ILLUMINA INC, 10-K filed on 2/24/2012
Annual Report
Document and Entity Information Document (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 31, 2012
Jul. 3, 2011
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
Illumina Inc 
 
 
Entity Central Index Key
0001110803 
 
 
Document Type
10-K 
 
 
Document Period End Date
Jan. 01, 2012 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--01-01 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 9.3 
Entity Common Stock, Shares Outstanding
 
122,327,021 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Current assets:
 
 
Cash and cash equivalents
$ 302,978 
$ 248,947 
Short-term investments
886,590 
645,342 
Accounts receivable, net
173,886 
165,598 
Inventory, net
128,781 
142,211 
Deferred tax assets, current portion
23,188 
19,378 
Prepaid expenses and other current assets
29,196 
36,922 
Total current assets
1,544,619 
1,258,398 
Property and equipment, net
143,483 
129,874 
Goodwill
321,853 
278,206 
Intangible assets, net
106,475 
91,462 
Deferred tax assets, long-term portion
19,675 
39,497 
Other assets
59,735 
41,676 
Total assets
2,195,840 
1,839,113 
Current liabilities:
 
 
Accounts payable
49,806 
66,744 
Accrued liabilities
187,774 
156,164 
Long-term debt, current portion
0 
311,609 
Total current liabilities
237,580 
534,517 
Long-term debt
807,369 
0 
Other long-term liabilities
69,954 
28,531 
Commitments and contingencies
   
   
Conversion option subject to cash settlement
5,722 
78,390 
Stockholders' equity:
 
 
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued at January 1, 2012 and January 2, 2011
0 
0 
Common stock, $0.01 par value, 320,000,000 shares authorized, 166,707,208 shares issued at January 1, 2012, 151,512,837 shares issued at January 2, 2011
1,668 
1,516 
Additional paid-in capital
2,249,900 
1,891,288 
Accumulated other comprehensive income
2,117 
1,765 
Accumulated deficit
(68,707)
(155,335)
Treasury stock, at cost (44,664,972 shares at January 1, 2012 and 24,904,564 shares at January 2, 2011)
(1,109,763)
(541,559)
Total stockholders' equity
1,075,215 
1,197,675 
Total liabilities and stockholders' equity
$ 2,195,840 
$ 1,839,113 
Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Revenue:
 
 
 
Product revenue
$ 987,280 
$ 842,510 
$ 627,240 
Service and other revenue
68,255 
60,231 
39,084 
Total revenue
1,055,535 
902,741 
666,324 
Cost of revenue:
 
 
 
Cost of product revenue
308,228 
271,997 
190,714 
Cost of service and other revenue
26,118 
21,399 
15,055 
Amortization of acquired intangible assets
12,091 
7,805 
6,680 
Total cost of revenue
346,437 
301,201 
212,449 
Gross profit
709,098 
601,540 
453,875 
Operating expense:
 
 
 
Research and development
196,913 
177,947 
140,616 
Selling, general and administrative
261,843 
220,454 
176,337 
Headquarter relocation expense
41,826 
0 
0 
Restructuring charges
8,136 
0 
0 
Acquisition related expense (gain), net
919 
(8,515)
11,325 
Total operating expense
509,637 
389,886 
328,278 
Income from operations
199,461 
211,654 
125,597 
Other income (expense):
 
 
 
Interest income
7,052 
8,378 
11,029 
Interest expense
(34,790)
(24,598)
(23,718)
Other (expense) income, net
(38,678)
(10,055)
1,217 
Total other expense, net
(66,416)
(26,275)
(11,472)
Income before income taxes
133,045 
185,379 
114,125 
Provision for income taxes
46,417 
60,488 
41,844 
Net income
$ 86,628 
$ 124,891 
$ 72,281 
Net income per basic share
$ 0.70 
$ 1.01 
$ 0.59 
Net income per diluted share
$ 0.62 
$ 0.87 
$ 0.53 
Shares used in calculating basic net income per share
123,399 
123,581 
123,154 
Shares used in calculating diluted net income per share
138,937 
143,433 
137,096 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Balance at Dec. 28, 2008
$ 798,667 
$ 1,389 
$ 1,469,770 
$ 2,422 
$ (352,507)
$ (322,407)
Balance, shares at Dec. 28, 2008
 
138,937,000 
 
 
 
(17,928,000)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]
 
 
 
 
 
 
Net income
72,281 
 
 
 
72,281 
 
Unrealized gain (loss) on available-for-sale securities, net of deferred tax
408 
 
 
408 
 
 
Comprehensive income
72,689 
 
 
 
 
 
Issuance of common stock, shares
 
4,523,000 
 
 
 
 
Issuance of common stock, value
 
46 
46,909 
 
 
 
Net repurchase of common stock, shares
(6,140,000)
 
 
 
 
(6,140,000)
Net repurchase of common stock, value
 
 
 
 
 
(175,136)
Issuance of common stock, net of repurchases
(128,181)
 
 
 
 
 
Share-based compensation
60,813 
 
60,813 
 
 
 
Net incremental tax benefit related to stock options exercised
39,319 
 
39,319 
 
 
 
Remeasurement of convertible debt, value
20,941 
1 
20,940 
 
 
 
Remeasurement of convertible debt, shares
 
84,000 
 
 
 
 
Balance at Jan. 03, 2010
864,248 
1,436 
1,637,751 
2,830 
(280,226)
(497,543)
Balance, shares at Jan. 03, 2010
 
143,544,000 
 
 
 
(24,068,000)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]
 
 
 
 
 
 
Net income
124,891 
 
 
 
124,891 
 
Unrealized gain (loss) on available-for-sale securities, net of deferred tax
(1,065)
 
 
(1,065)
 
 
Comprehensive income
123,826 
 
 
 
 
 
Issuance of common stock, shares
 
7,969,000 
 
 
 
 
Issuance of common stock, value
 
80 
117,965 
 
 
 
Net repurchase of common stock, shares
 
 
 
 
 
(836,000)
Net repurchase of common stock, value
 
 
 
 
 
(44,016)
Issuance of common stock, net of repurchases
74,029 
 
 
 
 
 
Share-based compensation
71,725 
 
71,725 
 
 
 
Net incremental tax benefit related to stock options exercised
42,445 
 
42,445 
 
 
 
Reclassification of conversion option subject to cash settlement
21,402 
 
21,402 
 
 
 
Balance at Jan. 02, 2011
1,197,675 
1,516 
1,891,288 
1,765 
(155,335)
(541,559)
Balance, shares at Jan. 02, 2011
 
151,513,000 
 
 
 
(24,904,000)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]
 
 
 
 
 
 
Net income
86,628 
 
 
 
86,628 
 
Unrealized gain (loss) on available-for-sale securities, net of deferred tax
352 
 
 
352 
 
 
Comprehensive income
86,980 
 
 
 
 
 
Issuance of common stock, shares
 
15,194,000 
 
 
 
 
Issuance of common stock, value
 
152 
104,268 
 
 
 
Net repurchase of common stock, shares
 
 
 
 
 
(19,990,000)
Net repurchase of common stock, value
 
 
 
 
 
(572,207)
Issuance of common stock, net of repurchases
(467,787)
 
 
 
 
 
Convertible note, equity portion, net of tax and issuance costs
155,366 
 
155,366 
 
 
 
Tax impact from the issuance of convertible debt
(59,427)
 
(59,427)
 
 
 
Tax benefit related to conversions of convertible debt
11,409 
 
11,409 
 
 
 
Share-based compensation
92,153 
 
92,153 
 
 
 
Net incremental tax benefit related to stock options exercised
43,122 
 
43,122 
 
 
 
Reclassification of conversion option subject to cash settlement
7,667 
 
7,667 
 
 
 
Equity based contingent compensation
3,457 
 
3,457 
 
 
 
Issuance of treasury stock, value
4,600 
 
597 
 
 
4,003 
Issuance of treasury stock, shares
 
 
 
 
 
229,000 
Balance at Jan. 01, 2012
$ 1,075,215 
$ 1,668 
$ 2,249,900 
$ 2,117 
$ (68,707)
$ (1,109,763)
Balance, shares at Jan. 01, 2012
 
166,707,000 
 
 
 
(44,665,000)
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Cash flows from operating activities:
 
 
 
Net income
$ 86,628 
$ 124,891 
$ 72,281 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation expense
55,575 
34,204 
24,504 
Amortization of acquired intangible assets
12,689 
7,805 
6,680 
Share-based compensation expense
92,092 
71,645 
60,811 
Accretion of debt discount
32,173 
21,407 
20,286 
Loss on extinguishment of debt
37,611 
0 
0 
Cease-use loss
23,638 
   
   
Contingent compensation expense
3,457 
0 
0 
Incremental tax benefit related to stock options exercised
(46,354)
(42,445)
(39,319)
Deferred income taxes
19,227 
48,696 
29,704 
Change in fair value of contingent consideration
(4,500)
(10,376)
0 
Impairment of cost-method investment
0 
13,223 
0 
Acquired in-process research and development
0 
1,325 
11,325 
Other non-cash adjustments
8,872 
4,325 
1,721 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(7,011)
(7,844)
(18,578)
Inventory
22,152 
(48,583)
(20,557)
Prepaid expenses and other current assets
(2,016)
2,554 
(3,429)
Other assets
(4,004)
(3,566)
(2,670)
Accounts payable
(21,097)
23,150 
11,778 
Accrued liabilities
42,955 
32,028 
19,997 
Other long-term liabilities
8,058 
(113)
814 
Unrealized gain (loss) on foreign exchange
(2,005)
247 
(3,157)
Net cash provided by operating activities
358,140 
272,573 
172,191 
Cash flows from investing activities:
 
 
 
Purchases of available-for-sale securities
(1,310,269)
(846,208)
(694,487)
Sales of available-for-sale securities
900,884 
539,161 
310,226 
Maturities of available-for-sale securities
160,007 
149,450 
203,990 
Sales and maturities of trading securities
0 
54,900 
1,000 
Net cash paid for acquisitions
(58,302)
(98,211)
(1,325)
Purchases of strategic investments
(13,769)
(27,677)
(19,900)
Purchases of property and equipment
(77,800)
(49,818)
(52,673)
Cash paid for intangible assets
(1,750)
(6,650)
(3,400)
Net cash used in investing activities
(400,999)
(285,053)
(256,569)
Cash flows from financing activities:
 
 
 
Payments on current portion of long-term debt
(349,874)
0 
(10,000)
Proceeds from issuance of convertible notes
903,492 
0 
0 
Incremental tax benefit related to stock options exercised
46,354 
42,445 
39,319 
Common stock repurchases
(570,406)
(44,016)
(175,136)
Proceeds from the exercise of warrants
5,512 
16,029 
7,576 
Proceeds from issuance of common stock
61,938 
102,016 
39,379 
Net cash provided by (used in) financing activities
97,016 
116,474 
(98,862)
Effect of exchange rate changes on cash and cash equivalents
(126)
320 
849 
Net increase (decrease) in cash and cash equivalents
54,031 
104,314 
(182,391)
Cash and cash equivalents at beginning of year
248,947 
144,633 
327,024 
Cash and cash equivalents at end of year
302,978 
248,947 
144,633 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest
2,481 
2,437 
2,437 
Cash paid for income taxes
$ 9,806 
$ 31,566 
$ 10,361 
Consolidated Balance Sheets (Parenthetical) (USD $)
Jan. 1, 2012
Jan. 2, 2011
Statement of Financial Position [Abstract]
 
 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
320,000,000 
320,000,000 
Common stock, shares issued
166,707,208 
151,512,837 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
0 
0 
Treasury stock, shares
44,664,972 
24,904,564 
Organization and Summary of Significant Accounting Policies
Organization and Summary of Significant Accounting Policies
Organization and Summary of Significant Accounting Policies

Organization and Business

Illumina, Inc. (the Company) is a leading developer, manufacturer, and marketer of life science tools and integrated systems for the analysis of genetic variation and biological function. Using the Company’s proprietary technologies, Illumina provides a comprehensive line of genetic analysis solutions, with products and services that serve a broad range of highly interconnected markets, including sequencing, genotyping, gene expression, and molecular diagnostics. The Company’s customers include leading genomic research centers, academic institutions, government laboratories, and clinical research organizations, as well as pharmaceutical, biotechnology, agrigenomics, and consumer genomics companies.

Basis of Presentation

The consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Fiscal Year

The Company's fiscal year is 52 or 53 weeks ending the Sunday closest to December 31, with quarters of 13 or 14 weeks ending the Sunday closest to March 31, June 30, September 30, and December 31. The years ended January 1, 2012, January 2, 2011, and January 3, 2010 were 52, 52 and 53 weeks, respectively.

Use of Estimates

The preparation of financial statements requires that management make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Segment Information

The Company is organized in two operating segments for purposes of recording and reporting our financial results: Life Sciences and Diagnostics. The Life Sciences operating segment includes all products and services related to the research market, namely the product lines based on the Company’s sequencing, BeadArray, VeraCode, and real-time polymerase chain reaction (PCR) technologies. The Diagnostics operating segment focuses on the emerging opportunity in molecular diagnostics. During all periods presented, the Diagnostics operating segment had limited activity. Accordingly, the Company’s operating results for both segments are reported on an aggregate basis as one reportable segment. The Company will begin reporting in two reportable segments once revenues, operating profit or loss, or assets of the Diagnostics operating segment exceeds 10% of the consolidated amounts.

Acquisitions

The Company measures all assets acquired and liabilities assumed, including contingent considerations and all contractual contingencies, at fair value as of the acquisition date. In addition, the Company capitalizes in-process research and development (IPR&D) and either amortizes it over the life of the product upon commercialization, or writes it off if the project is abandoned or impaired. Post-acquisition adjustments related to business combination deferred tax asset valuation allowances and liabilities for uncertain tax positions are recorded in current period income tax expense. Contingent purchase considerations are remeasured to estimated fair value at each reporting period with the change in fair value recorded in acquisition related (gain) expense, net, a component of operating expenses.

Cash Equivalents and Short-Term Investments

Cash equivalents are comprised of short-term, highly liquid investments with maturities of 90 days or less at the date of purchase.

Short-term investments consist of U.S. Treasury, U.S. government agency securities, and corporate debt securities. Management classifies short-term investments as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. All short-term investments are recorded at estimated fair value. Unrealized gains and losses for available-for-sale securities are included in accumulated other comprehensive income, a component of stockholders’ equity. The Company evaluates its investments to assess whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered to be other than temporary if they are related to deterioration in credit risk or if it is likely that the Company will sell the securities before the recovery of their cost basis. Realized gains and losses and declines in value judged to be other than temporary are determined based on the specific identification method and are reported in other (expense) income, net in the consolidated statements of income.

Fair Value Measurements

The Company determines the fair value of its assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

•
Level 1 — Quoted prices in active markets for identical assets or liabilities.
•
Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of financial instruments such as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued liabilities, excluding acquisition related contingent consideration liabilities, approximate the related fair values due to the short-term maturities of these instruments.

Accounts Receivable

Trade accounts receivable are recorded at the net invoice value and are not interest bearing. The Company considers receivables past due based on the contractual payment terms. The Company reviews its exposure to accounts receivable and reserves specific amounts if collectibility is no longer reasonably assured. The Company also reserves a percentage of its trade receivable balance based on collection history and current economic trends that might impact the level of future credit losses. The Company re-evaluates such reserves on a regular basis and adjusts its reserves as needed.

Concentrations of Risk

The Company operates in markets that are highly competitive and rapidly changing. Significant technological changes, shifting customer needs, the emergence of competitive products or services with new capabilities, and other factors could negatively impact the Company’s operating results. A significant portion of the Company's customers consist of university and research institutions that management believes are, to some degree, directly or indirectly supported by the United States Government. A significant change in current research funding, particularly with respect to the National Institutes of Health, could have a material adverse impact on the Company’s future revenues and results of operations.

The Company is also subject to risks related to its financial instruments including its cash and cash equivalents, investments, and accounts receivable. Most of the Company’s cash and cash equivalents as of January 1, 2012 were deposited with financial institutions in the United States. The Company’s investment policy restricts the amount of credit exposure to any one issuer to 5% of the portfolio at the time of purchase and to any one industry sector, as defined by Bloomberg classifications, to 25% of the portfolio at the time of purchase. There is no limit to the percentage of the portfolio that may be maintained in U.S. treasury obligations, U.S. government agency securities, and money market funds.

The Company’s products require customized components that currently are available from a limited number of sources. The Company obtains certain key components included in its products from single vendors.

The Company performs a regular review of customer activity and associated credit risks and do not require collateral or enter into netting arrangements. Shipments to customers outside the United States comprised 50%, 45%, and 48% of the Company's revenue for the years ended January 1, 2012, January 2, 2011, and January 3, 2010, respectively. Customers outside the United States represented 52% and 59% of the Company's gross trade accounts receivable balance as of January 1, 2012 and January 2, 2011, respectively. Sales to territories outside of the United States may be denominated in U.S. dollars or in the local currency.

International sales entail a variety of risks, including currency exchange fluctuations, longer payment cycles, and greater difficulty in accounts receivable collection. The Company is also subject to general geopolitical risks, such as political, social and economic instability, and changes in diplomatic and trade relations. The risks of international sales are mitigated in part by the extent to which sales are geographically distributed. The Company has historically not experienced significant credit losses from investments and accounts receivable. Approximately 20% of the Company's revenue is derived from European countries other than the United Kingdom. As the credit and economic conditions in certain southern European countries continue to deteriorate, the Company regularly reviews its accounts receivable outstanding in these countries and assesses the allowance for doubtful accounts accordingly. As of January 1, 2012, non-current accounts receivables from these countries accounted for approximately 3% of the Company's accounts receivable balance, and the Company has not experienced significant difficulties in collecting on the accounts receivable outstanding in these countries.

Inventory

Inventory is stated at the lower of cost (on a first in, first out basis) or market. Inventory includes raw materials and finished goods that may be used in the research and development process and such items are expensed as consumed or expired. Provisions for slow moving, excess, and obsolete inventories are estimated based on product life cycles, quality issues, historical experience, and usage forecasts.

Property and Equipment

Property and equipment are stated at cost, subject to review of impairment, and depreciated over the estimated useful lives of the assets (generally three to seven years) using the straight-line method. Amortization of leasehold improvements is computed over the shorter of the lease term or the estimated useful life of the related assets. Maintenance and repairs are charged to operations as incurred. When assets are sold, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operating expense.

Goodwill, Intangible Assets and Other Long-Lived Assets

Goodwill represents the excess of cost over fair value of net assets acquired. The change in the carrying value of goodwill during the year ended January 1, 2012 was due to goodwill recorded in connection with the Company's acquisition of Epicentre Technologies Corporation (Epicentre) in January 2011.

The Company's identifiable intangible assets are comprised primarily of IPR&D, licensed technology, acquired core technologies, customer relationships, trade names, and license agreements. Except IPR&D, the cost of all identifiable intangible assets is amortized on a straight-line basis over their respective useful lives. The Company regularly performs reviews to determine if the carrying values of its long-lived assets are impaired. A review of intangible assets that have finite useful lives and other long-lived assets is performed when an event occurs indicating the potential for impairment. If indicators of impairment exist, the Company assesses the recoverability of the affected long-lived assets by determining whether the carrying amount of such assets exceeds the undiscounted expected future cash flows associated with such assets. If impairment is indicated, the Company compares the carrying amount to the estimated fair value of the affected assets and adjusts the value of such assets accordingly. Factors that would indicate potential impairment include a significant decline in the Company's stock price and market capitalization compared to its net book value, significant changes in the ability of a particular asset to generate positive cash flows, and significant changes in the Company's strategic business objectives and utilization of a particular asset. The Company performed quarterly reviews of its long-lived assets and noted no indications of impairment for the year ended January 1, 2012.

Goodwill and IPR&D, which have indefinite useful lives, are reviewed for impairment at least annually during the second fiscal quarter, or more frequently if an event occurs indicating the potential for impairment. The performance of the goodwill impairment test is a two-step process. The first step of the impairment test involves comparing the estimated fair value of the reporting unit with its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to determine the amount of loss, which involves comparing the implied fair value of the goodwill with the carrying value of the goodwill. The Company performed its annual impairment test of goodwill in the second fiscal quarter of 2011, noting no impairment. In its impairment test, the Company concluded that it has a single reporting unit and that its fair value exceeded its book value, using market capitalization as a reference for the Company's fair value. Therefore, the first step recoverability test was passed and the second step analysis was not required.
The IPR&D impairment test requires the Company to assess the fair value of the asset as compared to its carrying value, and if the carrying value exceeds the fair value, record an impairment charge. The Company performed its annual impairment test of its IPR&D in the second fiscal quarter of 2011, noting no impairment. In addition, in connection of our restructuring plan executed in the fourth quarter of 2011, the Company identified certain impairment indicators related to its IPR&D asset, and performed another impairment test as of January 1, 2012, noting no impairment. In its impairment test, the Company assessed the fair value of IPR&D using an income approach, taking into consideration various factors such as future revenue contributions, additional research and development costs to be incurred, and contributory asset charges. The rate used to discount net future cash flows to their present values was based on a risk-adjusted rate of return.

Reserve for Product Warranties

The Company generally provides a one-year warranty on instruments. Additionally, the Company provides a warranty on its consumables through the expiration date, which generally ranges from six to twelve months after the manufacture date. The Company establishes an accrual for estimated warranty expenses based on historical experience as well as anticipated product performance. The Company periodically reviews the adequacy of its warranty reserve, and adjusts, if necessary, the warranty percentage and accrual based on actual experience and estimated costs to be incurred. Warranty expense is recorded as a component of cost of product revenue. Warranty expenses associated with extended maintenance contracts for systems are recorded as cost of service and other revenue as incurred.

Revenue Recognition

The Company’s revenue is generated primarily from the sale of products and services. Product revenue primarily consists of sales of instrumentation and consumables used in genetic analysis. Service and other revenue primarily consists of revenue received for performing genotyping and sequencing services, instrument service contract sales, and amounts earned under research agreements with government grants, which are recognized in the period during which the related costs are incurred.

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectibility is reasonably assured. In instances where final acceptance of the product or system is required, revenue is deferred until all the acceptance criteria have been met. All revenue is recorded net of any discounts.

Revenue for product sales is recognized generally upon transfer of title to the customer, provided that no significant obligations remain and collection of the receivable is reasonably assured. Revenue for genotyping and sequencing services is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer or agreed upon milestones are reached.

In order to assess whether the price is fixed or determinable, the Company evaluates whether refund rights exist. If there are refund rights or payment terms based on future performance, the Company defers revenue recognition until the price becomes fixed or determinable. The Company assesses collectibility based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. If the Company determines that collection of a payment is not reasonably assured, revenue recognition is deferred until receipt of payment.

The Company regularly enters into contracts where revenue is derived from multiple deliverables including any mix of products or services. These products or services are generally delivered within a short time frame, approximately three to six months, of the contract execution date. Revenue recognition for contracts with multiple deliverables is based on the individual units of accounting determined to exist in the contract. A delivered item is considered a separate unit of accounting when the delivered item has value to the customer on a stand-alone basis. Items are considered to have stand-alone value when they are sold separately by any vendor or when the customer could resell the item on a stand-alone basis. Consideration is allocated at the inception of the contract to all deliverables based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence exists, the Company uses its best estimate of the selling price for the deliverable.

In order to establish VSOE of selling price, the Company must regularly sell the product or service on a standalone basis with a substantial majority priced within a relatively narrow range. VSOE of selling price is usually the midpoint of that range. If there are not a sufficient number of standalone sales and VSOE of selling price cannot be determined, then the Company considers whether third party evidence can be used to establish selling price. Due to the lack of similar products and services sold by other companies within the industry, the Company has rarely established selling price using third-party evidence. If neither VSOE nor third party evidence of selling price exists, the Company determines its best estimate of selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, the Company relies upon prices set by the Company’s pricing committee adjusted for applicable discounts. The Company recognizes revenue for delivered elements only when it determines there are no uncertainties regarding customer acceptance.

In the first quarter of 2010, the Company offered an incentive with the launch of the HiSeq 2000 that enabled existing Genome Analyzer customers to trade in their Genome Analyzer and receive a discount on the purchase of a HiSeq 2000. The incentive was limited to customers who had purchased a Genome Analyzer as of the date of the announcement and was the first significant trade-in program offered by the Company. The Genome Analyzer trade-in program was completed in 2011. The Company accounted for HiSeq 2000 discounts related to the Genome Analyzer trade-in program as reductions to revenue upon recognition of the HiSeq 2000 sales revenue, which is later than the date the trade-in program was launched.

In certain markets within Europe, the Asia-Pacific region, Latin America, the Middle East, and South Africa the Company sells products and provides services to customers through distributors that specialize in life science products. In most sales through distributors, the product is delivered directly to customers. In cases where the product is delivered to a distributor, revenue recognition is deferred until acceptance is received from the distributor, and/or the end-user, if required by the applicable sales contract. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. These transactions are accounted for in accordance with the Company's revenue recognition policy described herein.

Shipping and Handling Expenses

Shipping and handling expenses are included in cost of product revenue.

Research and Development

Research and development expenses consist of costs incurred for internal and grant-sponsored research and development. Research and development expenses include personnel expenses, contractor fees, facilities costs, and utilities. Expenditures relating to research and development are expensed in the period incurred.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were $6.8 million, $6.9 million, and $4.2 million for the years ended January 1, 2012, January 2, 2011, and January 3, 2010, respectively.

Leases

Leases are reviewed and classified as capital or operating at their inception. For leases that contain rent escalations, the Company records rent expense on a straight-line basis over the term of the lease, which includes the construction build-out period and lease extension periods, if appropriate. The difference between rent payments and straight-line rent expense is recorded as deferred rent in accrued liabilities and other long-term liabilities. Landlord allowances are amortized on a straight-line basis over the lease term as a reduction to rent expense. The Company capitalizes leasehold improvements and amortizes them over the shorter of the lease term or their expected useful lives.

During the year ended January 1, 2012, the Company substantially moved its headquarters to another facility in San Diego, California, and recorded headquarter relocation expense of $41.8 million, which primarily consisted of accelerated depreciation expense, impairment of assets, additional rent expense during the transition period when both the new and former headquarter facilities are occupied, moving expenses, and a cease-use loss. The Company recorded accelerated depreciation expense for leasehold improvements at its former headquarter facility based on the reassessed useful lives of less than a year. The Company recorded the cease-use loss and a corresponding facility exit obligation upon vacating certain buildings of its former headquarters, calculated as the present value of the remaining lease obligation offset by estimated sublease rental receipts during the remaining lease period, adjusted for deferred items and estimated lease incentives. The key assumptions used in the calculation include the amount and timing of estimated sublease rental receipts, and the risk-adjusted discount rate. Over the course of the remaining lease term of the former facility, the Company will record additional headquarter relocation expenses due to additional cease-use loss to be recorded upon exit of additional buildings, the accretion on the facility exit obligation and adjustments that may arise from change in estimates for the sublease rental receipts.

Restructuring Charges

During the fourth quarter of the year ended January 1, 2012, the Company announced and executed a restructuring plan, to reduce the Company's workforce and to consolidate certain facilities. The Company measured and accrued the liabilities associated with employee separation costs at fair value as of the date the plan was announced and terminations are communicated to employees, which primarily included severance pay and other separation costs such as outplacement services and benefits. The Company will measure and accrue the facilities exit costs at fair value upon its exit. Facilities exit costs will primarily consist of cease-use losses to be recorded upon vacating the facilities, asset impairment, and accelerated depreciation expenses.  

The fair value measurement of restructuring related liabilities requires certain assumptions and estimates to be made by the Company, such as the retention period of certain employees, the timing and amount of sublease income on properties to be vacated, and the operating costs to be paid until lease termination. It is the Company's policy to use the best estimates based on facts and circumstances available at the time of measurement, review the assumptions and estimates periodically, and adjust the liabilities when necessary.

Income Taxes

The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and credit carryforwards. Deferred tax assets and liabilities are determined using the enacted tax rates in effect for the years in which those tax assets are expected to be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date.

Deferred tax assets are regularly assessed to determine the likelihood they will be recovered from future taxable income. A valuation allowance is established when the Company believes it is more likely than not the future realization of all or some of a deferred tax asset will not be achieved. In evaluating the ability to recover deferred tax assets within the jurisdiction which they arise the Company considers all available positive and negative evidence. Factors reviewed include the cumulative pre-tax book income for the past three years, scheduled reversals of deferred tax liabilities, history of earnings and reliable forecasting, projections of pre-tax book income over the foreseeable future, and the impact of any feasible and prudent tax planning strategies.

The Company recognizes excess tax benefits associated with share-based compensation to stockholders’ equity only when realized. When assessing whether excess tax benefits relating to share-based compensation have been realized, the Company follows the with-and-without approach excluding any indirect effects of the excess tax deductions. Under this approach, excess tax benefits related to share-based compensation are not deemed to be realized until after the utilization of all other tax benefits available to the Company.

The Company recognizes the impact of a tax position in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions will be reflected in income tax expense.

Functional Currency

The U.S. dollar has been determined to be the functional currency of the Company's international operations. The Company remeasures its foreign subsidiaries’ assets and liabilities and revenue and expense accounts related to monetary assets and liabilities to the U.S. dollar and records the net gains or losses resulting from remeasurement in other (expense) income, net in the consolidated statements of income. The remeasurement resulted in an immaterial loss in the year ended January 1, 2012, an immaterial gain in the year ended January 2, 2011, and a loss of $2.3 million for the year ended January 3, 2010, respectively.

Derivatives

The Company is exposed to foreign exchange rate risks in the normal course of business. To manage a portion of the accounting exposure resulting from changes in foreign currency exchange rates, the Company enters into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the U.S. dollar. These foreign exchange contracts are carried at fair value and are not designated as hedging instruments. Changes in the value of the derivative are recognized in other (expense) income, net, in the consolidated statements of income for the current period, along with an offsetting remeasurement gain or loss on the underlying foreign currency denominated assets or liabilities.

As of January 1, 2012, the Company had foreign exchange forward contracts in place to hedge exposures in the euro, Japanese yen, and Australian dollar. As of January 1, 2012 and January 2, 2011, the total notional amount of outstanding forward contracts in place for foreign currency purchases was $25.5 million and $20.0 million, respectively. Gains and losses related to the non-designated foreign exchange forward contracts for the years ended January 1, 2012, January 2, 2011, and January 3, 2010 were immaterial.

Share-Based Compensation

The Company uses the Black-Scholes-Merton option-pricing model to estimate the fair value of stock options granted and stock purchases under the Employee Stock Purchase Plan (ESPP). This model incorporates various assumptions including expected volatility, expected term of an award, expected dividends, and the risk-free interest rates. The Company determines the expected volatility by equally weighing the historical and implied volatility of the Company’s common stock. The historical volatility of the Company’s common stock over the most recent period is generally commensurate with the estimated expected term of the Company’s stock awards, adjusted for the impact of unusual fluctuations not reasonably expected to recur and other relevant factors. The implied volatility is calculated from the implied market volatility of exchange-traded call options on the Company’s common stock. The expected term of an award is based on historical forfeiture experience, exercise activity, and on the terms and conditions of the stock awards. The fair value of restricted stock units granted is based on the market price of our common stock on the date of grant. The Company recognizes the fair value of share-based compensation on a straight-line basis over the requisite service periods of the awards.

Net Income per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period increased to include dilutive potential common shares calculated using the treasury stock method. Diluted net income per share reflects the potential dilution from outstanding stock options, restricted stock units, ESPP, warrants, shares subject to forfeiture, and convertible senior notes. Under the treasury stock method, convertible senior notes will have a dilutive impact when the average market price of the Company's common stock is above the applicable conversion price of the respective notes. In addition, the following amounts are assumed to be used to repurchase shares: the amount that must be paid to exercise stock options and warrants and purchase shares under the ESPP; the amount of compensation expense for future services that the Company has not yet recognized for stock options, restricted stock units, ESPP, and shares subject to forfeiture; and the amount of tax benefits that will be recorded in additional paid-in capital when the expenses related to respective awards become deductible.

The following table presents the calculation of weighted average shares used to calculate basic and diluted net income per share (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Weighted average shares outstanding
123,399

 
123,581

 
123,154

Effect of dilutive Convertible Senior Notes
3,783

 
9,058

 
6,497

Effect of dilutive equity awards
4,703

 
4,674

 
4,335

Effect of dilutive warrants sold in connection with the Convertible Senior Notes
7,052

 
5,317

 
1,566

Effect of dilutive warrants assumed in a prior acquisition
—

 
803

 
1,544

Weighted-average shares used in calculating diluted net income per share
138,937

 
143,433

 
137,096

Weighted average shares excluded from calculation due to anti-dilutive effect
2,418

 
1,934

 
924



Accumulated Other Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income. The Company has disclosed comprehensive income as a component of stockholders' equity. Accumulated other comprehensive income on the consolidated balance sheets at January 1, 2012 and January 2, 2011 includes accumulated foreign currency translation adjustments and unrealized gains and losses on the Company's available-for-sale securities.
The components of accumulated other comprehensive income are as follows (in thousands):
 
January 1,
2012
 
January 2,
2011
Foreign currency translation adjustments
$
1,289

 
$
1,338

Unrealized gain on available-for-sale securities, net of deferred tax
828

 
427

Total accumulated other comprehensive income
$
2,117

 
$
1,765



Balance Sheet Account Details
Balance Sheet Account Details
Investments
The following is a summary of short-term investments (in thousands):

 
January 1, 2012
 
January 2, 2011
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
 
Estimated
Fair Value
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
 
Estimated
Fair Value
Available-for-sale securities:
Debt securities in government sponsored entities
$
393,759

 
$
428

 
$
(148
)
 
$
394,039

 
$
261,890

 
$
106

 
$
(299
)
 
$
261,697

Corporate debt securities
432,550

 
1,293

 
(461
)
 
433,382

 
329,823

 
1,170

 
(235
)
 
330,758

U.S. treasury securities
58,955

 
214

 
—

 
59,169

 
52,938

 
70

 
(121
)
 
52,887

Total available-for-sale securities
$
885,264

 
$
1,935

 
$
(609
)
 
$
886,590

 
$
644,651

 
$
1,346

 
$
(655
)
 
$
645,342



Available-For-Sale Securities

As of January 1, 2012 the Company had 107 available-for-sale securities in a gross unrealized loss position, all of which had been in such position for less than twelve months. There were no impairments considered other-than-temporary as it is more likely than not the Company will hold the securities until maturity or a recovery of the cost basis. The following table shows the fair values and the gross unrealized losses of the Company's available-for- sale securities that were in an unrealized loss position as of January 1, 2012 and January 2, 2011 aggregated by investment category (in thousands):

 
January 1, 2012
 
January 2, 2011
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
Debt securities in government sponsored entities
$
133,904

 
$
(148
)
 
$
127,756

 
$
(299
)
Corporate debt securities
138,326

 
(461
)
 
92,199

 
(235
)
U.S. treasury securities
—

 
—

 
13,490

 
(121
)
Total
$
272,230

 
$
(609
)
 
$
233,445

 
$
(655
)


Realized gains and losses are determined based on the specific identification method and are reported in interest income in the consolidated statements of income. For the year ended January 1, 2012, gross realized gains on sales of available-for sale securities were $1.4 million and gross realized losses were immaterial. Gross realized gains and losses on sales of available-for-sale securities were immaterial for each of the years ended January 1, 2012 and January 3, 2010.

Contractual maturities of available-for-sale debt securities as of January 1, 2012 were as follows (in thousands):

 
Estimated Fair Value
Due within one year
$
268,355

After one but within five years
618,235

Total
$
886,590


Cost-Method Investments

As of January 1, 2012 and January 2, 2011, the aggregate carrying amounts of the Company’s cost-method investments in non-publicly traded companies were $45.3 million and $32.0 million, respectively. The Company’s cost-method investments are assessed for impairment quarterly. The Company does not estimate the fair value of cost-method investments if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investments. The Company includes cost-method investments in other long term assets in the consolidated balance sheets.

In 2010, the Company determined that a $6.0 million cost-method investment and a related $6.8 million note receivable with interest receivable of $0.4 million were below carrying value and the impairment was other-than-temporary. This determination was based upon continued shortfalls from revenue plans coupled with events at the time of assessment that created uncertainty regarding the entity's ability to obtain additional funding in a required timeframe for the entity to continue operations. As a result, the Company recorded an impairment charge of $13.2 million in other (expense) income, net in the consolidated statements of income for the year ended January 2, 2011.

Accounts Receivable
Accounts receivable consist of the following (in thousands):

 
January 1,
2012
 
January 2,
2011
Accounts receivable from product and service sales
$
175,226

 
$
165,117

Other receivables
2,657

 
2,167

Total accounts receivable, gross
177,883

 
167,284

Allowance for doubtful accounts
(3,997
)
 
(1,686
)
Total accounts receivable, net
$
173,886

 
$
165,598


Inventory

Inventory, net, consists of the following (in thousands):

 
January 1,
2012
 
January 2,
2011
Raw materials
$
58,340

 
$
54,762

Work in process
53,412

 
64,862

Finished goods
17,029

 
22,587

Total inventory, net
$
128,781

 
$
142,211



Property and Equipment

Property and equipment, net consists of the following (in thousands):

 
January 1,
2012
 
January 2,
2011
Leasehold improvements
$
63,406

 
$
55,681

Manufacturing and laboratory equipment
137,805

 
114,108

Computer equipment and software
54,826

 
41,500

Furniture and fixtures
9,274

 
6,732

Leased equipment
14,854

 
15,475

Total property and equipment, gross
280,165

 
233,496

Accumulated depreciation
(136,682
)
 
(103,622
)
Total property and equipment, net
$
143,483

 
$
129,874


Depreciation expense was $55.6 million, $34.2 million and $24.5 million for the years ended January 1, 2012, January 2, 2011, and January 3, 2010, respectively. Capital expenditures included accrued expenditures of $5.9 million, $1.8 million, and $2.3 million in the years ended January 1, 2012, January 2, 2011, and January 3, 2010, respectively. These amounts have been excluded from the Consolidated Statements of Cash Flows for the respective periods as they represent non-cash investing activities.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

 
January 1,
2012
 
January 2,
2011
Deferred revenue, current portion
$
52,573

 
$
45,863

Accrued compensation expenses
52,035

 
49,368

Accrued taxes payable
19,339

 
13,277

Customer deposits
17,958

 
14,900

Reserve for product warranties
11,966

 
16,761

Deferred rent, current portion
11,042

 
—

Accrued royalties
5,682

 
2,781

Facility exit obligation, current portion
4,408

 
—

Acquisition related contingent consideration liability
2,335

 
3,738

Other accrued expenses
10,436

 
9,476

Total accrued liabilities
$
187,774

 
$
156,164

Restructuring Activities
Restructuring Activities
Restructuring Activities

During the fourth quarter of 2011 the Company implemented a cost reduction initiative that included workforce reductions and the consolidation of certain facilities. In total, the Company notified approximately 200 employees of their involuntary termination. 

In 2011, the Company recorded a pre-tax restructuring charge of $8.1 million, primarily related to severance pay and other employee separation costs. A summary of the pre-tax charge and estimated total costs associated with the initiative is as follows (in thousands):

 
Employee Separation costs
 
Facilities Exit Costs
 
Other Costs
 
Total
Expense recorded in the year ended January 1, 2012
$
7,683

 
$
—

 
$
453

 
$
8,136

Cash paid during the year ended January 1, 2012
4,187

 
—

 
423

 
4,610

Amount recorded in accrued liabilities as of January 1, 2012
$
3,496

 
$
—

 
$
30

 
$
3,526

 
 
 
 
 
 
 
 
Estimated total restructuring costs to be incurred
$
10,932

 
$
1,600

 
$
1,303

 
$
13,835



It is expected that the accrued employee related restructuring charges will be substantially paid and the restructuring project substantially completed by the end of second quarter of 2012.
Acquisitions
Acquisitions
Acquisitions

Epicentre

On January 10, 2011, the Company acquired Epicentre, a provider of nucleic acid sample preparation reagents and specialty enzymes used in sequencing and microarray applications. Total consideration for the acquisition was $71.4 million, which included $59.4 million in net cash payments made at closing, $4.6 million in the fair value of contingent consideration settled in stock that is subject to forfeiture if certain non-revenue based milestones are not met, and $7.4 million in the fair value of contingent cash consideration of up to $15 million based on the achievement of certain revenue based milestones by January 10, 2013.

The Company estimated the fair value of contingent stock consideration based on the closing price of its common stock as of the acquisition date. Approximately 229,000 shares of common stock were issued to Epicentre shareholders in connection with the acquisition, which are subject to forfeiture if certain non-revenue-based milestones are not met. One third of these shares issued with an assessed fair value of $4.6 million were determined to be part of the purchase price. The remaining shares with an assessed fair value of $10.1 million were determined to be compensation for post-acquisition service, the cost of which will be recognized as contingent compensation expense over a period of 2 years in research and development expense or selling, general and administrative expense.

The Company estimated the fair value of contingent cash consideration using a probability weighted discounted cash flow approach, a Level 3 measurement based on unobservable inputs that are supported by little or no market activity and reflect the Company's own assumptions in measuring fair value. The Company used a discount rate of 21% in the assessment of the acquisition date fair value for the contingent cash consideration. Future changes in significant inputs such as the discount rate and estimated probabilities of milestone achievements could have a significant effect on the fair value of the contingent consideration.

The Company allocated $0.9 million of the total consideration to tangible assets, net of liabilities, and $26.9 million to identified intangible assets, including additional developed technologies of $23.3 million, customer relationships of $1.1 million, and a trade name of $2.5 million, with weighted average useful lives of approximately nine, three, and ten years, respectively. The Company recorded the excess consideration of $43.6 million as goodwill.

Prior Acquisitions

On April 30, 2010, the Company completed the acquisition of Helixis, a company developing a high-performance, low-cost, real time PCR system used for nucleic acid analysis. Total consideration for the acquisition at the closing date was approximately $86.7 million, including $70.0 million in net cash payments and $14.1 million for the fair value of contingent consideration payments that could range from $0 to $35 million based on the achievement of certain revenue-based milestones by December 31, 2011. Using information available at the close of the acquisition, the Company allocated approximately $2.3 million of the consideration to tangible assets, net of liabilities, and approximately $28.0 million to identified intangible assets that will be amortized over a useful life of 10 years. The Company also recorded a $10.7 million deferred tax liability to reflect the tax impact of the identified intangible assets that will not generate tax deductible amortization expense and an $8.7 million deferred tax asset which primarily relates to acquired net operating loss carryforwards. The Company recorded the excess consideration of approximately $58.4 million as goodwill.

Prior to the acquisition, the Company had an equity interest in Helixis with a cost basis of $2.0 million that was accounted for under the cost method of accounting. The Company recognized a gain of $2.9 million, which was included in other (expense) income, net, in its consolidated statement of income as a result of revaluing the Company's equity interest in Helixis on the acquisition date.

On July 28, 2010, the Company completed an acquisition of another privately-held, development stage entity. Total consideration for the acquisition was $22.0 million. As a result of this transaction, the Company recorded an in-process research and development (IPR&D) asset of $21.4 million in intangible assets. In determining the fair value of the IPR&D, various factors were considered, such as future revenue contributions, additional research and development costs to be incurred, and contributory asset charges. The fair value of the IPR&D was calculated using an income approach, and the rate used to discount net future cash flows to their present values was based on a risk-adjusted rate of return of approximately 28%. Significant factors considered in the calculation of the rate of return include the weighted average cost of capital, the weighted average return on assets, the internal rate of return, as well as the risks inherent in the development process for development-stage entities of similar sizes.

In addition, the Company completed the acquisition of a development-stage company in 2008, and agreed to pay the former shareholders of the entity up to an additional $35.0 million in contingent cash consideration based on the achievement of certain product-related and employment-related milestones. In accordance with the applicable accounting guidance effective at that time, when the contingency is resolved beyond a reasonable doubt and the additional consideration is issued or becomes issuable, the additional considerations are accounted for as an additional element of the cost of acquisition, resulting in additional IPR&D charges in the periods presented. All employment-related contingent compensation expense is recorded in operating expense.

As of January 1, 2012, the Company's remaining gross milestone obligations related to these prior year acquisitions consisted of potential employment-related milestone payments of $1.4 million. Contingent compensation expenses and IPR&D charges as a result of acquisitions consist of the following (in thousands):
 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Contingent compensation expense, included in research and development expense
$
4,799

 
$
3,675

 
$
3,675

Contingent compensation expense, included in selling, general and administrative expense
1,258

 
—

 
—

     Total contingent compensation expense
$
6,057

 
$
3,675

 
$
3,675

IPR&D, included in acquisition related (gain) expense, net
$
5,425

 
$
1,325

 
$
11,325

Intangible Assets
Intangible Assets
Intangible Assets

The Company’s intangible assets, excluding goodwill, are comprised primarily of acquired core technology, licensed technology from a settlement, IPR&D, license agreements, trade name, and customer relationships. Amortization for the intangible assets that have finite useful lives is recorded on a straight-line basis over their useful lives.

The following is a summary of the Company’s identifiable intangible assets as of the respective balance sheet dates (in thousands):
 
January 1, 2012
 
January 2, 2011
 
Weighted
Average
Useful Life
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Intangibles,
Net
 
Weighted
Average
Useful Life
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Intangibles,
Net
Finite-lived Intangible assets:
Licensed technology
8.0

 
$
36,000

 
$
(20,000
)
 
$
16,000

 
8.0

 
$
36,000

 
$
(15,849
)
 
$
20,151

Core technology
9.7

 
74,800

 
(18,544
)
 
56,256

 
10.0

 
51,500

 
(10,604
)
 
40,896

Customer relationships
3.0

 
1,980

 
(1,253
)
 
727

 
3.0

 
900

 
(900
)
 
—

License agreements
8.9

 
12,404

 
(2,605
)
 
9,799

 
8.9

 
10,654

 
(1,677
)
 
8,977

Trade name
10.0

 
2,500

 
(245
)
 
2,255

 
—

 
—

 
—

 
—

Infinite-lived Intangible Asset:
In-process research & development
—

 
21,438

 
—

 
21,438

 
—

 
21,438

 
—

 
21,438

Total intangible assets, net
 

 
$
149,122

 
$
(42,647
)
 
$
106,475

 
 

 
$
120,492

 
$
(29,030
)
 
$
91,462


Additions to intangible assets in the current year are a result of the Epicentre acquisition. Amortization expense associated with intangible assets was $13.6 million for the year ended January 1, 2012, $12.7 million of which related to acquired intangible assets. Amortization expense associated with intangible assets was $7.8 million and $6.7 million for the years ended January 2, 2011 and January 3, 2010 respectively.

The estimated annual amortization of intangible assets for the next five years is shown in the following table (in thousands). Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, asset impairments, and other factors.

2012
$
14,247

2013
14,332

2014
13,548

2015
13,102

2016
8,426

Thereafter
21,382

Total
$
85,037


Fair Value Measurements
Fair Value Measurements
Fair Value Measurements

The following table presents the Company's fair value hierarchy for assets and liability measured at fair value on a recurring basis as of January 1, 2012 and January 2, 2011 (in thousands):
 
January 1, 2012
 
January 2, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds (cash equivalent)
$
166,898

 
$
—

 
$
—

 
$
166,898

 
$
148,822

 
$
—

 
$
—

 
$
148,822

Debt securities in government sponsored entities
—

 
394,039

 
—

 
394,039

 
—

 
261,697

 
—

 
261,697

Corporate debt securities
—

 
433,382

 
—

 
433,382

 
—

 
330,758

 
—

 
330,758

U.S. Treasury securities
59,169

 
—

 
—

 
59,169

 
52,887

 
—

 
—

 
52,887

Deferred compensation plan assets
—

 
10,800

 
—

 
10,800

 
—

 
6,449

 
—

 
6,449

Total assets measured at fair value
$
226,067

 
$
838,221

 
$
—

 
$
1,064,288

 
$
201,709

 
$
598,904

 
$
—

 
$
800,613

Liabilities:

 

 

 

 

 

 

 

Acquisition related contingent consideration liability
$
—

 
$
—

 
$
6,638

 
$
6,638

 
$
—

 
$
—

 
$
3,738

 
$
3,738

Deferred compensation liability
—

 
8,970

 
—

 
8,970

 
—

 
5,272

 
—

 
5,272

Total liabilities measured at fair value
$
—

 
$
8,970

 
$
6,638

 
$
15,608

 
$
—

 
$
5,272

 
$
3,738

 
$
9,010


The Company holds available-for-sale securities that consist of highly liquid, investment grade debt securities. The Company determines the fair value of its debt security holdings based on pricing from a service provider. The service provider values the securities based on "consensus pricing," using market prices from a variety of industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures. The Company performs certain procedures to corroborate the fair value of its holdings, including comparing prices obtained from the service provider to prices obtained from other reliable sources.

The Company's deferred compensation plan assets consist primarily of mutual funds. See footnote "14. Employee Benefit Plans" for additional information about our deferred compensation plan.

At January 1, 2012, the Company reassessed the fair value of the contingent consideration settled in cash related to acquisitions using the income approach. These fair value measurements are Level 3 measurements. Significant assumptions used in the measurement include probabilities of achieving the remaining milestones and the discount rates, which depends on the milestone risk profiles. Due to changes in the estimated probabilities to achieve the relevant milestones and a shorter discounting period, the fair value of the contingent consideration liabilities changed, resulting in a gain of $4.5 million recorded in acquisition related (gain) expense, net, in the consolidated statements of income during the year ended January 1, 2012, respectively.

Changes in estimated fair value of contingent consideration liabilities from January 3, 2010 through January 1, 2012 are as follows (in thousands):
 
 
Contingent
Consideration
Liability
(Level 3 Measurement) 
 
Balance as of January 3, 2010
$
—

Acquisition of Helixis
14,114

Gain recorded in acquisition related (gain) expense, net
(10,376
)
Balance as of January 2, 2011
$
3,738

Acquisition of Epicentre
7,400

Gain recorded in acquisition related (gain) expense, net
(4,500
)
Balance as of January 1, 2012
$
6,638

..
Warranties
Warranties
Warranties

The Company generally provides a one-year warranty on instruments. Additionally, the Company provides a warranty on its consumables through the expiration date, which generally ranges from six to twelve months after the manufacture date. At the time revenue is recognized, the Company establishes an accrual for estimated warranty expenses based on historical experience as well as anticipated product performance. The Company periodically reviews the adequacy of our warranty reserve, and adjusts, if necessary, the warranty percentage and accrual based on actual experience and estimated costs to be incurred. Warranty expense is recorded as a component of cost of product revenue. Estimated warranty expenses associated with extended maintenance contracts for systems are recorded as a cost of service and other revenue as incurred.

Changes in the Company’s reserve for product warranties from December 28, 2008 through January 1, 2012 are as follows (in thousands):

Balance as of December 28, 2008
$
8,203

Additions charged to cost of revenue
14,613

Repairs and replacements
(12,601
)
Balance as of January 3, 2010
10,215

Additions charged to cost of revenue
25,146

Repairs and replacements
(18,600
)
Balance as of January 2, 2011
16,761

Additions charged to cost of revenue
17,913

Repairs and replacements
(22,708
)
Balance as of January 1, 2012
$
11,966



Convertible Senior Notes
Convertible Senior Notes
Convertible Senior Notes

0.25% Convertible Senior Notes due 2016

In March 2011, the Company issued $800 million aggregate principal amount of 0.25% convertible senior notes due 2016 (the 2016 Notes) in an offering conducted in accordance with Rule 144A under the Securities Act of 1933, as amended. The 2016 Notes were issued at 98.25% of par value. Debt issuance costs of approximately $0.4 million primarily comprised legal, accounting, and other professional fees, the majority of which were recorded in other noncurrent assets and are being amortized to interest expense over the five-year term of the 2016 Notes. The Company issued an additional $120 million aggregate principal amount of 2016 Notes in April 2011. The net proceeds from the initial issuance and subsequent issuance, after deducting the initial purchasers' discount and the estimated offering expenses payable by the Company, were $785.6 million and $117.9 million, respectively.

The 2016 Notes will be convertible into cash, shares of common stock, or a combination of cash and shares of common stock, at the Company's election, based on an initial conversion rate, subject to adjustment, of 11.9687 shares per $1,000 principal amount of the 2016 Notes (which represents an initial conversion price of approximately $83.55+ per share), only in the following circumstances and to the following extent: (1) during the five business-day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price per 2016 Note for each day of such measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such day; (2) during any calendar quarter (and only during that quarter) after the calendar quarter ending March 31, 2011, if the last reported sale price of the Company's common stock for 20 or more trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter; (3) upon the occurrence of specified events described in the indenture for the 2016 Notes; and (4) at any time on or after December 15, 2015 through the second scheduled trading day immediately preceding the maturity date.

As noted in the indenture for the 2016 Notes, it is the Company's intent and policy to settle conversions through combination settlement, which essentially involves repayment of an amount of cash equal to the “principal portion” and delivery of the “share amount” in excess of the conversion value over the principal portion in shares of common stock. In general, for each $1,000 in principal, the “principal portion” of cash upon settlement is defined as the lesser of $1,000, and the conversion value during the 20-day observation period as described in the indenture for the 2016 Notes. The conversion value is the sum of the daily conversion value which is the product of the effective conversion rate divided by 20 days and the daily volume weighted average price (“VWAP”) of the Company's common stock. The “share amount” is the cumulative “daily share amount” during the observation period, which is calculated by dividing the daily VWAP into the difference between the daily conversion value (i.e., conversion rate x daily VWAP) and $1,000.

The Company pays 0.25% interest per annum on the principal amount of the 2016 Notes, payable semiannually in arrears in cash on March 15 and September 15 of each year, which began on September 15, 2011. The Company made an interest payment of $1.1 million in September 2011. The 2016 Notes mature on March 15, 2016. If a designated event, as defined in the indenture for the 2016 Notes, such as acquisition, merger, or liquidation, occurs prior to the maturity date, subject to certain limitations, holders of the 2016 Notes may require the Company to repurchase all or a portion of their 2016 Notes for cash at a repurchase price equal to 100% of the principal amount of the 2016 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the repurchase date.

The Company accounts separately for the liability and equity components of the 2016 Notes in accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. The guidance requires the carrying amount of the liability component to be estimated by measuring the fair value of a similar liability that does not have an associated conversion feature. Because the Company has no outstanding non-convertible public debt, the Company determined that senior, unsecured corporate bonds traded on the market represent a similar liability to the convertible senior notes without the conversion option. Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and with similar maturity, the Company estimated the implied interest rate of its 2016 Notes to be 4.5%, assuming no conversion option. Assumptions used in the estimate represent what market participants would use in pricing the liability component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs. The estimated implied interest rate was applied to the 2016 Notes, which resulted in a fair value of the liability component of $748.5 million upon issuance, calculated as the present value of implied future payments based on the $920.0 million aggregate principal amount. The $155.4 million difference between the cash proceeds of $903.9 million and the estimated fair value of the liability component was recorded in additional paid-in capital as the 2016 Notes are not considered currently redeemable at the balance sheet date.

If the 2016 Notes were converted as of January 1, 2012, the if-converted value would not exceed the principal amount. As a policy election under applicable guidance related to the calculation of diluted net income per share, the Company elected the combination settlement method as its stated settlement policy and applied the treasury stock method in the calculation of dilutive impact of the 2016 Notes, which was anti-dilutive for the year ended January 1, 2012.
 
The Company used $314.3 million of the net proceeds to purchase 4,890,500 shares of its common stock in privately negotiated transactions concurrently with the issuance. The Company also used part of the net proceeds for the extinguishment of $349.9 million principal amount of its outstanding 0.625% convertible senior notes due 2014 upon conversions during the year ended January 1, 2012.

0.625% Convertible Senior Notes due 2014

In February 2007, the Company issued $400.0 million principal amount of 0.625% convertible senior notes due 2014 (the 2014 Notes). The Company pays 0.625% interest per annum on the principal amount of the 2014 Notes, payable semi-annually in arrears in cash on February 15 and August 15 of each year. The Company made an interest payment of $1.2 million in February 2011. Interest payment in August 2011 was immaterial due to conversions prior to the payment date. The 2014 Notes mature on February 15, 2014.

The Company entered into hedge transactions concurrently with the issuance of the 2014 Notes under which the Company is entitled to purchase up to approximately 18,322,000 shares of the Company's common stock at a strike price of approximately $21.83 per share, subject to adjustment. The convertible note hedge transactions had the effect of reducing dilution to the Company's stockholders upon conversion of the 2014 Notes. Also concurrently with the issuance of the 2014 Notes, the Company sold to the hedge counterparties warrants exercisable, on a cashless basis, for up to approximately 18,322,000 shares of the Company's common stock at a strike price of $31.435 per share, subject to adjustment. The proceeds from these warrants partially offset the cost to the Company of the convertible note hedge transactions.

The 2014 Notes became convertible into cash and shares of the Company's common stock in various prior periods and were convertible through, and including, December 31, 2011. As of January 1, 2012, the conditions to permit conversion were no longer satisfied and, as a result, the 2014 Notes were classified in long-term liabilities. During the year ended January 1, 2012, the principal amount of all 2014 Notes converted was repaid with cash and the excess of the conversion value over the principal amount was paid in shares of common stock. The equity dilution resulting from the issuance of common stock related to the conversion of the 2014 Notes was offset by repurchase of the same amount of shares under the convertible note hedge transactions, which were automatically exercised in accordance with their terms at the time of each such conversion. The balance of the convertible note hedge transactions with respect to approximately $40.1 million principal amount of the 2014 Notes (which are convertible into up to 1,837,958 shares of the Company's common stock) remained in place as of January 1, 2012. The warrants were not affected by the early conversions of the 2014 Notes and, as a result, warrants covering up to approximately 18,322,000 shares of common stock remained outstanding as of January 1, 2012.

As a result of the conversions during the year ended January 1, 2012, the Company recorded losses on extinguishment of debt calculated as the difference between the estimated fair value of the debt and the carrying value of the notes as of the settlement dates. To measure the fair value of the converted notes as of the settlement dates, the applicable interest rates were estimated using Level 2 observable inputs and applied to the converted notes using the same methodology as in the issuance date valuation. If the 2014 Notes were converted as of January 1, 2012, the if-converted value would exceed the principal amount by $15.9 million.

The following table summarizes information about the conversions of the 2014 Notes during the year ended January 1, 2012 (in thousands, except percentages):
 
 
January 1,
2012
Cash paid for principal of notes converted
 
$
349,874

Conversion value over principal amount paid in shares of common stock
 
$
727,618

Number of shares of common stock issued upon conversion
 
10,733

Loss on extinguishment of debt
 
$
37,611

Effective interest rates used to measure fair value of converted notes upon conversion
 
3.5% - 4.3%



The following table summarizes information about the equity and liability components of the 2014 and 2016 Notes (dollars in thousands). The fair values of the respective notes outstanding were measured based on quoted market prices.
 
 
January 1, 2012
 
January 2, 2011
 
 
0.25% Convertible Senior Notes due 2016 
 
 
0.625% Convertible Senior Notes due 2014 
 
 
0.625% Convertible Senior Notes due 2014 
 
Principal amount of convertible notes outstanding
 
$
920,000

 
$
40,125

 
$
389,999

Unamortized discount of liability component
 
(147,034
)
 
(5,722
)
 
(78,390
)
Net carrying amount of liability component
 
772,966

 
34,403

 
311,609

Less: current portion
 
—

 
—

 
(311,609
)
Long-term debt
 
$
772,966

 
$
34,403

 
$
—

Conversion option subject to cash settlement
 
$
—

 
$
5,722

 
$
78,390

Carrying value of equity component, net of issuance costs
 
$
155,366

 
$
114,035

 
$
71,199

Fair value of outstanding notes
 
$
725,632

 
$
60,122

 
$
1,157,450

Remaining amortization period of discount on the liability component
 
4.2 years

 
2.1 years

 
3.1 years

Effective interest rate of liability component
 
4.5
%
 
8.3
%
 
8.3
%
Contractual coupon interest expense
 
$
1,871

 
$
414

 
$
2,390

Accretion of discount on the liability component
 
$
24,502

 
$
7,671

 
$
21,407

Commitments
Commitments
Commitments

Operating Leases

The Company leases office and manufacturing facilities under various noncancellable operating lease agreements. Facility leases generally provide for periodic rent increases, and many contain escalation clauses and renewal options. Certain leases require the Company to pay property taxes and routine maintenance. The Company is headquartered in San Diego, California and leases facilities in San Diego, California; Hayward, California; Branford, Connecticut; Madison, Wisconsin; the United Kingdom; the Netherlands; Japan; Singapore; Australia; Brazil; and China.

Annual future minimum payments under these operating leases as of January 1, 2012 were as follows (in thousands):

2012
$
16,336

2013
22,598

2014
21,351

2015
20,355

2016
20,852

Thereafter
385,775

Total
$
487,267


Rent expense was $17.4 million, $14.7 million, and $13.6 million for the years ended January 1, 2012, January 2, 2011, and January 3, 2010, respectively.

In 2010, the Company entered into the lease agreement for its current corporate headquarters facility located in San Diego, California. The lease commenced on November 1, 2011 and has an initial term of 20 years with four five-year options to extend. There is a one-time option to terminate the lease after 15 years in exchange for an early termination fee. The lease includes two existing office buildings and a central plant building with approximately 346,600 square feet. The Company has also agreed to lease a third office building to be built at this facility containing approximately 123,400 rentable square feet. The Company has the right to further expand the premises and lease one or more of three additional office buildings that may be built at this facility. Total minimum lease payments during the initial term of the lease is expected to be $355.9 million, excluding further expansion beyond the third building, and taking no consideration of tenant improvement allowances totaling $21.9 million. The Company capitalizes the leasehold improvements and amortizes them over the shorter of the lease term or their expected useful life. The leasehold improvement allowances reduce rent expense over the initial lease term.

Lease commitments of $100.0 million related to the lease for the Company’s former headquarters are also included in the table above. Upon vacating certain buildings of its former headquarters in late 2011, the Company recorded a cease-use loss of $23.6 million and a corresponding facility exit obligation of $25.0 million, as the Company is further obligated for certain ongoing operating costs prior to any sublease that may be obtained.

The facility exit obligation as of January 1, 2012 is as follows (in thousands):
 
 
January 1,
2012
Facility exit obligation, current portion
$
4,408

Facility exit obligation, non-current
20,641

Total facility exit obligation
$
25,049

Share-based Compensation Expense
Share-based Compensation Expense
Share-based Compensation Expense

Total share-based compensation expense for all stock awards consists of the following (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Cost of product revenue
$
6,951

 
$
5,378

 
$
4,776

Cost of service and other revenue
695

 
470

 
514

Research and development
32,105

 
25,428

 
19,960

Selling, general and administrative
52,341

 
40,369

 
35,561

Share-based compensation expense before taxes
92,092

 
71,645

 
60,811

Related income tax benefits
(32,168
)
 
(25,231
)
 
(20,121
)
Share-based compensation expense, net of taxes
$
59,924

 
$
46,414

 
$
40,690


The assumptions used for the specified reporting periods and the resulting estimates of weighted-average fair value per share of options granted and for stock purchased under the ESPP during those periods are as follows:

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Stock options granted:
 
 
 
 
 
Risk-free interest rate
0.85 - 2.23%

 
2.05 - 2.73%

 
1.69 - 1.97%

Expected volatility
41 - 53%

 
46 - 48%

 
55 - 58%

Expected term
4.7 - 5.5 years

 
6.0 years

 
5.2 years

Expected dividends
—

 
—

 
—

 
 
 
 
 
 
Stock purchased under the ESPP:
 
 
 
 
 
Risk-free interest rate
0.16 - 0.30%

 
0.17 - 0.48%

 
0.28 - 2.90%

Expected volatility
43 - 48%

 
46 - 48%

 
48 - 58%

Expected term
0.5 - 1.0 years

 
0.5 - 1.0 years

 
0.5 - 1.0 years

Expected dividends
—

 
—

 
—


As of January 1, 2012, approximately $158.9 million of total unrecognized compensation cost related to stock options, restricted stock units, and ESPP shares issued to date is expected to be recognized over a weighted-average period of approximately 2.4 years.

Stockholders' Equity
Stockholders' Equity
Stockholders’ Equity

Common Stock

On January 1, 2012 and January 2, 2011, the Company had 122,041,000 and 126,607,000 shares of common stock outstanding, respectively, excluding treasury shares.

Stock Options

On January 1, 2012, the Company had three active stock plans: the 2005 Stock and Incentive Plan (the 2005 Stock Plan), the 2005 Solexa Equity Incentive Plan (the 2005 Solexa Equity Plan), and the New Hire Stock and Incentive Plan. As of January 1, 2012, options to purchase 5,220,000 shares remained available for future grant under the 2005 Stock Plan and 2005 Solexa Equity Plan. There is no set number of shares reserved for issuance under the New Hire Stock and Incentive Plan.

Stock options granted at the time of hire primarily vest over a four or five-year period, with 20% or 25% of options vesting on the first anniversary of the grant date and the remaining options vesting monthly over the remaining vesting period. Stock options granted subsequent to hiring primarily vest monthly over a four or five-year period. Each grant of options has a maximum term of ten years, measured from the applicable grant date, subject to earlier termination if the optionee's service with us ceases. Vesting in all cases is subject to the individual's continued service to us through the vesting date. The Company satisfies option exercises through the issuance of new shares.

The Company's stock option activity under all stock option plans from December 28, 2008 through January 1, 2012 is as follows:

 
Options (in thousands)
 
Weighted-
Average
Exercise Price
 
Weighted
Average
Grant-Date
Fair Value
per Share
Outstanding at December 28, 2008
18,134

 
$
16.26

 
 
Granted
1,560

 
28.86

 
$
14.74

Exercised
(2,966
)
 
10.56

 
 
Cancelled
(639
)
 
14.88

 
 
Outstanding at January 3, 2010
16,089

 
18.59

 
 
Granted
2,045

 
39.11

 
18.82

Exercised
(5,541
)
 
16.65

 
 
Cancelled
(711
)
 
21.76

 
 
Outstanding at January 2, 2011
11,882

 
22.83

 
 
Granted
1,399

 
64.98

 
$
27.47

Exercised
(2,784
)
 
17.98

 
 
Cancelled
(119
)
 
33.49

 
 
Outstanding at January 1, 2012
10,378

 
$
29.69

 
 

At January 1, 2012, outstanding options to purchase 7,126,000 shares were exercisable with a weighted average per share exercise price of $23.58. The weighted average remaining life of options outstanding and exercisable is 6.1 years and 5.4 years, respectively, as of January 1, 2012.

The aggregate intrinsic value of options outstanding and options exercisable as of January 1, 2012 was $78.3 million and $71.2 million, respectively. Aggregate intrinsic value represents the difference between the Company's closing stock price per share on the last trading day of the fiscal period, which was $30.48 as of December 30, 2011, and the exercise price multiplied by the number of options outstanding. Total intrinsic value of options exercised was $136.5 million, $156.9 million, and $73.4 million for the years ended January 1, 2012, January 2, 2011, and January 3, 2010, respectively. Total fair value of options vested was $49.5 million, $47.3 million, and $52.2 million for the years ended January 1, 2012, January 2, 2011, and January 3, 2010, respectively.

Employee Stock Purchase Plan

A total of 15,467,000 shares of the Company's common stock have been reserved for issuance under its 2000 Employee Stock Purchase Plan, or ESPP. The ESPP permits eligible employees to purchase common stock at a discount, but only through payroll deductions, during defined offering periods. The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. The initial offering period commenced in July 2000.

The ESPP provides for annual increases of shares available for issuance by the lesser of 3% of the number of outstanding shares of the Company's common stock on the last day of the immediately preceding fiscal year, 3,000,000 shares or such lesser amount as determined by the Company's board of directors. Shares totaling 328,000, 373,000, and 360,000 were issued under the ESPP during the years ended January 1, 2012, January 2, 2011, and January 3, 2010, respectively. The weighted average subscription date fair values of shares under the ESPP during the same periods were $20.08, $11.10, and $9.24, respectively. As of January 1, 2012 and January 2, 2011, there were 15,734,000 shares and 16,062,000 shares available for issuance under the ESPP, respectively.

Restricted Stock Units

The Company grants restricted stock units (RSUs) pursuant to its 2005 Stock and Incentive Plan as part of its periodic employee equity compensation review program. RSUs are share awards that, upon vesting, will deliver to the holder shares of the Company's common stock. For grants to new hires prior to July 2011, RSUs generally vest 15% on the first anniversary of the grant date, 20% on the second anniversary of the grant date, 30% on the third anniversary of the grant date, and 35% on the fourth anniversary of the grant date. For grants to new hires subsequent to July 2011, RSUs generally vest over a four-year period with equal vesting on anniversaries of the grant date. For grants to existing employees, RSUs generally vest over a four-year period with 15% vesting on the first anniversary of the grant date, 20% vesting on the second anniversary of the grant date, 30% vesting on the third anniversary of the grant date, and 35% vesting on the fourth anniversary of the grant date. The Company satisfies RSU vesting through the issuance of new shares.

A summary of the Company's RSU activity and related information from December 28, 2008 through January 1, 2012 is as follows:

 
Restricted
Stock Units (in thousands)(1)
 
Weighted Average
Grant-Date Fair
Value per Share
Outstanding at December 28, 2008
1,579

 
$
32.68

Awarded
1,293

 
32.25

Vested
(246
)
 
32.33

Cancelled
(117
)
 
33.19

Outstanding at January 3, 2010
2,509

 
32.45

Awarded
1,353

 
50.74

Vested
(510
)
 
32.10

Cancelled
(243
)
 
33.36

Outstanding at January 2, 2011
3,109

 
40.39

Awarded
1,550

 
42.02

Vested
(827
)
 
36.47

Cancelled
(356
)
 
42.15

Outstanding at January 1, 2012
3,476

 
$
41.87

_______________________________________
(1)
Each RSU represents the fair market value of one share of common stock.

Based on the closing price per share of the Company's common stock of $30.48 and $63.34 on December 30, 2011 and December 31, 2010, respectively, the total pretax intrinsic value of all outstanding RSUs as of January 1, 2012 and January 2, 2011 was $145.5 million and $125.6 million, respectively. Total fair value of RSUs vested was $30.2 million, $16.4 million, and $8.0 million for the years ended January 1, 2012, January 2, 2011, and January 3, 2010, respectively.

Warrants

During the year ended January 1, 2012, the remaining warrants assumed by the Company in a prior acquisition to purchase approximately 505,000 shares of the Company's common stock were exercised, resulting in cash proceeds to the Company of approximately $5.5 million. As of January 1, 2012, warrants exercisable, on a cashless basis, for up to approximately 18,322,000 shares of common stock were outstanding with an exercise price of $31.435. These warrants were sold to counterparties to the Company's convertible note hedge transactions in connection with the offering of the Company's 2014 Notes, with the proceeds of such warrants used by the Company to partially offset the cost of such hedging transactions. All outstanding warrants expire in equal installments during the 40 consecutive scheduled trading days beginning on May 16, 2014.

Share Repurchases

In August 2011, the Company's board of directors authorized a $100 million discretionary repurchase program. During the year ended January 1, 2012, the Company utilized the authorized amount in its entirety and repurchased approximately 1,894,000 shares under this program.

Concurrently with the issuance of the Company's 2016 Notes in March 2011, 4,890,500 shares were repurchased for $314.3 million.

In July 2010, the Company's board of directors authorized a $200 million stock repurchase program, with $100 million allocated to repurchasing Company common stock under a 10b5-1 plan over a 12 month period and $100 million allocated to repurchasing Company common stock at management's discretion during open trading windows. During the year ended January 1, 2012, the Company repurchased approximately 2,438,000 shares for $156.0 million. The authorized repurchase amount had been utilized completely as of January 1, 2012.

In November 2009, upon the completion of the $75.0 million repurchase program authorized by the Company's board of directors in July 2009, our board of directors authorized an additional $100.0 million stock repurchase program. In fiscal 2009, the Company repurchased a total of 6.1 million shares for $175.1 million, under both programs in open-market transactions or through privately negotiated transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934. This program expired at the end of 2009.

Stockholder Rights Plan

On May 3, 2001, the board of directors of the Company declared a dividend of one preferred share purchase right (a Right) for each outstanding share of common stock of the Company. The dividend was payable on May 14, 2001 to the stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one unit consisting of one thousandth of a share of its Series A Junior Participating Preferred Stock at a price of $100 per unit. The Rights will be exercisable if a person or group hereafter acquires beneficial ownership of 15% or more of the outstanding common stock of the Company or announces an offer for 15% or more of the outstanding common stock. If a person or group acquires 15% or more of the outstanding common stock of the Company, each Right will entitle its holder to purchase, at the exercise price of the Right, a number of shares of common stock having a market value of two times the exercise price of the Right. If the Company is acquired in a merger or other business combination transaction after a person acquires 15% or more of the Company’s common stock, each Right will entitle its holder to purchase, at the Right’s then-current exercise price, a number of common shares of the acquiring company which at the time of such transaction have a market value of two times the exercise price of the Right. The board of directors will be entitled to redeem the Rights at a price of $0.01 per Right at any time before any such person acquires beneficial ownership of 15% or more of the outstanding common stock. The Rights expired on May 14, 2011.

On January 25, 2012, the board of directors of the Company declared a dividend of one preferred share purchase right (a Right) for each outstanding share of common stock of the Company. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock of the Company, par value $0.01 per share (the Preferred Shares), at a price of $275.00 per one one thousandth of a Preferred Share, subject to adjustment. The Rights will not be exercisable until such time, if ever, that the board of directors determines to eliminate its deferral of the date on which separate Rights certificates are issued and the Rights trade separately from the Company's common stock (the Distribution Date). If a person or group acquires 15% or more of the outstanding common stock of the Company, each Right will entitle its holder to purchase, at the exercise price of the Right, a number of shares of common stock having a market value of two times the exercise price of the Right. If the Company is acquired in a merger or other business combination transaction after a person acquires 15% or more of the Company’s common stock, each Right will entitle its holder to purchase, at the Right’s then-current exercise price, a number of common shares of the acquiring company which at the time of such transaction have a market value of two times the exercise price of the Right. The board of directors will be entitled to redeem the Rights at a price of $0.001 per Right at any time before the Distribution Date. The board of directors will also be entitled to exchange the Rights at an exchange ratio per Right of one share of common stock after any person acquires beneficial ownership of 15% or more of the outstanding common stock of the Company, and prior to the acquisition of 50% or more of the outstanding common stock of the Company. The Rights will expire on January 26, 2017.
Legal Proceedings
Legal Proceedings
Legal Proceedings

The Company is involved in various lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters. In connection with these matters, the Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. The Company regularly reviews contingencies to determine the adequacy of the accruals and related disclosures. The amount of ultimate loss may differ from these estimates. Because of the uncertainties related to the occurrence, amount, and range of loss on any pending litigation or claim, management is currently unable to predict their ultimate outcome, to determine whether a liability has been incurred, or to make a meaningful estimate of the reasonably possible loss or range of loss that could result from an unfavorable outcome. The Company believes, however, that the liability, if any, resulting from the aggregate amount of losses for any outstanding litigation or claim will not have a material adverse effect on the Company’s consolidated financial position, liquidity, or results of operations.

Income Taxes
Income Taxes
Income Taxes

The income (loss) before income taxes summarized by region is as follows (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
United States
$
(7,100
)
 
$
109,068

 
$
65,081

Foreign
140,145

 
76,311

 
49,044

Total income before income taxes
$
133,045

 
$
185,379

 
$
114,125


The provision for income taxes consists of the following (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Current:
 

 
 

 
 

Federal
$
43,161

 
$
39,476

 
$
43,565

State
3,958

 
8,607

 
2,511

Foreign
24,154

 
6,330

 
6,204

Total current provision
71,273

 
54,413

 
52,280

Deferred:
 

 
 

 
 

Federal
(22,738
)
 
6,557

 
(14,607
)
State
(8,050
)
 
(6,808
)
 
5,184

Foreign
5,932

 
6,326

 
(1,013
)
Total deferred provision (benefit)
(24,856
)
 
6,075

 
(10,436
)
Total tax provision
$
46,417

 
$
60,488

 
$
41,844


The provision for income taxes reconciles to the amount computed by applying the federal statutory rate to income before taxes as follows (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Tax at federal statutory rate
$
46,566

 
$
64,881

 
$
39,944

State, net of federal benefit
(49
)
 
6,231

 
4,275

Research and other credits
(6,774
)
 
(5,859
)
 
(4,050
)
Acquired in-process research & development
1,989

 
517

 
4,386

Change in valuation allowance
(688
)
 
(9,497
)
 
(1,967
)
Permanent differences
1,668

 
1,397

 
2,093

Change in fair value of contingent consideration
(1,311
)
 
(3,632
)
 
—

Impact of foreign operations
5,579

 
7,597

 
(5,400
)
Other
(563
)
 
(1,147
)
 
2,563

Total tax provision
$
46,417

 
$
60,488

 
$
41,844


Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

 
January 1,
2012
 
January 2,
2011
Deferred tax assets:
 

 
 

Net operating losses
$
4,981

 
$
11,898

Tax credits
16,647

 
18,329

Other accruals and reserves
22,411

 
17,616

Stock compensation
33,811

 
23,829

Inventory adjustments
16,469

 
5,573

Impairment of cost-method investment
4,972

 
5,058

Other amortization
4,521

 
4,893

Other
8,861

 
3,588

Total gross deferred tax assets
112,673

 
90,784

Valuation allowance on deferred tax assets
(1,799
)
 
(4,986
)
Total deferred tax assets
110,874

 
85,798

Deferred tax liabilities:
 

 
 

Purchased intangible amortization
(19,760
)
 
(22,605
)
Convertible debt
(49,404
)
 
(3,191
)
Other
(12,322
)
 
(7,137
)
Total deferred tax liabilities
(81,486
)
 
(32,933
)
Net deferred tax assets
$
29,388

 
$
52,865


A valuation allowance is established when it is more likely than not the future realization of all or some of the deferred tax assets will not be achieved. The evaluation of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis, and includes a review of all available positive and negative evidence. During the year ended January 1, 2012, the valuation allowance decreased by $3.2 million primarily due to the dissolution of a dormant foreign subsidiary that was finalized during the fourth quarter. Based on the available evidence as of January 1, 2012, the Company was not able to conclude it is more likely than not certain U.S. and foreign deferred tax assets will be realized. Therefore, the Company recorded a valuation allowance of $1.8 million against certain U.S. deferred tax assets.

As of January 1, 2012, the Company had net operating loss carryforwards for federal and state tax purposes of $25.2 million and $162.0 million, respectively, which begin to expire in 2020 and 2013, respectively, unless utilized prior. In addition, the Company also had U.S. federal and state research and development tax credit carryforwards of $11.0 million and $34.3 million, respectively, which begin to expire in 2028 and 2019, respectively, unless utilized prior.

Pursuant to Section 382 and 383 of the Internal Revenue Code, utilization of the Company’s net operating loss and credits may be subject to annual limitations in the event of any significant future changes in its ownership structure. These annual limitations may result in the expiration of net operating losses and credits prior to utilization. The deferred tax assets as of January 1, 2012 are net of any previous limitations due to Section 382 and 383.

The Company recognizes excess tax benefits associated with share-based compensation to stockholders’ equity only when realized. When assessing whether excess tax benefits relating to share-based compensation have been realized, the Company follows the with-and-without approach excluding any indirect effects of the excess tax deductions. Under this approach, excess tax benefits related to share-based compensation are not deemed to be realized until after the utilization of all other tax benefits available to the Company. During the year ended January 1, 2012, the Company realized $43.1 million of such excess tax benefits, and accordingly recorded a corresponding credit to additional paid in capital. As of January 1, 2012, the Company has $12.8 million of unrealized excess tax benefits associated with share-based compensation. These tax benefits will be accounted for as a credit to additional paid-in capital, if and when realized, rather than a reduction of the provision for income taxes.

The Company’s manufacturing operations in Singapore operate under various tax holidays and incentives that begin to expire in 2018. For the year ended January 1, 2012, these tax holidays and incentives resulted in an approximate $4.4 million decrease to the provision for income taxes and an increase to net income per diluted share of $0.03.

It is the Company's intention to indefinitely reinvest all current and future foreign earnings in order to ensure sufficient working capital and expand existing operations outside the United States. Accordingly, residual U.S. income taxes have not been provided on $102.8 million of undistributed earnings of foreign subsidiaries as of January 1, 2012. In the event the Company was required to repatriate funds from outside of the United States, such repatriation would be subject to local laws, customs, and tax consequences.
The following table summarizes the gross amount of the Company’s uncertain tax positions (in thousands):
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Balance at beginning of year
$
22,729

 
$
11,760

 
$
9,402

Increases related to prior year tax positions
875

 
5,066

 
—

Decreases related to prior year tax positions
(382
)
 
—

 
—

Increases related to current year tax positions
5,174

 
5,903

 
2,358

Balance at end of year
$
28,396

 
$
22,729

 
$
11,760


Included in the balance of uncertain tax positions as of January 1, 2012, and January 2, 2011 are $23.4 million and $18.3 million, respectively, of net unrecognized tax benefits that, if recognized, would reduce the Company's effective income tax rate in future periods.

The Company does not expect its uncertain tax positions to change significantly over the next 12 months. Any interest and penalties related to uncertain tax positions are reflected in income tax expense. During 2011, the Company recognized expenses of $1.1 million related to potential interest and penalties on uncertain tax positions. A minimal amount was recognized in 2010 for potential interest and penalties on uncertain tax positions. The Company recorded a liability for potential interest and penalties of $1.2 million as of January 1, 2012 and the liability was minimal as of January 2, 2011. Tax years 1997 to 2011 remain subject to future examination by the major tax jurisdictions in which the Company is subject to tax.
Employee Benefit Plans
Employee Benefit Plans
Employee Benefit Plans

Retirement Plan

The Company has a 401(k) savings plan covering substantially all of its employees. Company contributions to the plan are discretionary. During the years ended January 1, 2012, January 2, 2011, and January 3, 2010, the Company made matching contributions of $5.3 million, $4.2 million, and $3.3 million, respectively.

Deferred Compensation Plan

The Company adopted the Illumina, Inc. Deferred Compensation Plan (the Plan) that became effective January 1, 2008. Eligible participants, which include the Company’s senior level employees and members of the board of directors, can contribute up to 80% of their base salary and 100% of all other forms of compensation into the Plan, including bonus, equity awards, commission, and director fees. The Company has agreed to credit the participants’ contributions with earnings that reflect the performance of certain independent investment funds. On a discretionary basis, the Company may also make employer contributions to participant accounts in any amount determined by the Company. The vesting schedules of employer contributions are at the sole discretion of the Compensation Committee. However, all employer contributions shall become 100% vested upon the occurrence of the participant’s disability, death or retirement or a change in control of the Company. The benefits under this plan are unsecured. Participants are generally eligible to receive payment of their vested benefit at the end of their elected deferral period or after termination of their employment with the Company for any reason or at a later date to comply with the restrictions of Section 409A. As of January 1, 2012, no employer contributions were made to the Plan.

In January 2008, the Company also established a rabbi trust for the benefit of the participants under the Plan. In accordance with authoritative guidance related to consolidation of variable interest entities and accounting for deferred compensation arrangements where amounts earned are held in a rabbi trust and invested, the Company has included the assets of the rabbi trust in its consolidated balance sheet since the trust’s inception. As of January 1, 2012 and January 2, 2011, the assets of the trust were $10.8 million and $6.4 million, respectively, and liabilities of the Company were $9.0 million and $5.3 million, respectively. The assets and liabilities are classified as other assets and accrued liabilities, respectively, on the Company’s consolidated balance sheets. Changes in the values of the assets held by the rabbi trust are recorded in other (expense) income, net in the consolidated statement of income, and changes in the values of the deferred compensation liabilities are recorded in selling, general and administrative expenses.
Segment Information, Geographic Data, and Significant Customers
Segment Information, Geographic Data, and Significant Customers
Segment Information, Geographic Data, and Significant Customers

The Company is organized in two operating segments: Life Sciences and Diagnostics. Life Sciences operating segment includes all products and services related to the research market, namely the product lines based on the Company’s sequencing, BeadArray, VeraCode, and real-time PCR technologies. The Diagnostics operating segment focuses on the emerging opportunity in molecular diagnostics. During all periods presented, the Diagnostics operating segment had limited activity. Accordingly, the Company’s operating results for both units were reported on an aggregate basis as one reportable segment. The Company will begin reporting in two segments once revenues, operating profit or loss, or assets of the Diagnostics operating segment exceeds 10% of the consolidated amounts.

The Company had revenue in the following regions for the years ended January 1, 2012, January 2, 2011, and January 3, 2010 (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
United States
$
528,723

 
$
498,981

 
$
347,195

United Kingdom
67,578

 
60,521

 
55,854

Other European countries
210,393

 
163,062

 
140,931

Asia-Pacific
197,005

 
143,441

 
96,396

Other markets
51,836

 
36,736

 
25,948

Total
$
1,055,535

 
$
902,741

 
$
666,324


Net revenues are attributable to geographic areas based on the region of destination.

The majority of our product sales consist of consumables and instruments. For the years ended January 1, 2012, January 2, 2011, and January 3, 2010, consumable sales represented 56%, 56%, and 59%, respectively, of total revenues and instrument sales comprised 35%, 36%, and 34%, respectively, of total revenues. The Company’s customers include leading genomic research centers, academic institutions, government laboratories, and clinical research organizations, as well as pharmaceutical, biotechnology, agrigenomics, and consumer genomics companies. The Company had no customers that provided more than 10% of total revenue in the years ended January 1, 2012, January 2, 2011, and January 3, 2010.

Net long-lived assets exclude goodwill and other intangible assets since they are not allocated on a geographic basis. The Company had net long-lived assets consisting of property and equipment in the following regions as of January 1, 2012 and January 2, 2011 (in thousands):

 
January 1,
2012
 
January 2,
2011
United States
$
94,624

 
$
75,050

United Kingdom
22,642

 
26,578

Singapore
14,673

 
14,739

Other countries
11,544

 
13,507

Total
$
143,483

 
$
129,874

Quarterly Financial Information (unaudited)
Quarterly Financial Information (unaudited)
Quarterly Financial Information (unaudited)

The following financial information reflects all normal recurring adjustments, except as noted below, which are, in the opinion of management, necessary for a fair statement of the results and cash flows of interim periods. All quarters for fiscal years 2011 and 2010 ended January 1, 2012 and January 2, 2011, respectively were 13 weeks. Summarized quarterly data for fiscal years 2011 and 2010 are as follows (in thousands except per share data):

 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
2011:
 

 
 

 
 

 
 

Total revenue
$
282,515

 
$
287,450

 
$
235,499

 
$
250,071

Gross profit
188,041

 
193,356

 
157,115

 
170,586

Net income
24,137

 
30,620

 
20,151

 
11,720

Net income per share, basic
0.19

 
0.25

 
0.17

 
0.10

Net income per share, diluted
0.16

 
0.22

 
0.15

 
0.09

2010:
 
 
 
 
 
 
 
Total revenue
$
192,131

 
$
212,003

 
$
237,309

 
$
261,298

Gross profit
132,178

 
146,091

 
157,145

 
166,126

Net income
21,208

 
29,796

 
35,447

 
38,440

Net income per share, basic
0.18

 
0.24

 
0.28

 
0.31

Net income per share, diluted
0.16

 
0.21

 
0.24

 
0.25



Subsequent Event
Subsequent Event
17.
Subsequent Event

On January 27, 2012, CKH Acquisition Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of Roche Holding Ltd, a joint stock company organized under the laws of Switzerland (together, “Roche”), commenced an unsolicited tender offer (the "Offer") to purchase all outstanding shares of common stock of the Company for $44.50 per share. As more fully described in the Company's Solicitation/Recommendation on Schedule 14D-9 filed with the SEC on February 7, 2012 in response to the Offer, the Board of Directors unanimously recommended that the Company's stockholders reject the Roche offer and not tender their shares to Roche for purchase.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Valuation and Qualifying Accounts and Reserves
 
Balance at
Beginning of
Period
 
Additions Charged
to Expense/
Revenue(1)
 
Deductions(2)
 
Balance at End of
Period
 
(In thousands)
Year ended January 1, 2012
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
1,686

 
4,201

 
(1,890
)
 
$
3,997

Reserve for inventory
12,273

 
14,160

 
(11,935
)
 
14,498

Year ended January 2, 2011
 

 
 

 
 

 
 

Allowance for doubtful accounts
$
1,398

 
341

 
(53
)
 
$
1,686

Reserve for inventory
10,597

 
9,559

 
(7,883
)
 
12,273

Year ended January 3, 2010
 

 
 

 
 

 
 

Allowance for doubtful accounts
$
1,138

 
828

 
(568
)
 
$
1,398

Reserve for inventory
6,431

 
8,403

 
(4,237
)
 
10,597

_______________________________________
(1)
Additions to the allowance for doubtful accounts and reserve for inventory are charged to selling, general and administrative expense and cost of product revenue respectively.
(2)
Deductions for allowance for doubtful accounts and reserve for inventory are for accounts receivable written off and disposal of obsolete inventory.
Organization and Summary of Significant Accounting Policies (Policies)
Basis of Presentation 
Basis of Presentation

The consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Fiscal Year 
Fiscal Year

The Company's fiscal year is 52 or 53 weeks ending the Sunday closest to December 31, with quarters of 13 or 14 weeks ending the Sunday closest to March 31, June 30, September 30, and December 31. The years ended January 1, 2012, January 2, 2011, and January 3, 2010 were 52, 52 and 53 weeks, respectively.
Use of Estimates 
Use of Estimates

The preparation of financial statements requires that management make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Segment Information 
Segment Information

The Company is organized in two operating segments for purposes of recording and reporting our financial results: Life Sciences and Diagnostics. The Life Sciences operating segment includes all products and services related to the research market, namely the product lines based on the Company’s sequencing, BeadArray, VeraCode, and real-time polymerase chain reaction (PCR) technologies. The Diagnostics operating segment focuses on the emerging opportunity in molecular diagnostics. During all periods presented, the Diagnostics operating segment had limited activity. Accordingly, the Company’s operating results for both segments are reported on an aggregate basis as one reportable segment. The Company will begin reporting in two reportable segments once revenues, operating profit or loss, or assets of the Diagnostics operating segment exceeds 10% of the consolidated amounts.
Acquisitions 
Acquisitions

The Company measures all assets acquired and liabilities assumed, including contingent considerations and all contractual contingencies, at fair value as of the acquisition date. In addition, the Company capitalizes in-process research and development (IPR&D) and either amortizes it over the life of the product upon commercialization, or writes it off if the project is abandoned or impaired. Post-acquisition adjustments related to business combination deferred tax asset valuation allowances and liabilities for uncertain tax positions are recorded in current period income tax expense. Contingent purchase considerations are remeasured to estimated fair value at each reporting period with the change in fair value recorded in acquisition related (gain) expense, net, a component of operating expenses.

Cash Equivalents and Short-Term Investments 
Cash Equivalents and Short-Term Investments

Cash equivalents are comprised of short-term, highly liquid investments with maturities of 90 days or less at the date of purchase.

Short-term investments consist of U.S. Treasury, U.S. government agency securities, and corporate debt securities. Management classifies short-term investments as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. All short-term investments are recorded at estimated fair value. Unrealized gains and losses for available-for-sale securities are included in accumulated other comprehensive income, a component of stockholders’ equity. The Company evaluates its investments to assess whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered to be other than temporary if they are related to deterioration in credit risk or if it is likely that the Company will sell the securities before the recovery of their cost basis. Realized gains and losses and declines in value judged to be other than temporary are determined based on the specific identification method and are reported in other (expense) income, net in the consolidated statements of income.
Fair Value Measurements 
Fair Value Measurements

The Company determines the fair value of its assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

•
Level 1 — Quoted prices in active markets for identical assets or liabilities.
•
Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of financial instruments such as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued liabilities, excluding acquisition related contingent consideration liabilities, approximate the related fair values due to the short-term maturities of these instruments.

Accounts Receivable 
Accounts Receivable

Trade accounts receivable are recorded at the net invoice value and are not interest bearing. The Company considers receivables past due based on the contractual payment terms. The Company reviews its exposure to accounts receivable and reserves specific amounts if collectibility is no longer reasonably assured. The Company also reserves a percentage of its trade receivable balance based on collection history and current economic trends that might impact the level of future credit losses. The Company re-evaluates such reserves on a regular basis and adjusts its reserves as needed.

Inventory 
Inventory

Inventory is stated at the lower of cost (on a first in, first out basis) or market. Inventory includes raw materials and finished goods that may be used in the research and development process and such items are expensed as consumed or expired. Provisions for slow moving, excess, and obsolete inventories are estimated based on product life cycles, quality issues, historical experience, and usage forecasts.

Property and Equipment 
Property and Equipment

Property and equipment are stated at cost, subject to review of impairment, and depreciated over the estimated useful lives of the assets (generally three to seven years) using the straight-line method. Amortization of leasehold improvements is computed over the shorter of the lease term or the estimated useful life of the related assets. Maintenance and repairs are charged to operations as incurred. When assets are sold, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operating expense.

Goodwill, Intangible Assets and Other Long-Lived Assets 
Goodwill, Intangible Assets and Other Long-Lived Assets

Goodwill represents the excess of cost over fair value of net assets acquired. The change in the carrying value of goodwill during the year ended January 1, 2012 was due to goodwill recorded in connection with the Company's acquisition of Epicentre Technologies Corporation (Epicentre) in January 2011.

The Company's identifiable intangible assets are comprised primarily of IPR&D, licensed technology, acquired core technologies, customer relationships, trade names, and license agreements. Except IPR&D, the cost of all identifiable intangible assets is amortized on a straight-line basis over their respective useful lives. The Company regularly performs reviews to determine if the carrying values of its long-lived assets are impaired. A review of intangible assets that have finite useful lives and other long-lived assets is performed when an event occurs indicating the potential for impairment. If indicators of impairment exist, the Company assesses the recoverability of the affected long-lived assets by determining whether the carrying amount of such assets exceeds the undiscounted expected future cash flows associated with such assets. If impairment is indicated, the Company compares the carrying amount to the estimated fair value of the affected assets and adjusts the value of such assets accordingly. Factors that would indicate potential impairment include a significant decline in the Company's stock price and market capitalization compared to its net book value, significant changes in the ability of a particular asset to generate positive cash flows, and significant changes in the Company's strategic business objectives and utilization of a particular asset. The Company performed quarterly reviews of its long-lived assets and noted no indications of impairment for the year ended January 1, 2012.

Goodwill and IPR&D, which have indefinite useful lives, are reviewed for impairment at least annually during the second fiscal quarter, or more frequently if an event occurs indicating the potential for impairment. The performance of the goodwill impairment test is a two-step process. The first step of the impairment test involves comparing the estimated fair value of the reporting unit with its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to determine the amount of loss, which involves comparing the implied fair value of the goodwill with the carrying value of the goodwill. The Company performed its annual impairment test of goodwill in the second fiscal quarter of 2011, noting no impairment. In its impairment test, the Company concluded that it has a single reporting unit and that its fair value exceeded its book value, using market capitalization as a reference for the Company's fair value. Therefore, the first step recoverability test was passed and the second step analysis was not required.
The IPR&D impairment test requires the Company to assess the fair value of the asset as compared to its carrying value, and if the carrying value exceeds the fair value, record an impairment charge. The Company performed its annual impairment test of its IPR&D in the second fiscal quarter of 2011, noting no impairment. In addition, in connection of our restructuring plan executed in the fourth quarter of 2011, the Company identified certain impairment indicators related to its IPR&D asset, and performed another impairment test as of January 1, 2012, noting no impairment. In its impairment test, the Company assessed the fair value of IPR&D using an income approach, taking into consideration various factors such as future revenue contributions, additional research and development costs to be incurred, and contributory asset charges. The rate used to discount net future cash flows to their present values was based on a risk-adjusted rate of return.

Reserve for Product Warranties 
Reserve for Product Warranties

The Company generally provides a one-year warranty on instruments. Additionally, the Company provides a warranty on its consumables through the expiration date, which generally ranges from six to twelve months after the manufacture date. The Company establishes an accrual for estimated warranty expenses based on historical experience as well as anticipated product performance. The Company periodically reviews the adequacy of its warranty reserve, and adjusts, if necessary, the warranty percentage and accrual based on actual experience and estimated costs to be incurred. Warranty expense is recorded as a component of cost of product revenue. Warranty expenses associated with extended maintenance contracts for systems are recorded as cost of service and other revenue as incurred.
Revenue Recognition 
Revenue Recognition

The Company’s revenue is generated primarily from the sale of products and services. Product revenue primarily consists of sales of instrumentation and consumables used in genetic analysis. Service and other revenue primarily consists of revenue received for performing genotyping and sequencing services, instrument service contract sales, and amounts earned under research agreements with government grants, which are recognized in the period during which the related costs are incurred.

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectibility is reasonably assured. In instances where final acceptance of the product or system is required, revenue is deferred until all the acceptance criteria have been met. All revenue is recorded net of any discounts.

Revenue for product sales is recognized generally upon transfer of title to the customer, provided that no significant obligations remain and collection of the receivable is reasonably assured. Revenue for genotyping and sequencing services is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer or agreed upon milestones are reached.

In order to assess whether the price is fixed or determinable, the Company evaluates whether refund rights exist. If there are refund rights or payment terms based on future performance, the Company defers revenue recognition until the price becomes fixed or determinable. The Company assesses collectibility based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. If the Company determines that collection of a payment is not reasonably assured, revenue recognition is deferred until receipt of payment.

The Company regularly enters into contracts where revenue is derived from multiple deliverables including any mix of products or services. These products or services are generally delivered within a short time frame, approximately three to six months, of the contract execution date. Revenue recognition for contracts with multiple deliverables is based on the individual units of accounting determined to exist in the contract. A delivered item is considered a separate unit of accounting when the delivered item has value to the customer on a stand-alone basis. Items are considered to have stand-alone value when they are sold separately by any vendor or when the customer could resell the item on a stand-alone basis. Consideration is allocated at the inception of the contract to all deliverables based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence exists, the Company uses its best estimate of the selling price for the deliverable.

In order to establish VSOE of selling price, the Company must regularly sell the product or service on a standalone basis with a substantial majority priced within a relatively narrow range. VSOE of selling price is usually the midpoint of that range. If there are not a sufficient number of standalone sales and VSOE of selling price cannot be determined, then the Company considers whether third party evidence can be used to establish selling price. Due to the lack of similar products and services sold by other companies within the industry, the Company has rarely established selling price using third-party evidence. If neither VSOE nor third party evidence of selling price exists, the Company determines its best estimate of selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, the Company relies upon prices set by the Company’s pricing committee adjusted for applicable discounts. The Company recognizes revenue for delivered elements only when it determines there are no uncertainties regarding customer acceptance.

In the first quarter of 2010, the Company offered an incentive with the launch of the HiSeq 2000 that enabled existing Genome Analyzer customers to trade in their Genome Analyzer and receive a discount on the purchase of a HiSeq 2000. The incentive was limited to customers who had purchased a Genome Analyzer as of the date of the announcement and was the first significant trade-in program offered by the Company. The Genome Analyzer trade-in program was completed in 2011. The Company accounted for HiSeq 2000 discounts related to the Genome Analyzer trade-in program as reductions to revenue upon recognition of the HiSeq 2000 sales revenue, which is later than the date the trade-in program was launched.

In certain markets within Europe, the Asia-Pacific region, Latin America, the Middle East, and South Africa the Company sells products and provides services to customers through distributors that specialize in life science products. In most sales through distributors, the product is delivered directly to customers. In cases where the product is delivered to a distributor, revenue recognition is deferred until acceptance is received from the distributor, and/or the end-user, if required by the applicable sales contract. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. These transactions are accounted for in accordance with the Company's revenue recognition policy described herein.

Shippi
Shipping and Handling Expenses 
Shipping and Handling Expenses

Shipping and handling expenses are included in cost of product revenue.

Research and Development 
Research and Development

Research and development expenses consist of costs incurred for internal and grant-sponsored research and development. Research and development expenses include personnel expenses, contractor fees, facilities costs, and utilities. Expenditures relating to research and development are expensed in the period incurred.

Advertising Costs 
Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were $6.8 million, $6.9 million, and $4.2 million for the years ended January 1, 2012, January 2, 2011, and January 3, 2010, respectively.

Leases 
Leases

Leases are reviewed and classified as capital or operating at their inception. For leases that contain rent escalations, the Company records rent expense on a straight-line basis over the term of the lease, which includes the construction build-out period and lease extension periods, if appropriate. The difference between rent payments and straight-line rent expense is recorded as deferred rent in accrued liabilities and other long-term liabilities. Landlord allowances are amortized on a straight-line basis over the lease term as a reduction to rent expense. The Company capitalizes leasehold improvements and amortizes them over the shorter of the lease term or their expected useful lives.

During the year ended January 1, 2012, the Company substantially moved its headquarters to another facility in San Diego, California, and recorded headquarter relocation expense of $41.8 million, which primarily consisted of accelerated depreciation expense, impairment of assets, additional rent expense during the transition period when both the new and former headquarter facilities are occupied, moving expenses, and a cease-use loss. The Company recorded accelerated depreciation expense for leasehold improvements at its former headquarter facility based on the reassessed useful lives of less than a year. The Company recorded the cease-use loss and a corresponding facility exit obligation upon vacating certain buildings of its former headquarters, calculated as the present value of the remaining lease obligation offset by estimated sublease rental receipts during the remaining lease period, adjusted for deferred items and estimated lease incentives. The key assumptions used in the calculation include the amount and timing of estimated sublease rental receipts, and the risk-adjusted discount rate. Over the course of the remaining lease term of the former facility, the Company will record additional headquarter relocation expenses due to additional cease-use loss to be recorded upon exit of additional buildings, the accretion on the facility exit obligation and adjustments that may arise from change in estimates for the sublease rental receipts.
Restructuring Charges 

Restructuring Charges

During the fourth quarter of the year ended January 1, 2012, the Company announced and executed a restructuring plan, to reduce the Company's workforce and to consolidate certain facilities. The Company measured and accrued the liabilities associated with employee separation costs at fair value as of the date the plan was announced and terminations are communicated to employees, which primarily included severance pay and other separation costs such as outplacement services and benefits. The Company will measure and accrue the facilities exit costs at fair value upon its exit. Facilities exit costs will primarily consist of cease-use losses to be recorded upon vacating the facilities, asset impairment, and accelerated depreciation expenses.  

The fair value measurement of restructuring related liabilities requires certain assumptions and estimates to be made by the Company, such as the retention period of certain employees, the timing and amount of sublease income on properties to be vacated, and the operating costs to be paid until lease termination. It is the Company's policy to use the best estimates based on facts and circumstances available at the time of measurement, review the assumptions and estimates periodically, and adjust the liabilities when necessary.

Income Taxes 

Income Taxes

The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and credit carryforwards. Deferred tax assets and liabilities are determined using the enacted tax rates in effect for the years in which those tax assets are expected to be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date.

Deferred tax assets are regularly assessed to determine the likelihood they will be recovered from future taxable income. A valuation allowance is established when the Company believes it is more likely than not the future realization of all or some of a deferred tax asset will not be achieved. In evaluating the ability to recover deferred tax assets within the jurisdiction which they arise the Company considers all available positive and negative evidence. Factors reviewed include the cumulative pre-tax book income for the past three years, scheduled reversals of deferred tax liabilities, history of earnings and reliable forecasting, projections of pre-tax book income over the foreseeable future, and the impact of any feasible and prudent tax planning strategies.

The Company recognizes excess tax benefits associated with share-based compensation to stockholders’ equity only when realized. When assessing whether excess tax benefits relating to share-based compensation have been realized, the Company follows the with-and-without approach excluding any indirect effects of the excess tax deductions. Under this approach, excess tax benefits related to share-based compensation are not deemed to be realized until after the utilization of all other tax benefits available to the Company.

The Company recognizes the impact of a tax position in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions will be reflected in income tax expense.

Functional Currency 

Functional Currency

The U.S. dollar has been determined to be the functional currency of the Company's international operations. The Company remeasures its foreign subsidiaries’ assets and liabilities and revenue and expense accounts related to monetary assets and liabilities to the U.S. dollar and records the net gains or losses resulting from remeasurement in other (expense) income, net in the consolidated statements of income. The remeasurement resulted in an immaterial loss in the year ended January 1, 2012, an immaterial gain in the year ended January 2, 2011, and a loss of $2.3 million for the year ended January 3, 2010, respectively.
Derivatives 

Derivatives

The Company is exposed to foreign exchange rate risks in the normal course of business. To manage a portion of the accounting exposure resulting from changes in foreign currency exchange rates, the Company enters into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the U.S. dollar. These foreign exchange contracts are carried at fair value and are not designated as hedging instruments. Changes in the value of the derivative are recognized in other (expense) income, net, in the consolidated statements of income for the current period, along with an offsetting remeasurement gain or loss on the underlying foreign currency denominated assets or liabilities.

As of January 1, 2012, the Company had foreign exchange forward contracts in place to hedge exposures in the euro, Japanese yen, and Australian dollar. As of January 1, 2012 and January 2, 2011, the total notional amount of outstanding forward contracts in place for foreign currency purchases was $25.5 million and $20.0 million, respectively. Gains and losses related to the non-designated foreign exchange forward contracts for the years ended January 1, 2012, January 2, 2011, and January 3, 2010 were immaterial.

Share-Based Compensation 

Share-Based Compensation

The Company uses the Black-Scholes-Merton option-pricing model to estimate the fair value of stock options granted and stock purchases under the Employee Stock Purchase Plan (ESPP). This model incorporates various assumptions including expected volatility, expected term of an award, expected dividends, and the risk-free interest rates. The Company determines the expected volatility by equally weighing the historical and implied volatility of the Company’s common stock. The historical volatility of the Company’s common stock over the most recent period is generally commensurate with the estimated expected term of the Company’s stock awards, adjusted for the impact of unusual fluctuations not reasonably expected to recur and other relevant factors. The implied volatility is calculated from the implied market volatility of exchange-traded call options on the Company’s common stock. The expected term of an award is based on historical forfeiture experience, exercise activity, and on the terms and conditions of the stock awards. The fair value of restricted stock units granted is based on the market price of our common stock on the date of grant. The Company recognizes the fair value of share-based compensation on a straight-line basis over the requisite service periods of the awards.

Net Income per Share 

Net Income per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period increased to include dilutive potential common shares calculated using the treasury stock method. Diluted net income per share reflects the potential dilution from outstanding stock options, restricted stock units, ESPP, warrants, shares subject to forfeiture, and convertible senior notes. Under the treasury stock method, convertible senior notes will have a dilutive impact when the average market price of the Company's common stock is above the applicable conversion price of the respective notes. In addition, the following amounts are assumed to be used to repurchase shares: the amount that must be paid to exercise stock options and warrants and purchase shares under the ESPP; the amount of compensation expense for future services that the Company has not yet recognized for stock options, restricted stock units, ESPP, and shares subject to forfeiture; and the amount of tax benefits that will be recorded in additional paid-in capital when the expenses related to respective awards become deductible.

Accumulated Other Comprehensive Income 
Accumulated Other Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income. The Company has disclosed comprehensive income as a component of stockholders' equity. Accumulated other comprehensive income on the consolidated balance sheets at January 1, 2012 and January 2, 2011 includes accumulated foreign currency translation adjustments and unrealized gains and losses on the Company's available-for-sale securities.
Organization and Summary of Significant Accounting Policies (Tables)
Weighted-average shares used to calculate basic and diluted net income per share 

The following table presents the calculation of weighted average shares used to calculate basic and diluted net income per share (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Weighted average shares outstanding
123,399

 
123,581

 
123,154

Effect of dilutive Convertible Senior Notes
3,783

 
9,058

 
6,497

Effect of dilutive equity awards
4,703

 
4,674

 
4,335

Effect of dilutive warrants sold in connection with the Convertible Senior Notes
7,052

 
5,317

 
1,566

Effect of dilutive warrants assumed in a prior acquisition
—

 
803

 
1,544

Weighted-average shares used in calculating diluted net income per share
138,937

 
143,433

 
137,096

Weighted average shares excluded from calculation due to anti-dilutive effect
2,418

 
1,934

 
924


Accumulated other comprehensive income 
The components of accumulated other comprehensive income are as follows (in thousands):
 
January 1,
2012
 
January 2,
2011
Foreign currency translation adjustments
$
1,289

 
$
1,338

Unrealized gain on available-for-sale securities, net of deferred tax
828

 
427

Total accumulated other comprehensive income
$
2,117

 
$
1,765


Balance Sheet Account Details (Tables)
Short-term Investments 
The following is a summary of short-term investments (in thousands):

 
January 1, 2012
 
January 2, 2011
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
 
Estimated
Fair Value
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
 
Estimated
Fair Value
Available-for-sale securities:
Debt securities in government sponsored entities
$
393,759

 
$
428

 
$
(148
)
 
$
394,039

 
$
261,890

 
$
106

 
$
(299
)
 
$
261,697

Corporate debt securities
432,550

 
1,293

 
(461
)
 
433,382

 
329,823

 
1,170

 
(235
)
 
330,758

U.S. treasury securities
58,955

 
214

 
—

 
59,169

 
52,938

 
70

 
(121
)
 
52,887

Total available-for-sale securities
$
885,264

 
$
1,935

 
$
(609
)
 
$
886,590

 
$
644,651

 
$
1,346

 
$
(655
)
 
$
645,342

Available-for-sale securities in unrealized loss positions 
The following table shows the fair values and the gross unrealized losses of the Company's available-for- sale securities that were in an unrealized loss position as of January 1, 2012 and January 2, 2011 aggregated by investment category (in thousands):

 
January 1, 2012
 
January 2, 2011
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
Debt securities in government sponsored entities
$
133,904

 
$
(148
)
 
$
127,756

 
$
(299
)
Corporate debt securities
138,326

 
(461
)
 
92,199

 
(235
)
U.S. treasury securities
—

 
—

 
13,490

 
(121
)
Total
$
272,230

 
$
(609
)
 
$
233,445

 
$
(655
)
Contractual maturities of available-for-sale securities 
Contractual maturities of available-for-sale debt securities as of January 1, 2012 were as follows (in thousands):

 
Estimated Fair Value
Due within one year
$
268,355

After one but within five years
618,235

Total
$
886,590


Accounts receivable 
Accounts receivable consist of the following (in thousands):

 
January 1,
2012
 
January 2,
2011
Accounts receivable from product and service sales
$
175,226

 
$
165,117

Other receivables
2,657

 
2,167

Total accounts receivable, gross
177,883

 
167,284

Allowance for doubtful accounts
(3,997
)
 
(1,686
)
Total accounts receivable, net
$
173,886

 
$
165,598


Inventory, net 
Inventory, net, consists of the following (in thousands):

 
January 1,
2012
 
January 2,
2011
Raw materials
$
58,340

 
$
54,762

Work in process
53,412

 
64,862

Finished goods
17,029

 
22,587

Total inventory, net
$
128,781

 
$
142,211

Property and equipment 
Property and equipment, net consists of the following (in thousands):

 
January 1,
2012
 
January 2,
2011
Leasehold improvements
$
63,406

 
$
55,681

Manufacturing and laboratory equipment
137,805

 
114,108

Computer equipment and software
54,826

 
41,500

Furniture and fixtures
9,274

 
6,732

Leased equipment
14,854

 
15,475

Total property and equipment, gross
280,165

 
233,496

Accumulated depreciation
(136,682
)
 
(103,622
)
Total property and equipment, net
$
143,483

 
$
129,874


Accrued liabilities 

Accrued liabilities consist of the following (in thousands):

 
January 1,
2012
 
January 2,
2011
Deferred revenue, current portion
$
52,573

 
$
45,863

Accrued compensation expenses
52,035

 
49,368

Accrued taxes payable
19,339

 
13,277

Customer deposits
17,958

 
14,900

Reserve for product warranties
11,966

 
16,761

Deferred rent, current portion
11,042

 
—

Accrued royalties
5,682

 
2,781

Facility exit obligation, current portion
4,408

 
—

Acquisition related contingent consideration liability
2,335

 
3,738

Other accrued expenses
10,436

 
9,476

Total accrued liabilities
$
187,774

 
$
156,164

Restructuring Activities (Tables)
Summary of the pre-tax charge and remaining costs associated with the initiatives
A summary of the pre-tax charge and estimated total costs associated with the initiative is as follows (in thousands):

 
Employee Separation costs
 
Facilities Exit Costs
 
Other Costs
 
Total
Expense recorded in the year ended January 1, 2012
$
7,683

 
$
—

 
$
453

 
$
8,136

Cash paid during the year ended January 1, 2012
4,187

 
—

 
423

 
4,610

Amount recorded in accrued liabilities as of January 1, 2012
$
3,496

 
$
—

 
$
30

 
$
3,526

 
 
 
 
 
 
 
 
Estimated total restructuring costs to be incurred
$
10,932

 
$
1,600

 
$
1,303

 
$
13,835

Acquisitions (Tables)
Contingent compensation expense and IPR&D
Contingent compensation expenses and IPR&D charges as a result of acquisitions consist of the following (in thousands):
 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Contingent compensation expense, included in research and development expense
$
4,799

 
$
3,675

 
$
3,675

Contingent compensation expense, included in selling, general and administrative expense
1,258

 
—

 
—

     Total contingent compensation expense
$
6,057

 
$
3,675

 
$
3,675

IPR&D, included in acquisition related (gain) expense, net
$
5,425

 
$
1,325

 
$
11,325

Intangible Assets (Tables)
Finite and Infinite Lived Intangible Assets Excluding Goodwill 
The following is a summary of the Company’s identifiable intangible assets as of the respective balance sheet dates (in thousands):
 
January 1, 2012
 
January 2, 2011
 
Weighted
Average
Useful Life
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Intangibles,
Net
 
Weighted
Average
Useful Life
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Intangibles,
Net
Finite-lived Intangible assets:
Licensed technology
8.0

 
$
36,000

 
$
(20,000
)
 
$
16,000

 
8.0

 
$
36,000

 
$
(15,849
)
 
$
20,151

Core technology
9.7

 
74,800

 
(18,544
)
 
56,256

 
10.0

 
51,500

 
(10,604
)
 
40,896

Customer relationships
3.0

 
1,980

 
(1,253
)
 
727

 
3.0

 
900

 
(900
)
 
—

License agreements
8.9

 
12,404

 
(2,605
)
 
9,799

 
8.9

 
10,654

 
(1,677
)
 
8,977

Trade name
10.0

 
2,500

 
(245
)
 
2,255

 
—

 
—

 
—

 
—

Infinite-lived Intangible Asset:
In-process research & development
—

 
21,438

 
—

 
21,438

 
—

 
21,438

 
—

 
21,438

Total intangible assets, net
 

 
$
149,122

 
$
(42,647
)
 
$
106,475

 
 

 
$
120,492

 
$
(29,030
)
 
$
91,462


Estimated annual amortization of intangible assets 
The estimated annual amortization of intangible assets for the next five years is shown in the following table (in thousands). Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, asset impairments, and other factors.

2012
$
14,247

2013
14,332

2014
13,548

2015
13,102

2016
8,426

Thereafter
21,382

Total
$
85,037


Fair Value Measurements (Tables)
Fair value measurements 
The following table presents the Company's fair value hierarchy for assets and liability measured at fair value on a recurring basis as of January 1, 2012 and January 2, 2011 (in thousands):
 
January 1, 2012
 
January 2, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds (cash equivalent)
$
166,898

 
$
—

 
$
—

 
$
166,898

 
$
148,822

 
$
—

 
$
—

 
$
148,822

Debt securities in government sponsored entities
—

 
394,039

 
—

 
394,039

 
—

 
261,697

 
—

 
261,697

Corporate debt securities
—

 
433,382

 
—

 
433,382

 
—

 
330,758

 
—

 
330,758

U.S. Treasury securities
59,169

 
—

 
—

 
59,169

 
52,887

 
—

 
—

 
52,887

Deferred compensation plan assets
—

 
10,800

 
—

 
10,800

 
—

 
6,449

 
—

 
6,449

Total assets measured at fair value
$
226,067

 
$
838,221

 
$
—

 
$
1,064,288

 
$
201,709

 
$
598,904

 
$
—

 
$
800,613

Liabilities:

 

 

 

 

 

 

 

Acquisition related contingent consideration liability
$
—

 
$
—

 
$
6,638

 
$
6,638

 
$
—

 
$
—

 
$
3,738

 
$
3,738

Deferred compensation liability
—

 
8,970

 
—

 
8,970

 
—

 
5,272

 
—

 
5,272

Total liabilities measured at fair value
$
—

 
$
8,970

 
$
6,638

 
$
15,608

 
$
—

 
$
5,272

 
$
3,738

 
$
9,010


Changes in estimated fair value of contingent consideration liabilities 

Changes in estimated fair value of contingent consideration liabilities from January 3, 2010 through January 1, 2012 are as follows (in thousands):
 
 
Contingent
Consideration
Liability
(Level 3 Measurement) 
 
Balance as of January 3, 2010
$
—

Acquisition of Helixis
14,114

Gain recorded in acquisition related (gain) expense, net
(10,376
)
Balance as of January 2, 2011
$
3,738

Acquisition of Epicentre
7,400

Gain recorded in acquisition related (gain) expense, net
(4,500
)
Balance as of January 1, 2012
$
6,638

..

Warranties (Tables)
Reserve for product warranties
Changes in the Company’s reserve for product warranties from December 28, 2008 through January 1, 2012 are as follows (in thousands):

Balance as of December 28, 2008
$
8,203

Additions charged to cost of revenue
14,613

Repairs and replacements
(12,601
)
Balance as of January 3, 2010
10,215

Additions charged to cost of revenue
25,146

Repairs and replacements
(18,600
)
Balance as of January 2, 2011
16,761

Additions charged to cost of revenue
17,913

Repairs and replacements
(22,708
)
Balance as of January 1, 2012
$
11,966

Convertible Senior Notes (Tables)
Summarized information about the conversion of convertible senior notes 
.

The following table summarizes information about the conversions of the 2014 Notes during the year ended January 1, 2012 (in thousands, except percentages):
 
 
January 1,
2012
Cash paid for principal of notes converted
 
$
349,874

Conversion value over principal amount paid in shares of common stock
 
$
727,618

Number of shares of common stock issued upon conversion
 
10,733

Loss on extinguishment of debt
 
$
37,611

Effective interest rates used to measure fair value of converted notes upon conversion
 
3.5% - 4.3%

Summarized information about equity and liability components of convertible senior notes 
The following table summarizes information about the equity and liability components of the 2014 and 2016 Notes (dollars in thousands). The fair values of the respective notes outstanding were measured based on quoted market prices.
 
 
January 1, 2012
 
January 2, 2011
 
 
0.25% Convertible Senior Notes due 2016 
 
 
0.625% Convertible Senior Notes due 2014 
 
 
0.625% Convertible Senior Notes due 2014 
 
Principal amount of convertible notes outstanding
 
$
920,000

 
$
40,125

 
$
389,999

Unamortized discount of liability component
 
(147,034
)
 
(5,722
)
 
(78,390
)
Net carrying amount of liability component
 
772,966

 
34,403

 
311,609

Less: current portion
 
—

 
—

 
(311,609
)
Long-term debt
 
$
772,966

 
$
34,403

 
$
—

Conversion option subject to cash settlement
 
$
—

 
$
5,722

 
$
78,390

Carrying value of equity component, net of issuance costs
 
$
155,366

 
$
114,035

 
$
71,199

Fair value of outstanding notes
 
$
725,632

 
$
60,122

 
$
1,157,450

Remaining amortization period of discount on the liability component
 
4.2 years

 
2.1 years

 
3.1 years

Effective interest rate of liability component
 
4.5
%
 
8.3
%
 
8.3
%
Contractual coupon interest expense
 
$
1,871

 
$
414

 
$
2,390

Accretion of discount on the liability component
 
$
24,502

 
$
7,671

 
$
21,407

Commitments Commitments (Tables)
Future minimom payments under operating leases 
Annual future minimum payments under these operating leases as of January 1, 2012 were as follows (in thousands):

2012
$
16,336

2013
22,598

2014
21,351

2015
20,355

2016
20,852

Thereafter
385,775

Total
$
487,267


Facility exit obligations 
The facility exit obligation as of January 1, 2012 is as follows (in thousands):
 
 
January 1,
2012
Facility exit obligation, current portion
$
4,408

Facility exit obligation, non-current
20,641

Total facility exit obligation
$
25,049

Share-based Compensation Expense (Tables)
Share-based compensation expense for all stock awards 
Total share-based compensation expense for all stock awards consists of the following (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Cost of product revenue
$
6,951

 
$
5,378

 
$
4,776

Cost of service and other revenue
695

 
470

 
514

Research and development
32,105

 
25,428

 
19,960

Selling, general and administrative
52,341

 
40,369

 
35,561

Share-based compensation expense before taxes
92,092

 
71,645

 
60,811

Related income tax benefits
(32,168
)
 
(25,231
)
 
(20,121
)
Share-based compensation expense, net of taxes
$
59,924

 
$
46,414

 
$
40,690


Assumptions used to estimate the fair value per share of options granted and employee stock purchase rights granted 
The assumptions used for the specified reporting periods and the resulting estimates of weighted-average fair value per share of options granted and for stock purchased under the ESPP during those periods are as follows:

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Stock options granted:
 
 
 
 
 
Risk-free interest rate
0.85 - 2.23%

 
2.05 - 2.73%

 
1.69 - 1.97%

Expected volatility
41 - 53%

 
46 - 48%

 
55 - 58%

Expected term
4.7 - 5.5 years

 
6.0 years

 
5.2 years

Expected dividends
—

 
—

 
—

 
 
 
 
 
 
Stock purchased under the ESPP:
 
 
 
 
 
Risk-free interest rate
0.16 - 0.30%

 
0.17 - 0.48%

 
0.28 - 2.90%

Expected volatility
43 - 48%

 
46 - 48%

 
48 - 58%

Expected term
0.5 - 1.0 years

 
0.5 - 1.0 years

 
0.5 - 1.0 years

Expected dividends
—

 
—

 
—


Stockholders' Equity (Tables)
Stock option activity under all stock option plans 
The Company's stock option activity under all stock option plans from December 28, 2008 through January 1, 2012 is as follows:

 
Options (in thousands)
 
Weighted-
Average
Exercise Price
 
Weighted
Average
Grant-Date
Fair Value
per Share
Outstanding at December 28, 2008
18,134

 
$
16.26

 
 
Granted
1,560

 
28.86

 
$
14.74

Exercised
(2,966
)
 
10.56

 
 
Cancelled
(639
)
 
14.88

 
 
Outstanding at January 3, 2010
16,089

 
18.59

 
 
Granted
2,045

 
39.11

 
18.82

Exercised
(5,541
)
 
16.65

 
 
Cancelled
(711
)
 
21.76

 
 
Outstanding at January 2, 2011
11,882

 
22.83

 
 
Granted
1,399

 
64.98

 
$
27.47

Exercised
(2,784
)
 
17.98

 
 
Cancelled
(119
)
 
33.49

 
 
Outstanding at January 1, 2012
10,378

 
$
29.69

 
 

Restricted stock unit activity 
A summary of the Company's RSU activity and related information from December 28, 2008 through January 1, 2012 is as follows:

 
Restricted
Stock Units (in thousands)(1)
 
Weighted Average
Grant-Date Fair
Value per Share
Outstanding at December 28, 2008
1,579

 
$
32.68

Awarded
1,293

 
32.25

Vested
(246
)
 
32.33

Cancelled
(117
)
 
33.19

Outstanding at January 3, 2010
2,509

 
32.45

Awarded
1,353

 
50.74

Vested
(510
)
 
32.10

Cancelled
(243
)
 
33.36

Outstanding at January 2, 2011
3,109

 
40.39

Awarded
1,550

 
42.02

Vested
(827
)
 
36.47

Cancelled
(356
)
 
42.15

Outstanding at January 1, 2012
3,476

 
$
41.87

_______________________________________
(1)
Each RSU represents the fair market value of one share of common stock.

Income Taxes (Tables)
Income before income taxes summarized by region 
The income (loss) before income taxes summarized by region is as follows (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
United States
$
(7,100
)
 
$
109,068

 
$
65,081

Foreign
140,145

 
76,311

 
49,044

Total income before income taxes
$
133,045

 
$
185,379

 
$
114,125


Provision for income taxes 
The provision for income taxes consists of the following (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Current:
 

 
 

 
 

Federal
$
43,161

 
$
39,476

 
$
43,565

State
3,958

 
8,607

 
2,511

Foreign
24,154

 
6,330

 
6,204

Total current provision
71,273

 
54,413

 
52,280

Deferred:
 

 
 

 
 

Federal
(22,738
)
 
6,557

 
(14,607
)
State
(8,050
)
 
(6,808
)
 
5,184

Foreign
5,932

 
6,326

 
(1,013
)
Total deferred provision (benefit)
(24,856
)
 
6,075

 
(10,436
)
Total tax provision
$
46,417

 
$
60,488

 
$
41,844


Provision for income taxes reconciles to the amount computed by applying the federal statutory rate to income before taxes 
The provision for income taxes reconciles to the amount computed by applying the federal statutory rate to income before taxes as follows (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Tax at federal statutory rate
$
46,566

 
$
64,881

 
$
39,944

State, net of federal benefit
(49
)
 
6,231

 
4,275

Research and other credits
(6,774
)
 
(5,859
)
 
(4,050
)
Acquired in-process research & development
1,989

 
517

 
4,386

Change in valuation allowance
(688
)
 
(9,497
)
 
(1,967
)
Permanent differences
1,668

 
1,397

 
2,093

Change in fair value of contingent consideration
(1,311
)
 
(3,632
)
 
—

Impact of foreign operations
5,579

 
7,597

 
(5,400
)
Other
(563
)
 
(1,147
)
 
2,563

Total tax provision
$
46,417

 
$
60,488

 
$
41,844


Significant components of the Company’s deferred tax assets and liabilities 
Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

 
January 1,
2012
 
January 2,
2011
Deferred tax assets:
 

 
 

Net operating losses
$
4,981

 
$
11,898

Tax credits
16,647

 
18,329

Other accruals and reserves
22,411

 
17,616

Stock compensation
33,811

 
23,829

Inventory adjustments
16,469

 
5,573

Impairment of cost-method investment
4,972

 
5,058

Other amortization
4,521

 
4,893

Other
8,861

 
3,588

Total gross deferred tax assets
112,673

 
90,784

Valuation allowance on deferred tax assets
(1,799
)
 
(4,986
)
Total deferred tax assets
110,874

 
85,798

Deferred tax liabilities:
 

 
 

Purchased intangible amortization
(19,760
)
 
(22,605
)
Convertible debt
(49,404
)
 
(3,191
)
Other
(12,322
)
 
(7,137
)
Total deferred tax liabilities
(81,486
)
 
(32,933
)
Net deferred tax assets
$
29,388

 
$
52,865


Summary of the gross amount of the Company’s uncertain tax positions 
The following table summarizes the gross amount of the Company’s uncertain tax positions (in thousands):
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
Balance at beginning of year
$
22,729

 
$
11,760

 
$
9,402

Increases related to prior year tax positions
875

 
5,066

 
—

Decreases related to prior year tax positions
(382
)
 
—

 
—

Increases related to current year tax positions
5,174

 
5,903

 
2,358

Balance at end of year
$
28,396

 
$
22,729

 
$
11,760


Segment Information, Geographic Data, and Significant Customers (Tables)
Revenue by region 
The Company had revenue in the following regions for the years ended January 1, 2012, January 2, 2011, and January 3, 2010 (in thousands):

 
Years Ended
 
January 1,
2012
 
January 2,
2011
 
January 3,
2010
United States
$
528,723

 
$
498,981

 
$
347,195

United Kingdom
67,578

 
60,521

 
55,854

Other European countries
210,393

 
163,062

 
140,931

Asia-Pacific
197,005

 
143,441

 
96,396

Other markets
51,836

 
36,736

 
25,948

Total
$
1,055,535

 
$
902,741

 
$
666,324


Net long-lived assets consisting of property and equipment by region 
The Company had net long-lived assets consisting of property and equipment in the following regions as of January 1, 2012 and January 2, 2011 (in thousands):

 
January 1,
2012
 
January 2,
2011
United States
$
94,624

 
$
75,050

United Kingdom
22,642

 
26,578

Singapore
14,673

 
14,739

Other countries
11,544

 
13,507

Total
$
143,483

 
$
129,874



Quarterly Financial Information (unaudited) (Tables)
Schedule of Quarterly Financial Information [Table Text Block]
Summarized quarterly data for fiscal years 2011 and 2010 are as follows (in thousands except per share data):

 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
2011:
 

 
 

 
 

 
 

Total revenue
$
282,515

 
$
287,450

 
$
235,499

 
$
250,071

Gross profit
188,041

 
193,356

 
157,115

 
170,586

Net income
24,137

 
30,620

 
20,151

 
11,720

Net income per share, basic
0.19

 
0.25

 
0.17

 
0.10

Net income per share, diluted
0.16

 
0.22

 
0.15

 
0.09

2010:
 
 
 
 
 
 
 
Total revenue
$
192,131

 
$
212,003

 
$
237,309

 
$
261,298

Gross profit
132,178

 
146,091

 
157,145

 
166,126

Net income
21,208

 
29,796

 
35,447

 
38,440

Net income per share, basic
0.18

 
0.24

 
0.28

 
0.31

Net income per share, diluted
0.16

 
0.21

 
0.24

 
0.25

Organization and Summary of Significant Accounting Policies (Details)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Weighted-average shares used to calculate basic and diluted net income per share
 
 
 
Weighted average shares outstanding
123,399 
123,581 
123,154 
Effect of dilutive Convertible Senior Notes
3,783 
9,058 
6,497 
Effect of dilutive equity awards
4,703 
4,674 
4,335 
Effect of dilutive warrants sold in connection with the Convertible Senior Notes
7,052 
5,317 
1,566 
Effect of dilutive warrants assumed in a prior acquisition
0 
803 
1,544 
Weighted-average shares used in calculating diluted net income per share
138,937 
143,433 
137,096 
Weighted average shares excluded from calculation due to anti-dilutive effect
2,418 
1,934 
924 
Organization and Summary of Significant Accounting Policies (Details 1) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Organization and Summary of Significant Accounting Policies [Abstract]
 
 
Foreign currency translation adjustments
$ 1,289 
$ 1,338 
Unrealized gain on available-for-sale securities, net of deferred tax
828 
427 
Total accumulated other comprehensive income
$ 2,117 
$ 1,765 
Organization and Summary of Significant Accounting Policies (Details 2) (Geographic Concentration Risk [Member])
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Countries outside the United States |
Sales Revenue, Goods and Services, Net [Member]
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
50.00% 
45.00% 
48.00% 
Countries outside the United States |
Accounts Receivable [Member]
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
52.00% 
59.00% 
 
Other European countries |
Sales Revenue, Goods and Services, Net [Member]
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
20.00% 
 
 
Other European countries |
Accounts Receivable [Member]
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk, percentage
3.00% 
 
 
Organization and Summary of Significant Accounting Policies (Details Textual) (USD $)
12 Months Ended
Jan. 1, 2012
years
months
segments
Jan. 2, 2011
Jan. 3, 2010
Summary of Significant Accounting Principles (Textual) [Abstract]
 
 
 
Operating cycle
52 or 53 weeks 
 
 
Quarterly operating cycle
13 or 14 weeks 
 
 
Fiscal year quarterly operating cycle
P13W 
P13W 
 
Fiscal year operating cycle
P52W 
P52W 
P53W 
Number of business segments
2 
 
 
Number of reportable segments
1 
 
 
Number of future reportable segments
2 
 
 
Minimum percent of revenues, operating profit or loss, or assets of the Diagnostics Business Unit to begin reporting in two segments
10.00% 
 
 
Cash equivalents and short-term investments, maximum maturity period
90 days 
 
 
Maximum investment portfolio credit exposure per issuer at time of purchase
5.00% 
 
 
Maximum investment portfolio credit exposure per industry sector at time of purchase
25.00% 
 
 
Estimated useful life of property and equipment, minimum
3 
 
 
Estimated useful life of property and equipment, maximum
7 
 
 
Product warranty period
1 year 
 
 
Warranty on its consumable sales through the expiry date
six to twelve months after the manufacture date 
 
 
Product or service delivery period, minimum
3 
 
 
Product or service delivery period, maximum
6 
 
 
Advertising expense
$ 6,800,000 
$ 6,900,000 
$ 4,200,000 
Headquarter relocation expenses represent accelerated depreciation expense, double-rent expense and cease-use loss
41,826,000 
0 
0 
Foreign currency loss included in other (expense) income, net
 
 
2,300,000 
Total notional amount of outstanding forward contract in place for foreign currency purchase
$ 25,500,000 
$ 20,000,000 
 
Balance Sheet Account Details (Details) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Available-for-sale securities:
 
 
Available for sale securities, Amortized Cost
$ 885,264 
$ 644,651 
Available for sale securities, Gross Unrealized Gains
1,935 
1,346 
Available for sale securities, Gross Unrealized Losses
(609)
(655)
Available for sale securities, Estimated Fair Value
886,590 
645,342 
Debt securities in government sponsored entities [Member]
 
 
Available-for-sale securities:
 
 
Available for sale securities, Amortized Cost
393,759 
261,890 
Available for sale securities, Gross Unrealized Gains
428 
106 
Available for sale securities, Gross Unrealized Losses
(148)
(299)
Available for sale securities, Estimated Fair Value
394,039 
261,697 
Corporate debt securities [Member]
 
 
Available-for-sale securities:
 
 
Available for sale securities, Amortized Cost
432,550 
329,823 
Available for sale securities, Gross Unrealized Gains
1,293 
1,170 
Available for sale securities, Gross Unrealized Losses
(461)
(235)
Available for sale securities, Estimated Fair Value
433,382 
330,758 
U.S. Treasury securities [Member]
 
 
Available-for-sale securities:
 
 
Available for sale securities, Amortized Cost
58,955 
52,938 
Available for sale securities, Gross Unrealized Gains
214 
70 
Available for sale securities, Gross Unrealized Losses
0 
(121)
Available for sale securities, Estimated Fair Value
$ 59,169 
$ 52,887 
Balance Sheet Account Details (Details 1) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Available-for-sale securities gross unrealized loss position
 
 
Fair Value
$ 272,230 
$ 233,445 
Gross Unrealized Losses
(609)
(655)
Debt securities in government sponsored entities [Member]
 
 
Available-for-sale securities gross unrealized loss position
 
 
Fair Value
133,904 
127,756 
Gross Unrealized Losses
(148)
(299)
Corporate debt securities [Member]
 
 
Available-for-sale securities gross unrealized loss position
 
 
Fair Value
138,326 
92,199 
Gross Unrealized Losses
(461)
(235)
U.S. Treasury securities [Member]
 
 
Available-for-sale securities gross unrealized loss position
 
 
Fair Value
0 
13,490 
Gross Unrealized Losses
$ 0 
$ (121)
Balance Sheet Account Details Balance Sheet Account Details (Details 2) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Balance Sheet Account Details [Abstract]
 
 
Due within one year
$ 268,355 
 
After one but within five years
618,235 
 
Available for sale securities, Estimated Fair Value
$ 886,590 
$ 645,342 
Balance Sheet Account Details (Details 3) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
Accounts receivable, gross
$ 177,883 
$ 167,284 
Allowance for doubtful accounts
(3,997)
(1,686)
Total accounts receivable, net
173,886 
165,598 
Accounts receivable from product and service sales [Member]
 
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
Accounts receivable, gross
175,226 
165,117 
Other receivables [Member]
 
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
Accounts receivable, gross
$ 2,657 
$ 2,167 
Balance Sheet Account Details Balance Sheet Account Details (Details 4) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Balance Sheet Account Details [Abstract]
 
 
Raw materials
$ 58,340 
$ 54,762 
Work in process
53,412 
64,862 
Finished goods
17,029 
22,587 
Total inventory, net
$ 128,781 
$ 142,211 
Balance Sheet Account Details (Details 5) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 280,165 
$ 233,496 
Accumulated depreciation
(136,682)
(103,622)
Total property and equipment, net
143,483 
129,874 
Leasehold improvements [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
63,406 
55,681 
Manufacturing and laboratory equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
137,805 
114,108 
Computer equipment and software [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
54,826 
41,500 
Furniture and fixtures [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
9,274 
6,732 
Leased equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 14,854 
$ 15,475 
Balance Sheet Account Details (Details 6) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Dec. 28, 2008
Accrued Liabilities, Current [Abstract]
 
 
 
 
Deferred revenue, current portion
$ 52,573 
$ 45,863 
 
 
Accrued compensation expenses
52,035 
49,368 
 
 
Accrued taxes payable
19,339 
13,277 
 
 
Customer deposits
17,958 
14,900 
 
 
Reserve for product warranties
11,966 
16,761 
10,215 
8,203 
Deferred rent, current portion
11,042 
0 
 
 
Accrued royalties
5,682 
2,781 
 
 
Headquarters facility exit obligation, current
4,408 
   
 
 
Acquisition related contingent consideration liability
2,335 
3,738 
 
 
Other accrued expenses
10,436 
9,476 
 
 
Total accrued liabilities
$ 187,774 
$ 156,164 
 
 
Balance Sheet Account Details (Details Textual) (USD $)
3 Months Ended 12 Months Ended
Jan. 2, 2011
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Balance Sheet Account Details (Textual) [Abstract]
 
 
 
 
Number of available-for-sale securities in a gross unrealized loss position
 
107 
 
 
Impairment considered other-than-temporary
 
$ 0 
 
 
Gross realized gains
 
1,400,000 
 
 
Company's cost-method investments in non-publicly traded company
32,000,000 
45,300,000 
32,000,000 
 
Cost-method investment with impairment other-than-temporary
6,000,000 
 
 
 
Note receivable, other-than-temporary impairment
6,800,000 
 
 
 
Interest receivable on note with other-than-temporary impairment
400,000 
 
 
 
Impairment of cost-method investment
 
0 
13,223,000 
0 
Depreciation
 
55,575,000 
34,204,000 
24,504,000 
Accrued expenditures included in capital expenditures
 
$ 5,900,000 
$ 1,800,000 
$ 2,300,000 
Restructuring Activities (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Jan. 1, 2012
employees
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Number of employees involuntarily terminated
200 
 
 
 
Restructuring Reserve [Abstract]
 
 
 
 
Expense recorded in the year ended January 1, 2012
 
$ 8,136 
$ 0 
$ 0 
Cash paid during the year ended January 1, 2012
 
4,610 
 
 
Amount recorded in accrued liabilities as of January 1, 2012
3,526 
3,526 
 
 
Estimated total restructuring costs to be incurred
 
13,835 
 
 
Employee Severance And Employee Relocation Costs [Member]
 
 
 
 
Restructuring Reserve [Abstract]
 
 
 
 
Expense recorded in the year ended January 1, 2012
 
7,683 
 
 
Cash paid during the year ended January 1, 2012
 
4,187 
 
 
Amount recorded in accrued liabilities as of January 1, 2012
3,496 
3,496 
 
 
Estimated total restructuring costs to be incurred
 
10,932 
 
 
Facilities exit costs [Member]
 
 
 
 
Restructuring Reserve [Abstract]
 
 
 
 
Expense recorded in the year ended January 1, 2012
 
0 
 
 
Cash paid during the year ended January 1, 2012
 
0 
 
 
Amount recorded in accrued liabilities as of January 1, 2012
0 
0 
 
 
Estimated total restructuring costs to be incurred
 
1,600 
 
 
Other Restructuring Charges [Member]
 
 
 
 
Restructuring Reserve [Abstract]
 
 
 
 
Expense recorded in the year ended January 1, 2012
 
453 
 
 
Cash paid during the year ended January 1, 2012
 
423 
 
 
Amount recorded in accrued liabilities as of January 1, 2012
30 
30 
 
 
Estimated total restructuring costs to be incurred
 
$ 1,303 
 
 
Acquisitions (Details 1) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Contingent compensation expense and IPR&D
 
 
 
Total contingent compensation expense
$ 6,057 
$ 3,675 
$ 3,675 
IPR&D, included in acquisition related (gain) expense, net
5,425 
1,325 
11,325 
Research and Development Expense [Member]
 
 
 
Contingent compensation expense and IPR&D
 
 
 
Total contingent compensation expense
4,799 
3,675 
3,675 
Selling General and Administrative Expense [Member]
 
 
 
Contingent compensation expense and IPR&D
 
 
 
Total contingent compensation expense
$ 1,258 
$ 0 
$ 0 
Acquisitions (Details Textual) (USD $)
0 Months Ended 1 Months Ended 1 Months Ended 1 Months Ended
Jan. 1, 2012
Jan. 10, 2011
Epicentre [Member]
years
Apr. 30, 2010
Helixis Inc [Member]
years
Apr. 28, 2010
Helixis Inc [Member]
Jul. 28, 2010
Development stage entity 1 [Member]
Dec. 28, 2008
Development stage entity 2 [Member]
Jan. 31, 2011
Developed Technology Rights [Member]
Epicentre [Member]
years
Jan. 10, 2011
Developed Technology Rights [Member]
Epicentre [Member]
Jan. 31, 2011
Trade Names [Member]
Epicentre [Member]
years
Jan. 10, 2011
Trade Names [Member]
Epicentre [Member]
Jan. 31, 2011
Customer Relationships [Member]
Epicentre [Member]
years
Jan. 10, 2011
Customer Relationships [Member]
Epicentre [Member]
Acquisition Details (Textual) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
Business acquisition total consideration
 
$ 71,400,000 
$ 86,700,000 
 
$ 22,000,000 
 
 
 
 
 
 
 
In-process research and development (IPR&D) asset recorded as part of acquisition
 
 
 
 
21,400,000 
 
 
 
 
 
 
 
Business acquisition net cash consideration
 
59,400,000 
70,000,000 
 
 
 
 
 
 
 
 
 
Fair value of contingent consideration to be settled in stock
 
4,600,000 
 
 
 
 
 
 
 
 
 
 
Fair value of contingent consideration to be settled in cash
 
7,400,000 
14,114,000 
 
 
 
 
 
 
 
 
 
Share issued to epicentre shareholders in connection with business acquisition
 
229,000 
 
 
 
 
 
 
 
 
 
 
Portion of shares issued determined to be part of the purchase price
 
0.3333 
 
 
 
 
 
 
 
 
 
 
Fair value of shares contingently issued as part of purchase price for acquisition
 
4,600,000 
 
 
 
 
 
 
 
 
 
 
Fair value of shares as contingent compensation for post acquisition service
 
10,100,000 
 
 
 
 
 
 
 
 
 
 
Fair value of shares as contingent compensation for post acquisition service period of recognition
 
2 
 
 
 
 
 
 
 
 
 
 
Discount rate for assessment of the acquisition date fair value
 
21.00% 
 
 
28.00% 
 
 
 
 
 
 
 
Total consideration to tangible assets, net of liabilities
 
900,000 
2,300,000 
 
 
 
 
 
 
 
 
 
Consideration to identified intangible assets
 
26,900,000 
28,000,000 
 
 
 
 
23,300,000 
 
2,500,000 
 
1,100,000 
Weighted average useful life of identified intangible assets
 
 
10 
 
 
 
9 
 
10 
 
3 
 
Excess Consideration goodwill
 
43,600,000 
58,400,000 
 
 
 
 
 
 
 
 
 
Contingent consideration payments, minimum
 
 
0 
 
 
 
 
 
 
 
 
 
Contingent consideration payments, maximum
 
15,000,000 
35,000,000 
 
 
35,000,000 
 
 
 
 
 
 
Deferred tax liability to reflect the tax impact of the identified intangible assets that will not generate tax deductible amortization expense
 
 
10,700,000 
 
 
 
 
 
 
 
 
 
Deferred tax asset which primarily relates to acquired net operating loss carryforwards
 
 
8,700,000 
 
 
 
 
 
 
 
 
 
Equity interest in Helixis with a cost basis prior to the aquisition
 
 
 
2,000,000 
 
 
 
 
 
 
 
 
Gain included in other (expense) income, net, on Acquisiton of Helixis
 
 
2,900,000 
 
 
 
 
 
 
 
 
 
Remaining potential payment of contingent consideration related to prior year acquisitions
$ 1,400,000 
 
 
 
 
 
 
 
 
 
 
 
Intangible Assets (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
years
Jan. 2, 2011
years
Gross Carrying Amount
$ 149,122 
$ 120,492 
Accumulated Amortization
(42,647)
(29,030)
Intangible Assets, Net (Excluding Goodwill)
106,475 
91,462 
Finite-Lived Intangible Assets, Future Amortization Expense [Abstract]
 
 
2012
14,247 
 
2013
14,332 
 
2014
13,548 
 
2015
13,102 
 
2016
8,426 
 
Thereafter
21,382 
 
Total
85,037 
 
Licensed technology [Member]
 
 
Weighted-Average Useful Life
8.0 
8.0 
Gross Carrying Amount
36,000 
36,000 
Accumulated Amortization
(20,000)
(15,849)
Intangibles, Net
16,000 
20,151 
Core technology [Member]
 
 
Weighted-Average Useful Life
9.7 
10.0 
Gross Carrying Amount
74,800 
51,500 
Accumulated Amortization
(18,544)
(10,604)
Intangibles, Net
56,256 
40,896 
Customer relationships [Member]
 
 
Weighted-Average Useful Life
3.0 
3.0 
Gross Carrying Amount
1,980 
900 
Accumulated Amortization
(1,253)
(900)
Intangibles, Net
727 
0 
License agreements [Member]
 
 
Weighted-Average Useful Life
8.9 
8.9 
Gross Carrying Amount
12,404 
10,654 
Accumulated Amortization
(2,605)
(1,677)
Intangibles, Net
9,799 
8,977 
Trade Names [Member]
 
 
Weighted-Average Useful Life
10.0 
   
Gross Carrying Amount
2,500 
   
Accumulated Amortization
(245)
   
Intangibles, Net
2,255 
   
In Process Research and Development [Member]
 
 
Carrying Amount
$ 21,438 
$ 21,438 
Intangible Assets (Details Textual) (USD $)
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
 
Amortization of intangible assets
$ 13,600,000 
 
 
Amortization of acquired intangible assets
$ 12,689,000 
$ 7,805,000 
$ 6,680,000 
Fair Value Measurements (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Apr. 30, 2010
Helixis Inc [Member]
Jan. 10, 2011
Epicentre [Member]
Jan. 1, 2012
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Fair Value, Inputs, Level 1 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Fair Value, Inputs, Level 1 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Fair Value, Inputs, Level 2 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Fair Value, Inputs, Level 2 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Fair Value, Inputs, Level 3 [Member]
Jan. 2, 2011
Fair Value, Inputs, Level 3 [Member]
Jan. 1, 2012
Fair Value, Inputs, Level 3 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Fair Value, Inputs, Level 3 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Debt securities in government sponsored entities [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Debt securities in government sponsored entities [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Debt securities in government sponsored entities [Member]
Fair Value, Inputs, Level 1 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Debt securities in government sponsored entities [Member]
Fair Value, Inputs, Level 1 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Debt securities in government sponsored entities [Member]
Fair Value, Inputs, Level 2 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Debt securities in government sponsored entities [Member]
Fair Value, Inputs, Level 2 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Debt securities in government sponsored entities [Member]
Fair Value, Inputs, Level 3 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Debt securities in government sponsored entities [Member]
Fair Value, Inputs, Level 3 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Corporate debt securities [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Corporate debt securities [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Corporate debt securities [Member]
Fair Value, Inputs, Level 1 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Corporate debt securities [Member]
Fair Value, Inputs, Level 1 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Corporate debt securities [Member]
Fair Value, Inputs, Level 2 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Corporate debt securities [Member]
Fair Value, Inputs, Level 2 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
Corporate debt securities [Member]
Fair Value, Inputs, Level 3 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
Corporate debt securities [Member]
Fair Value, Inputs, Level 3 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
U.S. Treasury securities [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
U.S. Treasury securities [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
U.S. Treasury securities [Member]
Fair Value, Inputs, Level 1 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
U.S. Treasury securities [Member]
Fair Value, Inputs, Level 1 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
U.S. Treasury securities [Member]
Fair Value, Inputs, Level 2 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
U.S. Treasury securities [Member]
Fair Value, Inputs, Level 2 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 1, 2012
U.S. Treasury securities [Member]
Fair Value, Inputs, Level 3 [Member]
Fair Value, Measurements, Recurring [Member]
Jan. 2, 2011
U.S. Treasury securities [Member]
Fair Value, Inputs, Level 3 [Member]
Fair Value, Measurements, Recurring [Member]
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds (cash equivalent)
 
 
 
 
 
$ 166,898 
$ 148,822 
$ 166,898 
$ 148,822 
    
    
 
 
    
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, fair value disclosure
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
394,039 
261,697 
   
   
394,039 
261,697 
   
   
433,382 
330,758 
   
   
433,382 
330,758 
   
   
59,169 
52,887 
59,169 
52,887 
   
   
   
   
Deferred compensation plan assets, fair value
10,800 
6,400 
 
 
 
10,800 
6,449 
   
   
10,800 
6,449 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets measured at fair value
 
 
 
 
 
1,064,288 
800,613 
226,067 
201,709 
838,221 
598,904 
 
 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liability:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration
 
 
 
 
 
6,638 
3,738 
   
   
   
   
6,638 
3,738 
6,638 
3,738 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation liability, fair value
9,000 
5,300 
 
 
 
8,970 
5,272 
   
   
8,970 
5,272 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities measured at fair value
 
 
 
 
 
15,608 
9,010 
   
   
8,970 
5,272 
 
 
6,638 
3,738 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in estimated fair value of the contingent consideration liability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of beginning of period
 
 
 
 
 
6,638 
3,738 
   
   
   
   
3,738 
0 
6,638 
3,738 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition
 
 
 
14,114 
7,400 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain recorded in acquisition related (gain) expense, net
(4,500)
(10,376)
0 
 
 
 
 
 
 
 
 
(4,500)
(10,376)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of end of period
 
 
 
 
 
$ 6,638 
$ 3,738 
    
    
    
    
$ 6,638 
$ 3,738 
$ 6,638 
$ 3,738 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Measurements (Details Textual) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Change in fair value of contingent consideration
$ (4,500)
$ (10,376)
$ 0 
Fair Value, Inputs, Level 3 [Member]
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Change in fair value of contingent consideration
$ (4,500)
$ (10,376)
 
Warranties (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Reserve for product warranties
 
 
 
Balance as of beginning of period
$ 16,761 
$ 10,215 
$ 8,203 
Additions charged to cost of revenue
17,913 
25,146 
14,613 
Repairs and replacements
(22,708)
(18,600)
(12,601)
Balance as of end of period
$ 11,966 
$ 16,761 
$ 10,215 
Warranties (Textual) [Abstract]
 
 
 
Warranty on instruments
1 year 
 
 
Warranty on consumable sales through the expiry date
six to twelve months after the manufacture date 
 
 
Convertible Senior Notes (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Summarized Information about the conversions of Notes
 
 
 
Cash paid for principal of notes converted
$ 349,874 
$ 0 
$ 10,000 
Loss on extinguishment of debt
37,611 
0 
0 
0.625% Convertible senior notes due 2014 [Member]
 
 
 
Summarized Information about the conversions of Notes
 
 
 
Cash paid for principal of notes converted
349,874 
 
 
Conversion value over principal amount paid in shares of common stock
727,618 
 
 
Number of shares of common stock issued upon conversion
10,733 
 
 
Loss on extinguishment of debt
$ 37,611 
 
 
Maximum [Member] |
0.625% Convertible senior notes due 2014 [Member]
 
 
 
Summarized Information about the conversions of Notes
 
 
 
Effective interest rates used to measure fair value of converted notes
4.30% 
 
 
Minimum [Member] |
0.625% Convertible senior notes due 2014 [Member]
 
 
 
Summarized Information about the conversions of Notes
 
 
 
Effective interest rates used to measure fair value of converted notes
3.50% 
 
 
Convertible Senior Notes (Details 1) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Summarized information about equity and liability components of convertible senior notes
 
 
 
Current portion of long-term debt
$ 0 
$ 311,609 
 
Long-term debt
807,369 
0 
 
Conversion option subject to cash settlement
5,722 
78,390 
 
Accretion of discount on the liability component
32,173 
21,407 
20,286 
0.625% Convertible senior notes due 2014 [Member]
 
 
 
Summarized information about equity and liability components of convertible senior notes
 
 
 
Principal amount of convertible notes outstanding
40,125 
389,999 
 
Unamortized discount of liability component
(5,722)
(78,390)
 
Net carrying amount of liability component
34,403 
311,609 
 
Current portion of long-term debt
0 
311,609 
 
Long-term debt
34,403 
0 
 
Conversion option subject to cash settlement
5,722 
78,390 
 
Carrying value of equity component, net of debt issuance cost
114,035 
71,199 
 
Fair value of outstanding notes
60,122 
1,157,450 
 
Remaining amortization period of discount on the liability component
2.1 
3.1 
 
Effective interest rate of liability component
8.30% 
8.30% 
 
Contractual coupon interest expense
414 
2,390 
 
Accretion of discount on the liability component
7,671 
21,407 
 
0.25% Convertible Senior Notes due 2016 [Member]
 
 
 
Summarized information about equity and liability components of convertible senior notes
 
 
 
Principal amount of convertible notes outstanding
920,000 
 
 
Unamortized discount of liability component
(147,034)
 
 
Net carrying amount of liability component
772,966 
 
 
Current portion of long-term debt
0 
 
 
Long-term debt
772,966 
 
 
Conversion option subject to cash settlement
   
 
 
Carrying value of equity component, net of debt issuance cost
155,366 
 
 
Fair value of outstanding notes
725,632 
 
 
Remaining amortization period of discount on the liability component
4.2 
 
 
Effective interest rate of liability component
4.50% 
 
 
Contractual coupon interest expense
1,871 
 
 
Accretion of discount on the liability component
$ 24,502 
 
 
Convertible Senior Notes (Details Textual) (USD $)
12 Months Ended 3 Months Ended 12 Months Ended 12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Jul. 3, 2011
0.25% Convertible Senior Notes due 2016 [Member]
Apr. 3, 2011
0.25% Convertible Senior Notes due 2016 [Member]
Jan. 1, 2012
0.25% Convertible Senior Notes due 2016 [Member]
Apr. 30, 2011
0.25% Convertible Senior Notes due 2016 [Member]
Mar. 31, 2011
0.25% Convertible Senior Notes due 2016 [Member]
Jan. 1, 2012
0.625% Convertible senior notes due 2014 [Member]
Jan. 2, 2011
0.625% Convertible senior notes due 2014 [Member]
Feb. 28, 2007
0.625% Convertible senior notes due 2014 [Member]
Jan. 1, 2012
Warrants [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of convertible senior notes
 
 
 
 
 
 
 
$ 800,000,000 
 
 
$ 400,000,000 
 
Interest rate on convertible senior notes
 
 
 
 
 
0.25% 
 
 
0.625% 
 
 
 
Debt issuance price as a percentage of principal
 
 
 
 
 
 
 
98.25% 
 
 
 
 
Debt issuance costs
 
 
 
 
 
400,000 
 
 
 
 
 
 
Amortization period for debt issuance cost
 
 
 
 
 
 
 
5 years 
 
 
 
 
Amount of notes offered to initial purchasers at their option
 
 
 
 
 
 
120,000,000 
 
 
 
 
 
Net initial issuance
 
 
 
 
785,600,000 
 
 
 
 
 
 
 
Net Subsequent Issuance
 
 
 
117,900,000 
 
 
 
 
 
 
 
 
Conversion rate per 1,000 principal amount of notes
 
 
 
 
 
11.9687 
 
 
 
 
 
 
Conversion Price
 
 
 
 
 
$ 83.55 
 
 
 
 
 
 
Circumstances of converting notes at referred conversion ratio
 
 
 
 
 
(1) during the five business-day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price per 2016 Note for each day of such measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such day; (2) during any calendar quarter (and only during that quarter) after the calendar quarter ending March 31, 2011, if the last reported sale price of the Company's common stock for 20 or more trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter; (3) upon the occurrence of specified events described in the indenture for the 2016 Notes; and (4) at any time on or after December 15, 2015 through the second scheduled trading day immediately preceding the maturity date.  
 
 
 
 
 
 
Conversion triggering common stock trading price as a percentage of price last reported in Measurement period converted at conversion rate
 
 
 
 
 
less than 98% 
 
 
 
 
 
 
Number of days in which common stock prices needed to exceed triggering price in order to trigger conversion
 
 
 
 
 
20 or more 
 
 
 
 
 
 
Number of consecutive trading days on which trading price is examined for triggering of conversion
 
 
 
 
 
30 days 
 
 
 
 
 
 
Conversion triggering common stock price as a percentage of applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter
 
 
 
 
 
exceeds 130% 
 
 
 
 
 
 
Date after which notes will become convertible
 
 
 
 
 
Dec. 15, 2015 
 
 
 
 
 
 
Maximum payment on principal portion to be cash settled upon conversion
 
 
 
 
 
1,000 
 
 
 
 
 
 
Principal amount used in calculating incremental share settlement amount
 
 
 
 
 
1,000 
 
 
 
 
 
 
Repurchase Price as a Percentage of Principal Amount upon designated events
 
 
 
 
 
100.00% 
 
 
 
 
 
 
Effective interest rates used to measure fair value of converted notes
 
 
 
 
 
4.50% 
 
 
8.30% 
8.30% 
 
 
Fair value of liability component at issuance
 
 
 
 
 
 
748,500,000 
 
 
 
 
 
Principal Amount of Convertible Notes Outstanding Subject to Hedging
 
 
 
 
 
920,000,000 
 
 
40,125,000 
389,999,000 
 
 
Carrying value of equity component, net of debt issuance cost
 
 
 
 
 
155,366,000 
 
 
114,035,000 
71,199,000 
 
 
Cash proceeds
 
 
 
 
 
903,900,000 
 
 
 
 
 
 
Proceeds from debt issuance used in shares repurchases
 
 
 
 
 
314,300,000 
 
 
 
 
 
 
Number of shares repurchased concurrent with convertible debt issuance
 
 
 
 
 
4,890,500 
 
 
 
 
 
 
Cash paid for principal of notes converted
349,874,000 
0 
10,000,000 
 
 
 
 
 
349,874,000 
 
 
 
Interest payments
 
 
 
 
 
1,100,000 
 
 
1,200,000 
 
 
 
Maximum shares entitles to purchase shares under hedge transaction upon issuance of the convertible senior notes
 
 
 
 
 
 
 
 
18,322,000 
 
 
 
Exercise price of warrants held by hedging counter parties
 
 
 
 
 
 
 
 
 
 
 
$ 31.435 
Strike price of warrants held by the Company under hedge transaction upon issuance of the convertible senior notes
 
 
 
 
 
 
 
 
$ 21.83 
 
 
 
Maximum shares entitles to purchase shares under hedge transaction upon issuance of convertible senior notes outstanding principal
 
 
 
 
 
 
 
 
1,837,958 
 
 
 
If-converted value in excess of principal
 
 
 
 
 
 
 
 
$ 15,900,000 
 
 
 
Commitments (Details) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Commitments and Contingencies Disclosure [Abstract]
 
2012
$ 16,336 
2013
22,598 
2014
21,351 
2015
20,355 
2016
20,852 
Thereafter
385,775 
Total
$ 487,267 
Commitments (Details 1) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Commitments and Contingencies Disclosure [Abstract]
 
 
Headquarters facility exit obligation, current portion
$ 4,408 
    
Headquarters facility exit obligation, non-current
20,641 
 
Heaqdquarters facility exit obligation
$ 25,049 
 
Commitments (Details Textual) (USD $)
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
square_feet
options
buildings
Jan. 3, 2010
Commitments and Contingencies Disclosure [Abstract]
 
 
 
Rent expense
$ 17,400,000 
$ 14,700,000 
$ 13,600,000 
Description of headquarter lease arrangement
 
The lease commenced on November 1, 2011 and has an initial term of 20 years with four five-year options to extend. There is a one-time option to terminate the lease after 15 years in exchange for an early termination fee. The lease includes two existing office buildings and a central plant building with approximately 346,600 square feet. The Company has also agreed to lease a third office building to be built at this facility containing approximately 123,400 rentable square feet. The Company has the right to further expand the premises and lease one or more of three additional office buildings that may be built at this facility. 
 
Initial lease term
 
20 years 
 
Number of lease renewal options
 
4 
 
Lease renewal option term
 
5 years 
 
Period after which lease can be cancelled
 
15 years 
 
Number of buildings under lease
 
2 
 
Square footage of leased property
 
346,600 
 
Additional square footage of leased property
 
123,400 
 
Number of additional buidlings under lease option
 
3 
 
Minimum payments under initial lease term
 
355,900,000 
 
Tenant improvement allowances
 
21,900,000 
 
Lease commitments, former headquarters
100,000,000 
 
 
Cease-use loss
23,638,000 
   
   
Headquarters facility exit obligation
$ 25,049,000 
 
 
Share-based Compensation Expense (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Share-based Compensation
 
 
 
Share-based compensation expense before taxes
$ 92,092 
$ 71,645 
$ 60,811 
Related income tax benefits
(32,168)
(25,231)
(20,121)
Share-based compensation expense, net of taxes
59,924 
46,414 
40,690 
Employee Stock Purchase Rights [Member]
 
 
 
Assumptions used to estimate the fair value per share of options granted and employee stock purchase rights granted
 
 
 
Interest rate, minimum
0.16% 
0.17% 
0.28% 
Interest rate, maximum
0.30% 
0.48% 
2.90% 
Volatility, minimum
43.00% 
46.00% 
48.00% 
Volatility, maximum
48.00% 
48.00% 
58.00% 
Expected life, minimum
0.50 
0.5 
0.5 
Expected life, maximum
1.00 
1.0 
1.0 
Expected dividend yield
0.00% 
0.00% 
0.00% 
Employee Stock Option [Member]
 
 
 
Assumptions used to estimate the fair value per share of options granted and employee stock purchase rights granted
 
 
 
Interest rate, minimum
0.85% 
2.05% 
1.69% 
Interest rate, maximum
2.23% 
2.73% 
1.97% 
Volatility, minimum
41.00% 
46.00% 
55.00% 
Volatility, maximum
53.00% 
48.00% 
58.00% 
Expected life
 
6.0 
5.2 
Expected life, minimum
4.7 
 
 
Expected life, maximum
5.5 
 
 
Expected dividend yield
0.00% 
0.00% 
0.00% 
Cost of product revenue [Member]
 
 
 
Share-based Compensation
 
 
 
Share-based compensation expense before taxes
6,951 
5,378 
4,776 
Cost of service and other revenue [Member]
 
 
 
Share-based Compensation
 
 
 
Share-based compensation expense before taxes
695 
470 
514 
Research and Development Expense [Member]
 
 
 
Share-based Compensation
 
 
 
Share-based compensation expense before taxes
32,105 
25,428 
19,960 
Selling, general and administrative [Member]
 
 
 
Share-based Compensation
 
 
 
Share-based compensation expense before taxes
$ 52,341 
$ 40,369 
$ 35,561 
Share-based Compensation Expense (Details Textual) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 1, 2012
years
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
Unrecognized compensation cost related to stock options, restricted stock units and ESPP shares issued to date
$ 158.9 
Weighted-average period of unrecognized compensation cost related to stock options, restricted stock units and ESPP shares issued to date
2.4 
Stockholders' Equity (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Stock option activity
 
 
 
Options, Outstanding at Period Start
11,882 
16,089 
18,134 
Options, Granted
1,399 
2,045 
1,560 
Options, Exercised
(2,784)
(5,541)
(2,966)
Options, Cancelled
(119)
(711)
(639)
Options, Outstanding at Period End
10,378 
11,882 
16,089 
Weighted-Average Exercise Price, Outstanding at Period Start
$ 22.83 
$ 18.59 
$ 16.26 
Weighted Average Exercise Price, Granted
$ 64.98 
$ 39.11 
$ 28.86 
Weighted Average Exercise Price, Exercised
$ 17.98 
$ 16.65 
$ 10.56 
Weighted Average Exercise Price, Cancelled
$ 33.49 
$ 21.76 
$ 14.88 
Weighted-Average Exercise Price, Outstanding at Period End
$ 29.69 
$ 22.83 
$ 18.59 
Weighted Average Grant Date Fair Value per Share, Granted
$ 27.47 
$ 18.82 
$ 14.74 
Stockholders' Equity (Details 1) (Restricted Stock [Member], USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Restricted Stock [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Restricted Stock Units, Outstanding at Period Start
3,109 1
2,509 1
1,579 1
Restricted Stock Units, Awarded
1,550 1
1,353 1
1,293 1
Restricted Stock Units, Vested
(827)1
(510)1
(246)1
Restricted Stock Units, Cancelled
(356)1
(243)1
(117)1
Restricted Stock Units, Outstanding at Period End
3,476 1
3,109 1
2,509 1
Weighted Average Grant Date Fair Value per Share, Outstanding at Period Start
$ 40.39 
$ 32.45 
$ 32.68 
Weighted Average Grant Date Fair Value per Share, Awarded
$ 42.02 
$ 50.74 
$ 32.25 
Weighted Average Grant Date Fair Value per Share, Vested
$ 36.47 
$ 32.10 
$ 32.33 
Weighted Average Grant Date Fair Value per Share, Cancelled
$ 42.15 
$ 33.36 
$ 33.19 
Weighted Average Grant Date Fair Value per Share, Outstanding at Period End
$ 41.87 
$ 40.39 
$ 32.45 
Stockholders' Equity (Details Textual) (USD $)
1 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended
Jul. 31, 2010
Nov. 30, 2009
Jul. 31, 2009
Jan. 1, 2012
years
Jan. 2, 2011
Jan. 3, 2010
Dec. 30, 2011
Jan. 1, 2012
0.25% Convertible Senior Notes due 2016 [Member]
Jan. 1, 2012
2005 Stock Plan and 2005 Solexa Equity Plan [Member]
Jan. 1, 2012
Stock Options [Member]
Jan. 1, 2012
Employee Stock Purchase Plan [Member]
Jan. 2, 2011
Employee Stock Purchase Plan [Member]
Jan. 3, 2010
Employee Stock Purchase Plan [Member]
Jan. 1, 2012
Restricted Stock [Member]
Jan. 2, 2011
Restricted Stock [Member]
Jan. 3, 2010
Restricted Stock [Member]
Dec. 30, 2011
Restricted Stock [Member]
Dec. 31, 2010
Restricted Stock [Member]
Jan. 1, 2012
Warrants [Member]
Aug. 31, 2011
Share Repurchase Program [Member]
Jan. 1, 2012
Share Repurchase Program [Member]
Jan. 25, 2012
Stockholder Rights Plan [Member]
Jan. 1, 2012
Stockholder Rights Plan [Member]
May 3, 2001
Stockholder Rights Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares of common stock outstanding
 
 
 
122,041,000 
126,607,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of active stock plans
 
 
 
3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares available for issuance
 
 
 
 
 
 
 
 
5,220,000 
 
15,734,000 
16,062,000 
 
 
 
 
 
 
 
 
 
 
 
 
Stock options granted minimum vesting period
 
 
 
 
 
 
 
 
 
P4Y 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock options granted maximum vesting period
 
 
 
 
 
 
 
 
 
P5Y 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of options vesting on the first anniversary of the grant date Type 1
 
 
 
 
 
 
 
 
 
20.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of options vesting on the first anniversary of the grant date Type 2
 
 
 
 
 
 
 
 
 
25.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum term of each grant of options
 
 
 
 
 
 
 
 
 
10 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock option Exercisable
 
 
 
7,126,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock option Exercisable outstanding weighted average exercise price per share
 
 
 
$ 23.58 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average remaining life in years of options outstanding
 
 
 
6.1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average remaining life in years of options exercisable
 
 
 
5.4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate intrinsic value of options outstanding
 
 
 
$ 78,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closing stock price per share
 
 
 
 
 
 
$ 30.48 
 
 
 
 
 
 
 
 
 
$ 30.48 
$ 63.34 
 
 
 
 
 
 
Total instrinsic value of options exercised
 
 
 
136,500,000 
156,900,000 
73,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of options vested
 
 
 
49,500,000 
47,300,000 
52,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate intrinsic value of options exercisable
 
 
 
71,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax intrinsic value of all outstanding RSUs
 
 
 
 
 
 
 
 
 
 
 
 
 
145,500,000 
125,600,000 
 
 
 
 
 
 
 
 
 
Fair value of RSUs vested
 
 
 
30,200,000 
16,400,000 
8,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock shares reserved for issuance
 
 
 
 
 
 
 
 
 
 
15,467,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Specified percentage of the fair market value of the common stock on the first or last day of the offering period whichever is lower at which stock is purchased
 
 
 
 
 
 
 
 
 
 
85.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual percent increases of shares available for issuance
 
 
 
 
 
 
 
 
 
 
3.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual increases of shares available for issuance
 
 
 
 
 
 
 
 
 
 
3,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total shares issued under the ESPP
 
 
 
 
 
 
 
 
 
 
328,000 
373,000 
360,000 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Grant Date Fair Value per Share, Awarded
 
 
 
 
 
 
 
 
 
 
$ 20.08 
$ 11.10 
$ 9.24 
$ 42.02 
$ 50.74 
$ 32.25 
 
 
 
 
 
 
 
 
Percent vested on the first anniversary of the grant date
 
 
 
 
 
 
 
 
 
 
 
 
 
15.00% 
 
 
 
 
 
 
 
 
 
 
Percent vested on the second anniversary of the grant date
 
 
 
 
 
 
 
 
 
 
 
 
 
20.00% 
 
 
 
 
 
 
 
 
 
 
Percent vested on the third anniversary of the grant date
 
 
 
 
 
 
 
 
 
 
 
 
 
30.00% 
 
 
 
 
 
 
 
 
 
 
Percent vested on the fourth anniversary of the grant date
 
 
 
 
 
 
 
 
 
 
 
 
 
35.00% 
 
 
 
 
 
 
 
 
 
 
Number of shares purchased for warrants exercised
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
505,000 
 
 
 
 
 
Proceeds from the exercise of warrants
 
 
 
5,512,000 
16,029,000 
7,576,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18,322,000 
 
 
 
 
 
Exercise price of warrants held by hedging counter parties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 31.435 
 
 
 
 
 
Stock repurchase program authorized amount
200,000,000 
100,000,000 
75,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100,000,000 
 
 
 
 
Repurchase of common shares
 
 
 
 
 
6,140,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,894,000 
 
 
 
Number of shares repurchased concurrent with convertible debt issuance
 
 
 
 
 
 
 
4,890,500 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from debt issuance used in shares repurchases
 
 
 
 
 
 
 
314,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allocated to repurchasing company common stock under a 10b5-1 plan
100,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock Repurchasing Period Under 10 b 5 1 Plan
12 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount allocated to repurchasing Company common stock during open trading windows
100,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares repurchased under the July 2010 repurchase programs
 
 
 
2,438,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payments for repurchase of common stock under July 2010 repurchase programs
 
 
 
156,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock repurchases
 
 
 
$ 570,406,000 
$ 44,016,000 
$ 175,136,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend number of preferred share purchase rights for each outstanding share of common stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 
Number of units each right entitles
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 
 
Dividend portion of a share of Series A Junior Participating Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.001 
0.001 
 
Dividend price per share of Series A Junior Participating Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 275 
$ 100 
 
Minimum percent ownership of outstanding common stock required to exercise rights
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15.00% 
 
Preferred stock, par value
 
 
 
$ 0.01 
$ 0.01 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Price per right Board of Directors are entitled to redeem rights
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.001 
$ 0.01 
 
Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Income Tax Disclosure [Abstract]
 
 
 
United States
$ (7,100)
$ 109,068 
$ 65,081 
Foreign
140,145 
76,311 
49,044 
Income before income taxes
$ 133,045 
$ 185,379 
$ 114,125 
Income Taxes (Details 1) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Current:
 
 
 
Federal
$ 43,161 
$ 39,476 
$ 43,565 
State
3,958 
8,607 
2,511 
Foreign
24,154 
6,330 
6,204 
Total current provision
71,273 
54,413 
52,280 
Deferred:
 
 
 
Federal
(22,738)
6,557 
(14,607)
State
(8,050)
(6,808)
5,184 
Foreign
5,932 
6,326 
(1,013)
Total deferred provision (benefit)
(24,856)
6,075 
(10,436)
Total tax provision
$ 46,417 
$ 60,488 
$ 41,844 
Income Taxes (Details 2) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Income Tax Disclosure [Abstract]
 
 
 
Tax at federal statutory rate
$ 46,566 
$ 64,881 
$ 39,944 
State, net of federal benefit
(49)
6,231 
4,275 
Research and other credits
(6,774)
(5,859)
(4,050)
Acquired in-process research & development
1,989 
517 
4,386 
Change in valuation allowance
(688)
(9,497)
(1,967)
Permanent differences
1,668 
1,397 
2,093 
Change in fair value of contingent consideration
(1,311)
(3,632)
   
Impact of foreign operations
5,579 
7,597 
(5,400)
Other
(563)
(1,147)
2,563 
Total tax provision
$ 46,417 
$ 60,488 
$ 41,844 
Income Taxes (Details 3) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Deferred tax assets:
 
 
Net operating losses
$ 4,981 
$ 11,898 
Tax credits
16,647 
18,329 
Other accruals and reserves
22,411 
17,616 
Stock compensation
33,811 
23,829 
Inventory adjustments
16,469 
5,573 
Impairment of cost-method investment
4,972 
5,058 
Other amortization
4,521 
4,893 
Other
8,861 
3,588 
Total gross deferred tax assets
112,673 
90,784 
Valuation allowance on deferred tax assets
(1,799)
(4,986)
Total deferred tax assets
110,874 
85,798 
Deferred tax liabilities:
 
 
Purchased intangible amortization
(19,760)
(22,605)
Convertible debt
(49,404)
(3,191)
Other
(12,322)
(7,137)
Total deferred tax liabilities
81,486 
32,933 
Net deferred tax assets
$ 29,388 
$ 52,865 
Income Taxes (Details 4) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
 
 
 
Balance at beginning of year
$ 22,729 
$ 11,760 
$ 9,402 
Increases related to prior year tax positions
875 
5,066 
0 
Decreases related to prior year tax positions
(382)
0 
0 
Increases related to current year tax positions
5,174 
5,903 
2,358 
Balance at end of year
$ 28,396 
$ 22,729 
$ 11,760 
Income Taxes (Details Textual) (USD $)
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Income Taxes [Line Items]
 
 
 
Change in valuation allowance
$ 3,200,000 
 
 
Valuation allowance
1,799,000 
4,986,000 
 
Excess tax benefits realized
43,122,000 
42,445,000 
39,319,000 
Unrealized excess tax benefits associated with share-based compensation
12,800,000 
 
 
Decrease to the provision for income taxes
4,400,000 
 
 
Increase to net income per diluted share
$ 0.03 
 
 
Undistributed earnings of foreign subsidiaries
102,800,000 
 
 
Uncertain tax positions that would reduce the Company’s annual effective tax rate, if recognized
23,400,000 
18,300,000 
 
Potential interest and penalties on uncertain tax positions expense recognized
1,100,000 
 
 
Liability recorded for potential interest and penalties
1,200,000 
 
 
Internal Revenue Service (IRS) [Member]
 
 
 
Income Taxes [Line Items]
 
 
 
Net operating loss carryforwards
25,200,000 
 
 
Research and development tax credit carryforwards
11,000,000 
 
 
State and Local Jurisdiction [Member]
 
 
 
Income Taxes [Line Items]
 
 
 
Net operating loss carryforwards
162,000,000 
 
 
Research and development tax credit carryforwards
34,300,000 
 
 
Additional Paid-in Capital [Member]
 
 
 
Income Taxes [Line Items]
 
 
 
Excess tax benefits realized
$ 43,122,000 
$ 42,445,000 
$ 39,319,000 
Employee Benefit Plans (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Postemployment Benefits [Abstract]
 
 
 
Matching contributions
$ 5.3 
$ 4.2 
$ 3.3 
Percent of base salary available for contribution to the deferred compensation plan
80.00% 
 
 
Percent of all other forms of compensation available for contribution to the deferred compensation plan
100.00% 
 
 
Assets of the Deferred Compensation Plan rabbi trust
10.8 
6.4 
 
Liabilities of the Deferred Compensation Plan rabbi trust
$ 9.0 
$ 5.3 
 
Segment Information, Geographic Data, and Significant Customers (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Jan. 1, 2012
Oct. 2, 2011
Jul. 3, 2011
Apr. 3, 2011
Jan. 2, 2011
Oct. 3, 2010
Jul. 4, 2010
Apr. 4, 2010
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 250,071 
$ 235,499 
$ 287,450 
$ 282,515 
$ 261,298 
$ 237,309 
$ 212,003 
$ 192,131 
$ 1,055,535 
$ 902,741 
$ 666,324 
United States
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
528,723 
498,981 
347,195 
United Kingdom
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
67,578 
60,521 
55,854 
Other European countries
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
210,393 
163,062 
140,931 
Asia-Pacific
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
197,005 
143,441 
96,396 
Other markets
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
$ 51,836 
$ 36,736 
$ 25,948 
Segment Information, Geographic Data, and Significant Customers (Details 1) (USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Jan. 2, 2011
Segment Reporting Information [Line Items]
 
 
Long-Lived Assets
$ 143,483 
$ 129,874 
United States
 
 
Segment Reporting Information [Line Items]
 
 
Long-Lived Assets
94,624 
75,050 
United Kingdom
 
 
Segment Reporting Information [Line Items]
 
 
Long-Lived Assets
22,642 
26,578 
Singapore
 
 
Segment Reporting Information [Line Items]
 
 
Long-Lived Assets
14,673 
14,739 
Other countries
 
 
Segment Reporting Information [Line Items]
 
 
Long-Lived Assets
$ 11,544 
$ 13,507 
Segment Information, Geographic Data, and Significant Customers (Details Textual)
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Revenue from External Customer [Line Items]
 
 
 
Number of business segments
2 
 
 
Number of reportable segments
1 
 
 
Number of future reportable segments
2 
 
 
Minimum percent of revenues, operating profit or loss, or assets of the Diagnostics Business Unit to begin reporting in two segments
10.00% 
 
 
Products and Services, Consumables [Member]
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Percent of sales
56.00% 
56.00% 
59.00% 
Products and Services, Instruments [Member]
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Percent of sales
35.00% 
36.00% 
34.00% 
Quarterly Financial Information (unaudited) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Jan. 1, 2012
Oct. 2, 2011
Jul. 3, 2011
Apr. 3, 2011
Jan. 2, 2011
Oct. 3, 2010
Jul. 4, 2010
Apr. 4, 2010
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Fiscal year quarterly operating cycle
 
 
 
 
 
 
 
 
P13W 
P13W 
 
Revenue, Net
$ 250,071 
$ 235,499 
$ 287,450 
$ 282,515 
$ 261,298 
$ 237,309 
$ 212,003 
$ 192,131 
$ 1,055,535 
$ 902,741 
$ 666,324 
Gross Profit
170,586 
157,115 
193,356 
188,041 
166,126 
157,145 
146,091 
132,178 
709,098 
601,540 
453,875 
Net income
$ 11,720 
$ 20,151 
$ 30,620 
$ 24,137 
$ 38,440 
$ 35,447 
$ 29,796 
$ 21,208 
$ 86,628 
$ 124,891 
$ 72,281 
Earnings Per Share, Basic
$ 0.10 
$ 0.17 
$ 0.25 
$ 0.19 
$ 0.31 
$ 0.28 
$ 0.24 
$ 0.18 
$ 0.70 
$ 1.01 
$ 0.59 
Earnings Per Share, Diluted
$ 0.09 
$ 0.15 
$ 0.22 
$ 0.16 
$ 0.25 
$ 0.24 
$ 0.21 
$ 0.16 
$ 0.62 
$ 0.87 
$ 0.53 
Subsequent Event (Details)
Jan. 27, 2012
Subsequent Events [Abstract]
 
Offered price per share from Roche
$ 44.50 
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 3, 2010
Allowance for doubtful accounts [Member]
 
 
 
Valuation and Qualifying Accounts Disclosure [Line Items]
 
 
 
Balance at Beginning of Period
$ 1,686 
$ 1,398 
$ 1,138 
Additions Charged to Expense Revenue
4,201 1
341 1
828 1
Deductions
(1,890)2
(53)2
(568)2
Balance at End of Period
3,997 
1,686 
1,398 
Reserve for inventory [Member]
 
 
 
Valuation and Qualifying Accounts Disclosure [Line Items]
 
 
 
Balance at Beginning of Period
12,273 
10,597 
6,431 
Additions Charged to Expense Revenue
14,160 1
9,559 1
8,403 1
Deductions
(11,935)2
(7,883)2
(4,237)2
Balance at End of Period
$ 14,498 
$ 12,273 
$ 10,597