atmel Corporation
 CONSOLIDATED BALANCE SHEETS
 December 31,(In thousands, except per share data)
    
    2005
    
    
    2004ASSETSCurrent assetsCash and cash equivalents
    
    $
    300,323
    
    
    $
    346,350Short-term investments
    
    
    47,932
    
    
    
    58,858Accounts receivable, net of allowance for doubtful
accounts of $3,976 in 2005 and $10,043 in 2004
    
    
    235,341
    
    
    
    231,544Inventories
    
    
    309,702
    
    
    
    346,589Other current assets
    
    
    105,407
    
    
    
    89,421Total current assets
    
    
    998,705
    
    
    
    1,072,762Fixed assets, net
    
    
    890,948
    
    
    
    1,204,852Intangible and other assets
    
    
    37,692
    
    
    
    51,392Total assets
    
    $
    1,927,345
    
    
    $
    2,329,006LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    112,107
    
    
    $
    141,383Convertible notes
    
    
    142,401
    
    
    
    Trade accounts payable
    
    
    140,717
    
    
    
    245,240Accrued and other liabilities
    
    
    201,398
    
    
    
    211,425Deferred income on shipments to distributors
    
    
    18,345
    
    
    
    21,124Total current liabilities
    
    
    614,968
    
    
    
    619,172Long-term debt less current portion
    
    
    133,184
    
    
    
    110,302Convertible notes less current portion
    
    
    295
    
    
    
    213,648Other long-term liabilities
    
    
    238,607
    
    
    
    274,288Total liabilities
    
    
    987,054
    
    
    
    1,217,410Commitments and contingencies (Note 11)Stockholders equityCommon stock; par value $0.001; Authorized: 1,600,000 shares;
Shares issued and outstanding: 483,366 at December 31, 2005 and
477,926 at December 31, 2004
    
    
    483
    
    
    
    478Additional paid-in capital
    
    
    1,293,420
    
    
    
    1,281,235Accumulated other comprehensive income
    
    
    138,412
    
    
    
    289,009Accumulated deficit
    
    
    (492,024
    )
    
    
    (459,126
    )Total stockholders equity
    
    
    940,291
    
    
    
    1,111,596Total liabilities and stockholders equity
    
    $
    1,927,345
    
    
    $
    2,329,006
 The accompanying notes are an integral part of these Consolidated Financial Statements.
 44




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##### Table of Contents



Atmel Corporation
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,(In thousands)
    
    2005
    
    
    2004
    
    
    2003Cash from operating activitiesNet loss
    
    $
    (32,898
    )
    
    $
    (2,434
    )
    
    $
    (117,996
    )Adjustments to reconcile net loss to net cash provided by operating activitiesDepreciation and amortization
    
    
    290,748
    
    
    
    298,426
    
    
    
    275,968Asset impairment charges
    
    
    12,757
    
    
    
    
    
    
    
    27,632Non-cash restructuring charges (credits)
    
    
    4,068
    
    
    
    
    
    
    
    (360
    )Deferred taxes
    
    
    2,711
    
    
    
    (21,891
    )
    
    
    (10,147
    )(Gain) loss on sale of interest in a privately held company and other
    
    
    (4,120
    )
    
    
    (1,567
    )
    
    
    269Gain on sales of fixed assets
    
    
    (2,405
    )
    
    
    (664
    )
    
    
    (246
    )Recovery of doubtful accounts receivable
    
    
    (5,575
    )
    
    
    (4,889
    )
    
    
    (1,219
    )Accrued interest on zero coupon convertible debt
    
    
    9,893
    
    
    
    9,800
    
    
    
    11,266Accrued interest on other long term debt
    
    
    2,415
    
    
    
    2,094
    
    
    
    3,983Stock-based compensation expense
    
    
    289
    
    
    
    
    
    
    
    3,033Changes in operating assets and liabilities, net of acquisitionsAccounts receivable
    
    
    1,737
    
    
    
    (11,149
    )
    
    
    (18,869
    )Inventories
    
    
    25,984
    
    
    
    (70,456
    )
    
    
    22,511Current and other assets
    
    
    (15,942
    )
    
    
    (29,603
    )
    
    
    (1,362
    )Trade accounts payable
    
    
    (61,538
    )
    
    
    39,241
    
    
    
    43,004Other accrued liabilities
    
    
    (3,210
    )
    
    
    6,354
    
    
    
    (56,307
    )Income tax payable
    
    
    (22,062
    )
    
    
    13,207
    
    
    
    78,288Deferred income on shipments to distributors
    
    
    (2,779
    )
    
    
    1,967
    
    
    
    (1,690
    )Net cash provided by operating activities
    
    
    200,073
    
    
    
    228,436
    
    
    
    257,758Cash from investing activitiesAcquisition of fixed assets
    
    
    (169,126
    )
    
    
    (241,428
    )
    
    
    (64,422
    )Sales of fixed assets
    
    
    2,238
    
    
    
    4,558
    
    
    
    4,029Sale of interest in privately held companies
    
    
    6,746
    
    
    
    
    
    
    
    Acquisition of intangible assets
    
    
    (7,821
    )
    
    
    (8,150
    )
    
    
    (Increase) decrease in restricted cash
    
    
    
    
    
    
    26,835
    
    
    
    (4,708
    )Purchase of short-term investments
    
    
    (16,110
    )
    
    
    (53,834
    )
    
    
    (52,858
    )Sale or maturity of short-term investments
    
    
    26,790
    
    
    
    41,283
    
    
    
    107,237Net cash used by investing activities
    
    
    (157,283
    )
    
    
    (230,736
    )
    
    
    (10,722
    )Cash from financing activitiesProceeds from equipment financing and other debt
    
    
    146,242
    
    
    
    70,000
    
    
    
    27,478Principal payments on capital leases and other debt
    
    
    (139,308
    )
    
    
    (140,716
    )
    
    
    (166,767
    )Repurchase of convertible notes
    
    
    (80,846
    )
    
    
    
    
    
    
    (134,640
    )Issuance of common stock
    
    
    11,901
    
    
    
    12,133
    
    
    
    9,610Net cash used in financing activities
    
    
    (62,011
    )
    
    
    (58,583
    )
    
    
    (264,319
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (26,806
    )
    
    
    21,346
    
    
    
    56,799Net increase (decrease) in cash and cash equivalents
    
    
    (46,027
    )
    
    
    (39,537
    )
    
    
    39,516Cash and cash equivalents at beginning of year
    
    
    346,350
    
    
    
    385,887
    
    
    
    346,371Cash and cash equivalents at end of year
    
    $
    300,323
    
    
    $
    346,350
    
    
    $
    385,887Supplemental cash flow disclosures:Interest paid
    
    $
    15,434
    
    
    $
    17,273
    
    
    $
    25,472Income taxes paid (refunded), net
    
    
    11,851
    
    
    
    39,210
    
    
    
    (51,553
    )Issuance of common stock in exchange for intangible assets
    
    
    
    
    
    
    
    
    
    
    5,090Increases (decreases) in accounts payable related to fixed asset purchases
    
    
    (75,748
    )
    
    
    81,918
    
    
    
    15,967Fixed assets acquired under capital leases
    
    
    112,815
    
    
    
    7,073
    
    
    
    
 The accompanying notes are an integral part of these Consolidated Financial Statements.
 45




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##### Table of Contents



Atmel Corporation
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME (LOSS)
 Common Stock
    
    
    
    
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    
    
    
    
    otherPar
    
    
    paid-in
    
    
    Accumulated
    
    
    comprehensive(In thousands)
    
    Shares
    
    
    value
    
    
    capital
    
    
    deficit
    
    
    income (loss)
    
    
    TotalBalances, December 31, 2002
    
    
    465,630
    
    
    $
    466
    
    
    $
    1,252,273
    
    
    $
    (338,696
    )
    
    $
    55,100
    
    
    $
    969,143Comprehensive income (loss)Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117,996
    )
    
    
    
    
    
    
    (117,996
    )Unrealized losses on investments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (669
    )
    
    
    (669
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,834
    
    
    
    150,834Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,169Sales of common stockExercise of options
    
    
    1,403
    
    
    
    1
    
    
    
    2,537
    
    
    
    
    
    
    
    
    
    
    
    2,538Employee stock purchase plan
    
    
    5,014
    
    
    
    5
    
    
    
    7,067
    
    
    
    
    
    
    
    
    
    
    
    7,072Adjustment to tax benefit from exercise of options
    
    
    
    
    
    
    
    
    
    
    (928
    )
    
    
    
    
    
    
    
    
    
    
    (928
    )Issuance of common stock in exchange for intangible assets
    
    
    1,000
    
    
    
    1
    
    
    
    5,089
    
    
    
    
    
    
    
    
    
    
    
    5,090Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    3,033
    
    
    
    
    
    
    
    
    
    
    
    3,033Balances, December 31, 2003
    
    
    473,047
    
    
    
    473
    
    
    
    1,269,071
    
    
    
    (456,692
    )
    
    
    205,265
    
    
    
    1,018,117Comprehensive income (loss)Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,434
    )
    
    
    
    
    
    
    (2,434
    )Unrealized gains on derivative instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,918
    
    
    
    3,918Unrealized losses on investments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,835
    
    
    
    79,835Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,310Sales of common stockExercise of options
    
    
    1,973
    
    
    
    2
    
    
    
    4,193
    
    
    
    
    
    
    
    
    
    
    
    4,195Employee stock purchase plan
    
    
    2,906
    
    
    
    3
    
    
    
    7,971
    
    
    
    
    
    
    
    
    
    
    
    7,974Balances, December 31, 2004
    
    
    477,926
    
    
    
    478
    
    
    
    1,281,235
    
    
    
    (459,126
    )
    
    
    289,009
    
    
    
    1,111,596Comprehensive income (loss)Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,898
    )
    
    
    
    
    
    
    (32,898
    )Minimum pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,647
    )
    
    
    (2,647
    )Realization of gains on derivative instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,918
    )
    
    
    (3,918
    )Unrealized gains on investments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    335
    
    
    
    335Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (144,367
    )
    
    
    (144,367
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183,495
    )Sales of common stockExercise of options
    
    
    1,758
    
    
    
    3
    
    
    
    3,507
    
    
    
    
    
    
    
    
    
    
    
    3,510Employee stock purchase plan
    
    
    3,682
    
    
    
    2
    
    
    
    8,389
    
    
    
    
    
    
    
    
    
    
    
    8,391Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    289
    
    
    
    
    
    
    
    
    
    
    
    289Balances, December 31, 2005
    
    
    483,366
    
    
    $
    483
    
    
    $
    1,293,420
    
    
    $
    (492,024
    )
    
    $
    138,412
    
    
    $
    940,291
 The accompanying notes are an integral part of these Consolidated Financial Statements
 46




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1
   Nature of Operations
  Principles of Consolidation
  Use of Estimates
  Fair Value of Financial Instruments
  Cash and Cash Equivalents
   Short-Term Investments
   47




---



##### Table of Contents



Accounts Receivable
  Inventories
  December 31,
    
    2005
    
    2004Raw materials and purchased parts
    
    $
    15,076
    
    
    $
    18,006Work in progress
    
    
    221,438
    
    
    
    246,717Finished goods
    
    
    73,188
    
    
    
    81,866$
    309,702
    
    
    $
    346,589
 Fixed Assets
  Buildings and improvements
    
    10 to 20 yearsMachinery, equipment and software
    
    2 to 5 yearsFurniture and fixtures
    
    5 years
  Investments in Privately-Held Companies
   Revenue Recognition
  48




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##### Table of Contents



Grant Recognition
  Years ended December 31,
    
    2005
    
    
    2004
    
    
    2003Cost of revenues
    
    $
    12,202
    
    
    $
    12,239
    
    
    $
    6,512Research and development expenses
    
    
    27,510
    
    
    
    17,439
    
    
    
    10,955Total
    
    $
    39,712
    
    
    $
    29,678
    
    
    $
    17,467
 Advertising Costs
  Foreign Currency Translation
  Stock-based Compensation
  49




---



##### Table of Contents



Year ended
December 31,
    
    2005
    
    2004
    
    2003Net loss  as reported
    
    $
    (32,898
    )
    
    $
    (2,434
    )
    
    $
    (117,996
    )Add: employee stock-based compensation expense
included in net loss-as reported, net of tax effects
    
    
    289
    
    
    
    
    
    
    
    3,033Deduct: employee stock-based compensation expense based on
fair value, net of tax effects
    
    
    (16,347
    )
    
    
    (20,383
    )
    
    
    (17,200
    )Net loss  pro forma
    
    $
    (48,956
    )
    
    $
    (22,817
    )
    
    $
    (132,163
    )Basic and diluted net loss per share  as reported
    
    $
    (0.07
    )
    
    $
    (0.01
    )
    
    $
    (0.25
    )Basic and diluted net loss per share  pro forma
    
    $
    (0.10
    )
    
    $
    (0.05
    )
    
    $
    (0.28
    )
  Year ended
December 31,
    
    2005
    
    2004
    
    2003Risk-free interest
    
    
    3.86
    %
    
    
    3.43
    %
    
    
    2.97
    %Expected life (years)
    
    
    5.055.48
    
    
    
    5.025.90
    
    
    
    4.985.90Expected volatility
    
    
    92
    %
    
    
    92
    %
    
    
    76
    %Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
   Year ended
December 31,
    
    2005
    
    2004
    
    2003Risk-free interest
    
    
    3.54
    %
    
    
    2.55
    %
    
    
    0.96
    %Expected life (years)
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Expected volatility
    
    
    66
    %
    
    
    54
    %
    
    
    97
    %Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
   Recent Accounting Pronouncements
 50




---



##### Table of Contents



Certain Risks and Concentrations
    Income Taxes
   Long-Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived Assets.(SFAS No. 144)
  51




---



##### Table of Contents



Derivative Instruments
      Net Loss Per Share
  Product Warranties
  Research and Development and Software Development Costs
  52




---



##### Table of Contents



Recent Accounting Pronouncements
 SFAS No. 123R
         53




---



##### Table of Contents



FSP Nos. FAS 115-1 and FAS 124-1
  SFAS No. 154
  SFAS No. 153
  FIN 47
  SFAS No. 151
  Reclassifications
  54




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##### Table of Contents



Note 2
    December 31,
    
    2005
    
    2004VAT receivable
    
    $
    56,370
    
    
    $
    39,030Deferred income tax assets
    
    
    7,473
    
    
    
    8,998Grants receivable
    
    
    16,421
    
    
    
    9,709Other
    
    
    25,143
    
    
    
    31,684$
    105,407
    
    
    $
    89,421
  December 31,
    
    2005
    
    2004Intangible assets, net
    
    $
    11,770
    
    
    $
    24,143Investment in privately held companies
    
    
    5,817
    
    
    
    6,416Deferred income tax assets, net of current portion
    
    
    14,346
    
    
    
    16,233Other
    
    
    5,759
    
    
    
    4,600$
    37,692
    
    
    $
    51,392
  December 31,
    
    2005
    
    2004Advance payments from customers
    
    $
    10,000
    
    
    $
    10,000Income tax payable
    
    
    10,105
    
    
    
    7,508Deferred income tax liabilities
    
    
    4,535
    
    
    
    1,551Accrued salaries and benefits
    
    
    76,689
    
    
    
    80,215Deferred grants, current
    
    
    19,847
    
    
    
    21,413Warranty reserves and accrued returns, royalties and licenses
    
    
    22,353
    
    
    
    26,855Restructuring accrual
    
    
    4,919
    
    
    
    1,072Accrued expenses and other
    
    
    52,950
    
    
    
    62,811$
    201,398
    
    
    $
    211,425
  December 31,
    
    2005
    
    2004Advance payments from customers
    
    $
    74,668
    
    
    $
    84,668Income tax payable, net of current portion
    
    
    83,190
    
    
    
    107,849Deferred income tax liabilities, net of current portion
    
    
    
    
    
    
    3,685Accrued pension liability
    
    
    43,832
    
    
    
    42,278Long term technology license payable
    
    
    7,325
    
    
    
    10,575Restructuring accrual
    
    
    8,896
    
    
    
    9,847Other
    
    
    20,696
    
    
    
    15,386$
    238,607
    
    
    $
    274,288
   55




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##### Table of Contents



Note 3
     December 31, 2005
    
    December 31, 2004Book Value
    
    Market Value
    
    Book Value
    
    Market ValueU.S. Government obligations
    
    $
    884
    
    
    $
    880
    
    
    $
    998
    
    
    $
    998State and municipal securities
    
    
    4,950
    
    
    
    4,950
    
    
    
    798
    
    
    
    796Corporate debt securities and
other obligations
    
    
    41,256
    
    
    
    42,102
    
    
    
    56,555
    
    
    
    57,06447,090
    
    
    
    47,932
    
    
    
    58,351
    
    
    
    58,858Unrealized gains
    
    
    871
    
    
    
    
    
    
    
    666
    
    
    
    Unrealized losses
    
    
    (29
    )
    
    
    
    
    
    
    (159
    )
    
    
    Net unrealized gains
    
    
    842
    
    
    
    
    
    
    
    507
    
    
    
    Total
    
    $
    47,932
    
    
    $
    47,932
    
    
    $
    58,858
    
    
    $
    58,858
  Due within one year
    
    $
    8,066Due in 1-5 years
    
    
    6,606Due in 5-10 years
    
    
    3,509Due after 10 years
    
    
    28,909Total
    
    $
    47,090
   Less than 12 months
    
    
    Greater than 12 monthsFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    losses
    
    
    Value
    
    
    lossesU.S. government and agency securities
    
    $
    880
    
    
    $
    (4
    )
    
    
    
    
    
    
    Corporate and municipal debt securities
    
    
    7,025
    
    
    
    (22
    )
    
    $
    1,303
    
    
    $
    (3
    )$
    7,905
    
    
    $
    (26
    )
    
    $
    1,303
    
    
    $
    (3
    )
  56




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##### Table of Contents



Note 4
   December 31,
    
    2005
    
    2004Land
    
    $
    56,027
    
    
    $
    57,653Buildings and improvements
    
    
    734,473
    
    
    
    804,624Machinery and equipment
    
    
    1,735,123
    
    
    
    1,711,977Furniture and fixtures
    
    
    152,974
    
    
    
    174,946Construction in progress
    
    
    6,810
    
    
    
    142,0862,685,407
    
    
    
    2,891,286Less accumulated depreciation and amortization
    
    
    (1,794,459
    )
    
    
    (1,686,434
    )Fixed assets, net
    
    $
    890,948
    
    
    $
    1,204,852
  57




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##### Table of Contents



Note 5
    Gross
    
    Accumulated
    
    NetBalances as of December 31, 2005
    
    Assets
    
    Amortization
    
    AssetsCore / Licensed Technology
    
    $
    87,679
    
    
    $
    (76,318
    )
    
    $
    11,361Non-Compete Agreement
    
    
    306
    
    
    
    (306
    )
    
    
    Patents
    
    
    1,377
    
    
    
    (968
    )
    
    
    409Total Intangible Assets
    
    $
    89,362
    
    
    $
    (77,592
    )
    
    $
    11,770
  Gross
    
    Accumulated
    
    NetBalances as of December 31, 2004
    
    Assets
    
    Amortization
    
    AssetsCore / Licensed Technology
    
    $
    98,437
    
    
    $
    (75,304
    )
    
    $
    23,133Non-Compete Agreement
    
    
    306
    
    
    
    (164
    )
    
    
    142Patents
    
    
    1,377
    
    
    
    (509
    )
    
    
    868Total Intangible Assets
    
    $
    100,120
    
    
    $
    (75,977
    )
    
    $
    24,143
  December 31,Years ended
    
    2005
    
    2004
    
    2003Core / Licensed Technology
    
    $
    11,818
    
    
    $
    11,450
    
    
    $
    13,439Non-Compete Agreement
    
    
    142
    
    
    
    138
    
    
    
    26Patents
    
    
    459
    
    
    
    452
    
    
    
    57Total Amortization Expense on Intangible Assets
    
    $
    12,419
    
    
    $
    12,040
    
    
    $
    13,522
  Years Ending December 31:2006
    
    $
    6,1172007
    
    
    4,5682008
    
    
    9762009
    
    
    882010
    
    
    21Total future amortization
    
    $
    11,770
  58




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##### Table of Contents



Note 6
    December 31,
    
    2005
    
    
    2004Various interest-bearing notes
    
    $
    97,070
    
    
    $
    71,391Bank lines of credit
    
    
    40,000
    
    
    
    15,000Convertible notes
    
    
    142,696
    
    
    
    213,648Capital lease obligations
    
    
    108,221
    
    
    
    165,294387,987
    
    
    
    465,333Less amount due within one year
    
    
    (254,508
    )
    
    
    (141,383
    )Long-term debt due after one year
    
    $
    133,479
    
    
    $
    323,950
  ConvertibleYear ending December 31,
    
    Notes
    
    Other
    
    Total2006
    
    $
    145,208
    
    
    $
    119,665
    
    
    $
    264,8732007
    
    
    
    
    
    
    98,421
    
    
    
    98,4212008
    
    
    335
    
    
    
    24,670
    
    
    
    25,0052009
    
    
    
    
    
    
    5,477
    
    
    
    5,4772010
    
    
    
    
    
    
    4,408
    
    
    
    4,408Thereafter
    
    
    
    
    
    
    6,343
    
    
    
    6,343145,543
    
    
    
    258,984
    
    
    
    404,527Less amount representing interest
    
    
    (2,847
    )
    
    
    (13,693
    )
    
    
    (16,540
    )Total
    
    $
    142,696
    
    
    $
    245,291
    
    
    $
    387,987
     59




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##### Table of Contents



Note 7
   Stock Repurchase
   60




---



##### Table of Contents



Note 8
    Note 9
     Balance Sheet Hedges
  Cash Flow Hedges
  61




---



##### Table of Contents



Note 10
     As of December 31,2005
    
    
    2004Foreign currency translation
    
    $
    140,217
    
    
    $
    284,584Minimum pension liability adjustments
    
    
    (2,647
    )
    
    
    Unrealized gains on derivative instruments
    
    
    
    
    
    
    3,918Unrealized gains on investments
    
    
    842
    
    
    
    507Accumulated other comprehensive income
    
    $
    138,412
    
    
    $
    289,009
 Note 11
      Year ending December 31
    
    Operating leases, net
    
    
    Capital Leases2006
    
    $
    25,923
    
    
    $
    57,4492007
    
    
    23,290
    
    
    
    32,1402008
    
    
    18,513
    
    
    
    11,7322009
    
    
    5,386
    
    
    
    5,4772010
    
    
    4,419
    
    
    
    4,408Thereafter
    
    
    9,619
    
    
    
    4,948$
    87,150
    
    
    
    116,154Less amount representing interest
    
    
    
    
    
    
    (7,933
    )Total capital lease obligations
    
    
    
    
    
    
    108,221Less current portion
    
    
    
    
    
    
    (53,645
    )Capital lease obligations due
after one year
    
    
    
    
    
    $
    54,576
   62




---



##### Table of Contents



2005
    
    
    2004Balance at January 1
    
    
    ($10,495
    )
    
    
    ($9,998
    )Accrual for warranties during the period (including foreign exchange rate impact)
    
    
    (5,977
    )
    
    
    (8,860
    )Change in accrual relating to preexisting warranties (including change in
estimates)
    
    
    994
    
    
    
    1,056Settlements made (in cash or in kind) during the period
    
    
    6,742
    
    
    
    7,307Balance at December 31
    
    
    ($8,736
    )
    
    
    ($10,495
    )
 Indemnifications
  Purchase Commitments
  63




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##### Table of Contents



Note 12
    Years Ended December 31,
    
    2005
    
    2004
    
    2003U.S.
    
    $
    (140,539
    )
    
    $
    (160,956
    )
    
    $
    (186,502
    )Foreign
    
    
    99,951
    
    
    
    186,653
    
    
    
    82,451Income (loss) before income taxes
    
    $
    (40,588
    )
    
    $
    25,697
    
    
    $
    (104,051
    )
  Years EndedDecember 31,
    
    
    
    
    
    2005
    
    2004
    
    2003Federal
    
    Current
    
    $
    4,184
    
    
    $
    20,150
    
    
    $
    (6,593
    )Deferred
    
    
    1,407
    
    
    
    1,383
    
    
    
    (3,714
    )State
    
    Current
    
    
    
    
    
    
    
    
    
    
    Deferred
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    Current
    
    
    (13,693
    )
    
    
    29,872
    
    
    
    30,685Deferred
    
    
    412
    
    
    
    (23,274
    )
    
    
    (6,433
    )Total income tax (benefit) provision
    
    
    
    
    
    $
    (7,690
    )
    
    $
    28,131
    
    
    $
    13,945
  December 31,
    
    2005
    
    
    2004Deferred income tax assets:Fixed assets
    
    $
    151,353
    
    
    $
    185,058Intangible assets
    
    
    18,517
    
    
    
    16,731Deferred income on shipments to distributors
    
    
    4,626
    
    
    
    6,740Other accruals
    
    
    33,274
    
    
    
    57,735Net operating losses
    
    
    264,065
    
    
    
    200,705Research and development and other tax credits
    
    
    41,324
    
    
    
    39,270Total deferred income tax assets
    
    
    513,159
    
    
    
    506,239Deferred income tax liabilities:Deferred grant and undistributed subsidiary income
    
    
    
    
    
    
    (3,534
    )Unrealized foreign exchange loss
    
    
    (81
    )
    
    
    (714
    )Other
    
    
    (1,545
    )
    
    
    (355
    )Total deferred tax liabilities
    
    
    (1,626
    )
    
    
    (4,603
    )Less valuation allowance
    
    
    (494,249
    )
    
    
    (481,641
    )Net deferred income tax asset
    
    $
    17,284
    
    
    $
    19,995
   64




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##### Table of Contents



Years Ended December 31,
    
    2005
    
    2004
    
    2003U.S. Federal statutory income tax rate
    
    
    (35.00
    )%
    
    
    35.00
    %
    
    
    (35.00
    )%Difference between U.S. and foreign tax rates
    
    
    2.06
    
    
    
    (78.07
    )
    
    
    (0.41
    )Tax credits
    
    
    (5.55
    )
    
    
    
    
    
    
    Net operating loss and future deductions not
currently benefited
    
    
    67.67
    
    
    
    114.76
    
    
    
    59.68Reversal of taxes previously accrued on foreign
earnings expected to be repatriated
    
    
    
    
    
    
    (42.18
    )
    
    
    Provision for tax settlements and withholding taxes
    
    
    12.89
    
    
    
    78.41
    
    
    
    Release of income taxes previously accrued
    
    
    (60.56
    )
    
    
    
    
    
    
    (6.34
    )Other
    
    
    (0.46
    )
    
    
    1.55
    
    
    
    (4.53
    )Effective tax rate
    
    
    (18.95
    )%
    
    
    109.47
    %
    
    
    13.40
    %
         65




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##### Table of Contents



Note 13
     Outstanding OptionsWeightedExercise
    
    Aggregate
    
    AverageAvailable
    
    Number of
    
    Price
    
    Exercise
    
    Exercise PriceFor Grant
    
    Options
    
    Per Share
    
    Price
    
    Per ShareBalances, December 31, 2002
    
    
    7,755
    
    
    
    26,650
    
    
    $
    1.00-24.44
    
    
    
    145,120
    
    
    $
    5.45Options reserved for issuance
    
    
    20,000Options Granted
    
    
    (6,078
    )
    
    
    6,078
    
    
    
    1.68 - 6.27
    
    
    
    31,698
    
    
    
    5.22Options Cancelled
    
    
    614
    
    
    
    (656
    )
    
    
    1.00 - 24.44
    
    
    
    (4,975
    )
    
    
    7.56Options Exercised
    
    
    
    
    
    
    (1,403
    )
    
    
    1.60 - 6.85
    
    
    
    (2,538
    )
    
    
    1.81Balances, December 31, 2003
    
    
    22,291
    
    
    
    30,669
    
    
    $
    1.00-24.44
    
    
    
    169,305
    
    
    $
    5.52Options Granted
    
    
    (1,566
    )
    
    
    1,566
    
    
    
    3.18 - 7.38
    
    
    
    8,883
    
    
    
    5.67Options Cancelled
    
    
    631
    
    
    
    (684
    )
    
    
    1.80 - 21.47
    
    
    
    (5,323
    )
    
    
    7.78Options Exercised
    
    
    
    
    
    
    (1,973
    )
    
    
    1.68 - 5.13
    
    
    
    (4,159
    )
    
    
    2.11Balances, December 31, 2004
    
    
    21,356
    
    
    
    29,578
    
    
    $
    1.68-21.47
    
    
    
    168,706
    
    
    $
    5.70Options Granted
    
    
    (5,173
    )
    
    
    5,173
    
    
    
    2.06 - 3.29
    
    
    
    15,659
    
    
    
    3.03Options Cancelled
    
    
    1,650
    
    
    
    (2,758
    )
    
    
    1.68 - 21.47
    
    
    
    (15,467
    )
    
    
    5.61Options Exercised
    
    
    
    
    
    
    (1,758
    )
    
    
    1.68 - 2.62
    
    
    
    (3,509
    )
    
    
    1.99Balances, December 31, 2005
    
    
    17,833
    
    
    
    30,235
    
    
    $
    1.00-24.44
    
    
    
    165,389
    
    
    $
    5.46
  66




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeighted

    
    Weighted
    
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    
    Average

    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    Number
    
    
    Remaining

    
    Exercise
    
    
    Number
    
    
    ExercisePrices
    
    
    Outstanding
    
    
    Contractual Life (years)

    
    Price
    
    
    Exercisable
    
    
    Price$
    1.00 - 1.98
    
    
    
    4,943
    
    
    
    2.62
    
    
    $
    1.96
    
    
    
    4,689
    
    
    $
    1.972.06 - 2.11
    
    
    
    5,072
    
    
    
    7.05
    
    
    
    2.11
    
    
    
    2,697
    
    
    
    2.112.13 - 3.26
    
    
    
    1,988
    
    
    
    9.15
    
    
    
    2.72
    
    
    
    245
    
    
    
    2.803.29 - 3.29
    
    
    
    3,052
    
    
    
    9.13
    
    
    
    3.29
    
    
    
    383
    
    
    
    3.293.33 - 5.69
    
    
    
    1,685
    
    
    
    5.18
    
    
    
    4.21
    
    
    
    1,283
    
    
    
    4.225.75 - 5.75
    
    
    
    4,414
    
    
    
    7.98
    
    
    
    5.75
    
    
    
    1,807
    
    
    
    5.755.91 -7.76
    
    
    
    3,309
    
    
    
    5.78
    
    
    
    6.83
    
    
    
    2,348
    
    
    
    6.797.83 - 24.44
    
    
    
    5,772
    
    
    
    4.51
    
    
    
    12.87
    
    
    
    5,353
    
    
    
    12.99Total
    
    $
    1.00 - 24.44
    
    
    
    30,235
    
    
    
    6.08
    
    
    $
    5.46
    
    
    
    18,805
    
    
    $
    6.28
    Note 14
    Years ended December 31,
    
    2005
    
    2004
    
    2003Service costs-benefits earned during the period
    
    $
    2,380
    
    
    $
    2,045
    
    
    $
    1,778Interest cost on projected benefit obligation
    
    
    2,096
    
    
    
    1,921
    
    
    
    1,688Amortization of actuarial loss
    
    
    115
    
    
    
    426
    
    
    
    399Net pension cost
    
    $
    4,591
    
    
    $
    4,392
    
    
    $
    3,865
 67




---



##### Table of Contents



Years ended December 31,
    
    2005
    
    2004Projected benefit obligation at beginning of the year
    
    $
    48,070
    
    
    $
    36,828Service cost
    
    
    2,380
    
    
    
    2,045Interest cost
    
    
    2,096
    
    
    
    1,921Curtailment (a)
    
    
    (1,338
    )
    
    
    Actuarial losses
    
    
    9,923
    
    
    
    4,723Benefits paid
    
    
    (854
    )
    
    
    (875
    )Foreign currency exchange rate changes
    
    
    (2,060
    )
    
    
    3,428Projected benefit obligation at end of the year
    
    $
    58,217
    
    
    $
    48,070Unrecognized net actuarial loss
    
    
    (13,632
    )
    
    
    (4,717
    )Accumulated benefit obligation liability
    
    $
    44,585
    
    
    $
    43,353
 
 (a)
    
    Includes recognized actuarial losses due to curtailment in accordance with the guidance
under SFAS No. 88, Employers Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits of Nantes fabrication facility retirement plan which
occurred as a result of the sale of the facility to XbyBus SAS, a French corporation (XbyBus
SAS) (see Note 17 for further details).Key assumptions for defined benefit plans:
 Years ended December 31,
    
    2005
    
    2004
    
    2003Assumed discount rate
    
    
    4.0  4.3
    %
    
    
    4.5  4.9
    %
    
    
    5.0%  5.5
    %Assumed compensation rate of increase
    
    
    2.0  4.0
    %
    
    
    2.0%  3.0
    %
    
    
    2.5%  3.0
    %
  2006
    
    $
    8652007
    
    
    9982008
    
    
    1,2162009
    
    
    1,3742010
    
    
    1,6742011 through 2015
    
    
    11,241Total
    
    $
    17,368
    Executive Deferred Compensation Plan:
 68




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##### Table of Contents



Note 15
    
    
    Application specific integrated circuit (ASIC)segment includes
custom application specific integrated circuits designed to meet
specialized single-customer requirements for their high performance
devices in a broad variety of applications. In addition, this segment
includes smart card applications, imaging sensors and processors,
audio processors, field programmable gate arrays (FPGAs) and
programmable logic devices (PLDs), multimedia, and network storage
products.
    
    Microcontrollerssegment includes a variety of proprietary and
standard microcontrollers, the majority of which contain embedded
nonvolatile memory, and military and aerospace application specific
products.
    
    Nonvolatile Memoriessegment includes serial and parallel interface
electrically erasable programmable read only memories (EEPROMs),
serial and parallel interface Flash memories, and erasable
programmable read only memories (EPROMs) for use in a broad variety
of customer applications.
    
    Radio Frequency (RF) and Automotivesegment includes radio frequency
and analog circuits for the telecommunications, automotive and
industrial markets as well as application specific products for the
automotive industry.
   Information
about Reportable Segments
 Micro-
    
    Nonvolatile
    
    RF andASIC
    
    controllers
    
    Memories
    
    Automotive
    
    TotalYear ended December 31, 2005:Net revenues from external customers
    
    $
    610,158
    
    
    $
    315,476
    
    
    $
    393,037
    
    
    $
    357,044
    
    
    $
    1,675,715Segment income (loss) from operations
    
    
    (78,399
    )
    
    
    51,096
    
    
    
    (11,631
    )
    
    
    3,744
    
    
    
    (35,190
    )Year ended December 31, 2004:Net revenues from external customers
    
    $
    589,208
    
    
    
    337,084
    
    
    
    445,502
    
    
    
    277,928
    
    
    $
    1,649,722Segment income (loss) from operations
    
    
    (60,976
    )
    
    
    84,292
    
    
    
    (651
    )
    
    
    23,266
    
    
    
    45,931Year ended December 31, 2003:Net revenues from external customers
    
    $
    479,078
    
    
    
    271,676
    
    
    
    355,425
    
    
    
    224,456
    
    
    $
    1,330,635Segment income (loss) from operations
    
    
    (51,404
    )
    
    
    47,127
    
    
    
    (109,629
    )
    
    
    33,702
    
    
    
    (80,204
    )
 69




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##### Table of Contents



Reconciliation of segment information to Consolidated Statements of Operations
 2005
    
    
    2004
    
    
    2003Total income (loss) from operations for reportable segments
    
    $
    (35,190
    )
    
    $
    45,931
    
    
    $
    (80,204
    )Unallocated amounts:Asset impairment charges
    
    
    (12,757
    )
    
    
    
    
    
    
    (27,632
    )Restructuring (charges) credits and loss on sale
    
    
    (18,209
    )
    
    
    
    
    
    
    360Consolidated income (loss) from operations
    
    $
    (66,156
    )
    
    $
    45,931
    
    
    $
    (107,476
    )
  2005
    
    2004
    
    2003Long-lived
    
    
    
    
    
    Long-livedRevenues
    
    assets
    
    Revenues
    
    assets
    
    RevenuesUnited States
    
    $
    231,719
    
    
    $
    240,131
    
    
    $
    278,847
    
    
    $
    311,274
    
    
    $
    235,966Germany
    
    
    175,359
    
    
    
    19,736
    
    
    
    179,618
    
    
    
    31,498
    
    
    
    138,724France
    
    
    160,843
    
    
    
    325,246
    
    
    
    147,640
    
    
    
    466,613
    
    
    
    93,859UK
    
    
    35,029
    
    
    
    294,381
    
    
    
    35,710
    
    
    
    382,155
    
    
    
    32,945Japan
    
    
    52,809
    
    
    
    191
    
    
    
    63,427
    
    
    
    213
    
    
    
    67,321China, including Hong Kong
    
    
    357,852
    
    
    
    709
    
    
    
    357,760
    
    
    
    519
    
    
    
    297,262Singapore
    
    
    271,753
    
    
    
    
    
    
    
    105,399
    
    
    
    
    
    
    
    113,752Rest of Asia-Pacific
    
    
    199,942
    
    
    
    11,708
    
    
    
    266,393
    
    
    
    8,816
    
    
    
    180,266Rest of Europe
    
    
    169,492
    
    
    
    10,310
    
    
    
    176,259
    
    
    
    13,815
    
    
    
    132,417Rest of the World
    
    
    20,917
    
    
    
    
    
    
    
    38,669
    
    
    
    
    
    
    
    38,123Total
    
    $
    1,675,715
    
    
    $
    902,412
    
    
    $
    1,649,722
    
    
    $
    1,214,903
    
    
    $
    1,330,635
  Note 16
    Irving, Texas Facility
  70




---



##### Table of Contents



Colorado Springs, Colorado Construction-In-Progress
  Note 17
    
    
    $5,010 in one-time involuntary termination severance benefits costs related to the
termination of 196 employees primarily in manufacturing, research and development and
administration
    
    $2,614 of building and improvements were removed from operations and written down to
zero following relocation of certain manufacturing activities to Asia
    
    $10,585 associated with the loss on the sale of the Companys Nantes fabrication
facility, including the cost of transferring 319 employees to the buyer
 Nantes Fabrication Facility Sale
    2005 Restructuring Charges
  71




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##### Table of Contents



January 1, 2003
    
    
    
    
    
    Non-cash
    
    
    
    
    
    
    
    
    
    December 31, 2003accrual
    
    Charges
    
    Charges
    
    Reversals
    
    Payments
    
    accrualThird quarter of 2001Reduction of force in Europe
    
    $
    835
    
    
    $
    
    
    
    $
    
    
    
    $
    (360
    )
    
    $
    (475
    )
    
    $
    Third quarter of 2002Termination of contract with supplier
    
    
    13,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,692
    )
    
    
    11,732Employee termination costs
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (111
    )
    
    
    Repayment of property tax abatement
    
    
    512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (512
    )
    
    
    Fourth quarter of 2002Reduction of force in Europe
    
    
    1,618
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,618
    )
    
    
    Total 2003 activity
    
    $
    16,500
    
    
    $
    
    
    
    $
    
    
    
    $
    (360
    )
    
    $
    (4,408
    )
    
    $
    11,732
 January 1, 2004
    
    
    
    
    
    Non-cash
    
    
    
    
    
    
    
    
    
    December 31, 2004accrual
    
    Charges
    
    Charges
    
    Reversals
    
    Payments
    
    accrualThird quarter of 2002Termination of contract with supplier
    
    
    11,732
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (813
    )
    
    
    10,919Total 2004 activity
    
    $
    11,732
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (813
    )
    
    $
    10,919
 January 1, 2005
    
    
    
    
    
    Non-cash
    
    
    
    
    
    
    
    
    
    December 31, 2005accrual
    
    Charges
    
    Charges
    
    Reversals
    
    Payments
    
    accrualThird quarter of 2002Termination of contract with supplier
    
    
    10,919
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,086
    )
    
    
    9,833Third quarter of 2005Employee termination costs
    
    
    
    
    
    
    2,785
    
    
    
    
    
    
    
    (189
    )
    
    
    (1,067
    )
    
    
    1,529Fourth quarter of 2005Nantes fabrication facility sale
    
    
    
    
    
    
    10,585
    
    
    
    (1,454
    )
    
    
    
    
    
    
    (7,821
    )
    
    
    1,310Employee termination costs
    
    
    
    
    
    
    2,225
    
    
    
    
    
    
    
    
    
    
    
    (1,082
    )
    
    
    1,143Asset disposals
    
    
    
    
    
    
    2,614
    
    
    
    (2,614
    )
    
    
    
    
    
    
    
    
    
    
    Total 2005 activity
    
    $
    10,919
    
    
    $
    18,209
    
    
    $
    (4,068
    )
    
    $
    (189
    )
    
    $
    (11,056
    )
    
    $
    13,815
   72




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##### Table of Contents



Note 18
     Years Ended December 31,
    
    2005

    
    2004

    
    2003Basic and diluted net loss
    
    $
    (32,898
    )
    
    $
    (2,434
    )
    
    $
    (117,996
    )Shares used in basic and diluted net loss per share
calculations
    
    
    481,534
    
    
    
    476,063
    
    
    
    469,869Basic and diluted net loss per share
    
    $
    (0.07
    )
    
    $
    (0.01
    )
    
    $
    (0.25
    )
  Years ended December 31,2005
    
    
    2004
    
    
    2003Employee stock options outstanding
    
    
    30,235
    
    
    
    29,578
    
    
    
    30,669Common Stock equivalent shares associated with:Convertible notes due
2018
    
    
    5
    
    
    
    5
    
    
    
    601Convertible notes due
2021
    
    
    9,228
    
    
    
    9,086
    
    
    
    8,669Total shares excluded from per share calculation
    
    
    9,233
    
    
    
    9,091
    
    
    
    9,270
     73




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##### Table of Contents



Note 19
     Note 20
    Years Ended December 31,
    
    2005
    
    
    2004
    
    
    2003Interest and other income
    
    $
    12,099
    
    
    $
    8,873
    
    
    $
    9,502Interest expense
    
    
    (29,594
    )
    
    
    (26,979
    )
    
    
    (36,615
    )Foreign exchange transaction losses
    
    
    (1,306
    )
    
    
    (2,128
    )
    
    
    (7,312
    )Total
    
    $
    (18,801
    )
    
    $
    (20,234
    )
    
    $
    (34,425
    )
 Note 21
    74




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
  Consolidated financial statements and financial statement schedule
  Internal control over financial reporting
 Internal
Control  Integrated Framework Internal
Control  Integrated Framework
    
 75




---



##### Table of Contents



Schedule II
 ATMEL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2005, 2004 and 2003
 (In thousands)
 Balance at
    
    
    Credited
    
    
    Deductions -
    
    
    Balance atDescription
    
    Beginning of Year
    
    
    to Expense
    
    
    Write-offs
    
    
    End of YearAllowance for doubtful accounts receivable:Year ended December 31, 2005
    
    
    10,043
    
    
    
    (5,575
    )
    
    
    (492
    )
    
    
    3,976Year ended December 31, 2004
    
    
    16,411
    
    
    
    (4,889
    )
    
    
    (1,479
    )
    
    
    10,043Year ended December 31, 2003
    
    
    22,415
    
    
    
    (1,219
    )
    
    
    (4,785
    )
    
    
    16,411
 76




---



##### Table of Contents



SELECTED QUARTERLY FINANCIAL DATA
 (Unaudited, in thousands, except per share data)
    
    First Quarter
    
    
    Second Quarter
    
    
    Third Quarter
    
    
    Fourth QuarterYear ended December 31, 2005Net revenues
    
    $
    419,777
    
    
    $
    412,200
    
    
    $
    418,550
    
    
    $
    425,188Gross profit
    
    
    87,002
    
    
    
    92,780
    
    
    
    116,791
    
    
    
    137,172Income (loss) from operations
    
    
    (34,035
    )
    
    
    (32,093
    )
    
    
    (738
    )
    
    
    710Net income (loss)
    
    
    (43,021
    )
    
    
    (42,580
    )
    
    
    (1,097
    )
    
    
    53,800Basic and diluted net income (loss) per share
    
    
    (0.09
    )
    
    
    (0.09
    )
    
    
    (0.00
    )
    
    
    0.11Year ended December 31, 2004Net revenues
    
    $
    407,395
    
    
    $
    420,803
    
    
    $
    413,237
    
    
    $
    408,287Gross profit
    
    
    120,634
    
    
    
    119,715
    
    
    
    115,134
    
    
    
    112,493Income from operations
    
    
    20,773
    
    
    
    18,457
    
    
    
    4,901
    
    
    
    1,800Net income (loss)
    
    
    11,009
    
    
    
    11,651
    
    
    
    (18,009
    )
    
    
    (7,085
    )Basic and diluted net income (loss) per share
    
    
    0.02
    
    
    
    0.02
    
    
    
    (0.04
    )
    
    
    (0.01
    )
 77




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Effectiveness of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
   Internal Control  Integrated Framework Internal
Control  Integrated Framework
  Remediation of Prior Year Material Weaknesses
  Accounting for Income Taxes.
 78




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##### Table of Contents



Accounting for Inventory Reserves.
 Changes in Internal Control over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  79




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  1.
    
    Financial Statements. See Index to Consolidated
Financial Statements under Item 8 on page 42 of this
Annual Report on Form 10-K2.
    
    Financial Statement Schedules. See Index to Consolidated
Financial Statements under Item 8 on page 42 of this
Annual Report on Form 10-K
 Exhibits
 3.1
    
    Restated Certificate of Incorporation of Registrant (which is
incorporated herein by reference to Exhibit 3.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended
June 30, 2003, Commission File No. 0-19032).3.2
    
    Bylaws of Registrant, as amended, (which is incorporated herein by
reference to Exhibit 3.2 to the Registrants Annual Report on Form
10-K for the year ended December 31, 2004, Commission File No.
0-19032).3.3
    
    Certificate of Determination of Rights, Preferences and Privileges
of Series A Preferred Stock (which is incorporated herein by
reference to Exhibit A of Exhibit 1 to the Registrants
Registration Statement on Form 8-A/12G/A (File No. 000-19032)
filed on December 6, 1999).4.1
    
    Amended and Restated Preferred Shares Rights Agreement dated as of
October 18, 1999, between Atmel Corporation and BankBoston, N.A.,
a national banking association, including the Certificate of
Determination, the form of Rights Certificate and the Summary of
Rights (which is incorporated herein by reference to Exhibit 1 to
the Registrants Registration Statement on Form 8-A/12G/A (File
No. 000-19032) filed on December 6, 1999).10.1+
    
    1986 Incentive Stock Option Plan, as amended, and forms of stock
option agreements thereunder (which is incorporated herein by
reference to Exhibit 10.1 to the Registrants Registration
Statement on Form S-1 (File No. 33-38882) declared effective on
March 19, 1991).10.2+
    
    1991 Employee Stock Purchase Plan, as amended (which is
incorporated herein by reference to Exhibit 10.2 to the
Registrants Annual Report on Form 10-K for the year ended
December 31, 2002, Commission File No. 0-19032).10.3+
    
    Form of Indemnification Agreement between Registrant and its
officers and directors (which is incorporated herein by reference
to Exhibit 10.4 to the Registrants Annual Report on Form 10-K for
the year ended December 31, 1999, Commission File No. 0-19032).10.4+
    
    2005 Stock Plan and forms of agreements thereunder (which is
incorporated herein by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K (Commission File No.
0-19032) filed on May 16, 2005.10.5
    
    Indenture, dated as of April 21, 1998, by and between the
Registrant and State Street Bank and Trust Company of California,
N.A., as trustee thereunder (including the form of debenture)
(which is incorporated herein by reference to Exhibit 4.1 to the
Registrants Registration Statement on Form S-3 (File No.
333-59261) filed on July 16, 1998).10.6
    
    First Supplemental Indenture, dated as of October 15, 1999, to
Indenture dated as of April 21, 1998, by and between the
Registrant and State Street Bank and Trust Company of California,
N.A., as trustee thereunder (which is incorporated herein by
reference to Exhibit 10.6 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 2002, Commission File
No. 0-19032).10.7
    
    Registration Rights Agreement dated as of April 21, 1998, by and
between the Registrant and Morgan Stanley & Co. Incorporated
(which is incorporated herein by reference to Exhibit 4.3 to the
Registrants Registration Statement on Form S-3 (File No.
333-59261) filed on July 16, 1998).10.8
    
    Indenture, dated as of May 23, 2001, by and between the Registrant
and State Street Bank and Trust Company of California, N.A., as
trustee thereunder (including the form of debenture) (which is
incorporated herein by reference to Exhibit 4.1 to the
Registrants Registration Statement on Form S-3 (File No.
333-63996) filed on June 27, 2001).
 80




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##### Table of Contents



10.9
    
    Registration Rights Agreement dated as of May 23, 2001, by and among the Registrant and Morgan Stanley &
Co. Incorporated, Credit Lyonnais Securities (USA) Inc. and Needham & Company, Inc. (which is incorporated
herein by reference to Exhibit 4.3 to the Registrants Registration Statement on Form S-3 (File No.
333-63996) filed on June 27, 2001).21.1
    
    Subsidiaries of Registrant.23.1
    
    Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.24.1
    
    Power of Attorney (included on the signature pages hereof)31.1
    
    Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 +
    
    Indicates management compensatory plan, contract or arrangement.(b)
    
    Exhibits. See Item 15(a)(3) above.(c)
    
    Financial Statement Schedules. See Item 15(a)(2) above. 81




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##### Table of Contents



SIGNATURES
  ATMEL CORPORATIONMarch 16, 2006
    
    By:
    
    /s/ George PerlegosGeorge PerlegosPresident and Chief Executive Officer
 POWER OF ATTORNEY
   Signature
    
    Title/s/ George Perlegos
    
    President, Chief Executive Officer and Director (principal executive officer)(George Perlegos)/s/ Robert Avery
    
    Vice President Finance and Chief Financial Officer (principal financial and accounting officer)(Robert Avery)/s/ Gust Perlegos
    
    Director(Gust Perlegos)/s/ Tsung-Ching Wu
    
    Director(Tsung-Ching Wu)/s/ T. Peter Thomas
    
    Director(T. Peter Thomas)/s/ Pierre Fougere
    
    Director(Pierre Fougere)/s/ Dr. Chaiho Kim
    
    Director(Dr. Chaiho Kim)/s/ David Sugishita
    
    Director(David Sugishita)/s/ Steven Laub
    
    Director(Steven Laub)
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EXHIBIT INDEX
 3.1
    
    Restated Certificate of Incorporation of Registrant (which is
incorporated herein by reference to Exhibit 3.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended
June 30, 2003, Commission File No. 0-19032).3.2
    
    Bylaws of Registrant, as amended, (which is incorporated herein by
reference to Exhibit 3.2 to the Registrants Annual Report on Form
10-K for the year ended December 31, 2004, Commission File No.
0-19032).3.3
    
    Certificate of Determination of Rights, Preferences and Privileges
of Series A Preferred Stock (which is incorporated herein by
reference to Exhibit A of Exhibit 1 to the Registrants
Registration Statement on Form 8-A/12G/A (File No. 000-19032)
filed on December 6, 1999).4.1
    
    Amended and Restated Preferred Shares Rights Agreement dated as of
October 18, 1999, between Atmel Corporation and BankBoston, N.A.,
a national banking association, including the Certificate of
Determination, the form of Rights Certificate and the Summary of
Rights (which is incorporated herein by reference to Exhibit 1 to
the Registrants Registration Statement on Form 8-A/12G/A (File
No. 000-19032) filed on December 6, 1999).10.1+
    
    1986 Incentive Stock Option Plan, as amended, and forms of stock
option agreements thereunder (which is incorporated herein by
reference to Exhibit 10.1 to the Registrants Registration
Statement on Form S-1 (File No. 33-38882) declared effective on
March 19, 1991).10.2+
    
    1991 Employee Stock Purchase Plan, as amended (which is
incorporated herein by reference to Exhibit 10.2 to the
Registrants Annual Report on Form 10-K for the year ended
December 31, 2002, Commission File No. 0-19032).10.3+
    
    Form of Indemnification Agreement between Registrant and its
officers and directors (which is incorporated herein by reference
to Exhibit 10.4 to the Registrants Annual Report on Form 10-K for
the year ended December 31, 1999, Commission File No. 0-19032).10.4+
    
    2005 Stock Plan and forms of agreements thereunder (which is
incorporated herein by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K (Commission File No.
0-19032) filed on May 16, 2005.10.5
    
    Indenture, dated as of April 21, 1998, by and between the
Registrant and State Street Bank and Trust Company of California,
N.A., as trustee thereunder (including the form of debenture)
(which is incorporated herein by reference to Exhibit 4.1 to the
Registrants Registration Statement on Form S-3 (File No.
333-59261) filed on July 16, 1998).10.6
    
    First Supplemental Indenture, dated as of October 15, 1999, to
Indenture dated as of April 21, 1998, by and between the
Registrant and State Street Bank and Trust Company of California,
N.A., as trustee thereunder (which is incorporated herein by
reference to Exhibit 10.6 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 2002, Commission File
No. 0-19032).10.7
    
    Registration Rights Agreement dated as of April 21, 1998, by and
between the Registrant and Morgan Stanley & Co. Incorporated
(which is incorporated herein by reference to Exhibit 4.3 to the
Registrants Registration Statement on Form S-3 (File No.
333-59261) filed on July 16, 1998).10.8
    
    Indenture, dated as of May 23, 2001, by and between the Registrant
and State Street Bank and Trust Company of California, N.A., as
trustee thereunder (including the form of debenture) (which is
incorporated herein by reference to Exhibit 4.1 to the
Registrants Registration Statement on Form S-3 (File No.
333-63996) filed on June 27, 2001).10.9
    
    Registration Rights Agreement dated as of May 23, 2001, by and among the Registrant and Morgan Stanley &
Co. Incorporated, Credit Lyonnais Securities (USA) Inc. and Needham & Company, Inc. (which is incorporated
herein by reference to Exhibit 4.3 to the Registrants Registration Statement on Form S-3 (File No.
333-63996) filed on June 27, 2001).21.1
    
    Subsidiaries of Registrant.23.1
    
    Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.24.1
    
    Power of Attorney (included on the signature pages hereof)31.1
    
    Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 +
    
    Indicates management compensatory plan, contract or arrangement.