Monolithic Power Systems, Inc.
MONOLITHIC POWER SYSTEMS INC (Form: 10-Q, Received: 10/28/2015 16:34:47)

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q


 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2015

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 000-51026

 


Monolithic Power Systems, Inc.

(Exact name of registrant as specified in its charter)


 

Delaware

77-0466789

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

79 Great Oaks Boulevard, San Jose, CA 95119

(Address of principal executive offices)(Zip code)

 

   (408) 826-0600

(Registrant’s telephone number, including area code)


  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes       No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ☒

Accelerated filer            

Non-accelerated filer  ☐   

Smaller reporting company  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

 

There were 39,519,243 shares of the registrant’s common stock issued and outstanding as of October 23, 2015.

 



 

 
 

 

 

MONOLITHIC POWER SYSTEMS, INC.

 

 

TABLE OF CONTENTS

PAGE

PART I. FINANCIAL INFORMATION

3

ITEM 1.

FINANCIAL STATEMENTS (Unaudited)

3

 

CONDENSED CONSOLIDATED BALANCE SHEETS

3

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

4

 

    CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

5

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

6

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

22

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

29

ITEM 4.

CONTROLS AND PROCEDURES

29

PART II. OTHER INFORMATION

30

ITEM 1.

LEGAL PROCEEDINGS

30

ITEM 1A.

RISK FACTORS

30

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

46

ITEM 6.

EXHIBITS

46

 

 

 
2

 

 

 PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(unaudited)

 

   

September 30,

   

December 31,

 
   

2015

   

2014

 

ASSETS

               

Current assets:

               

Cash and cash equivalents

  $ 76,616     $ 126,266  

Short-term investments

    153,047       112,452  

Accounts receivable, net

    30,475       25,630  

Inventories

    67,309       40,918  

Prepaid expenses and other current assets

    2,521       2,880  

Total current assets

    329,968       308,146  

Property and equipment, net

    60,088       62,942  

Long-term investments

    5,364       5,389  

Goodwill

    6,571       6,571  

Acquisition-related intangible assets, net

    5,566       6,812  

Deferred tax assets, net

    1,031       1,049  

Other long-term assets

    11,491       8,457  

Total assets

  $ 420,079     $ 399,366  
                 

LIABILITIES AND STOCKHOLDERS’ EQUITY

               

Current liabilities:

               

Accounts payable

  $ 15,661     $ 13,138  

Accrued compensation and related benefits

    14,256       9,020  

Accrued liabilities

    18,703       14,703  

Total current liabilities

    48,620       36,861  

Deferred tax and other tax liabilities

    3,229       5,876  

Other long-term liabilities

    14,117       10,204  

Total liabilities

    65,966       52,941  

Stockholders' equity:

               

Common stock, $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 39,503 and 38,832 as of September 30, 2015 and December 31, 2014, respectively

    251,298       240,500  

Retained earnings

    99,731       100,114  

Accumulated other comprehensive income

    3,084       5,811  

Total stockholders’ equity

    354,113       346,425  

Total liabilities and stockholders’ equity

  $ 420,079     $ 399,366  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
3

 

 

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per-share amounts)

(unaudited)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2015

   

2014

   

2015

   

2014

 

Revenue

  $ 91,194     $ 78,335     $ 246,148     $ 206,832  

Cost of revenue

    41,754       35,872       112,896       95,173  

Gross profit

    49,440       42,463       133,252       111,659  

Operating expenses:

                               

Research and development

    17,272       14,679       49,053       43,649  

Selling, general and administrative

    18,722       17,006       54,204       49,968  

Litigation expense (benefit), net

    136       332       717       (8,093 )

Total operating expenses

    36,130       32,017       103,974       85,524  

Income from operations

    13,310       10,446       29,278       26,135  

Interest and other income (expense), net

    (6 )     202       871       686  

Income before income taxes

    13,304       10,648       30,149       26,821  

Income tax provision (benefit)

    2,103       (573 )     5,086       186  

Net income

  $ 11,201     $ 11,221     $ 25,063     $ 26,635  
                                 

Net income per share:

                               

Basic

  $ 0.28     $ 0.29     $ 0.64     $ 0.69  

Diluted

  $ 0.28     $ 0.28     $ 0.62     $ 0.67  

Weighted-average shares outstanding:

                               

Basic

    39,592       38,785       39,422       38,646  

Diluted

    40,689       39,727       40,676       39,618  
                                 

Cash dividends declared per common share

  $ 0.20     $ 0.15     $ 0.60     $ 0.30  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
4

 

 

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2015

   

2014

   

2015

   

2014

 

Net income

  $ 11,201     $ 11,221     $ 25,063     $ 26,635  

Other comprehensive loss, net of tax:

                               

Change in unrealized losses on auction-rate securities, net of $0 tax in 2015 and 2014

    (11 )     (53 )     (25 )     (65 )

Change in unrealized gains/losses on other available-for-sale securities, net of $0 tax in 2015 and 2014

    41       (28 )     76       (16 )

Foreign currency translation adjustments

    (3,132 )     (98 )     (2,778 )     (518 )

Total other comprehensive loss, net of tax

    (3,102 )     (179 )     (2,727 )     (599 )

Comprehensive income

  $ 8,099     $ 11,042     $ 22,336     $ 26,036  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
5

 

 

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

   

Nine Months Ended September 30,

 
   

2015

   

2014

 
                 

Cash flows from operating activities:

               

Net income

  $ 25,063     $ 26,635  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation and amortization

    10,478       9,688  

Premium amortization and losses on investments

    910       197  

Stock-based compensation

    29,191       24,872  

Excess tax benefit from equity awards

    (4,221 )     -  

Changes in operating assets and liabilities, net of effects of an acquisition:

               

Accounts receivable

    (4,845 )     (516 )

Inventories

    (26,378 )     (1,800 )

Prepaid expenses and other assets

    141       (1,868 )

Accounts payable

    3,545       3,864  

Accrued liabilities

    4,154       (2,885 )

Income tax liabilities

    1,912       (801 )

Accrued compensation and related benefits

    5,449       (3,789 )

Net cash provided by operating activities

    45,399       53,597  

Cash flows from investing activities:

               

Property and equipment purchases

    (8,410 )     (7,730 )

Purchases of short-term investments

    (172,651 )     (100,706 )

Proceeds from sale of short-term investments

    131,025       98,752  

Premiums paid on deferred compensation plan, net

    (3,455 )     (4,860 )

Cash paid for an acquisition, net of cash acquired

    -       (11,590 )

Net cash used in investing activities

    (53,491 )     (26,134 )

Cash flows from financing activities:

               

Property and equipment purchased on extended payment terms

    (150 )     (250 )

Proceeds from exercise of stock options

    6,876       10,403  

Proceeds from shares issued under the employee stock purchase plan

    2,227       2,078  

Repurchases of common shares

    (31,735 )     (32,976 )

Dividends and dividend equivalents paid

    (21,853 )     (5,817 )

Excess tax benefit from equity awards

    4,221       -  

Net cash used in financing activities

    (40,414 )     (26,562 )

Effect of change in exchange rates

    (1,144 )     (302 )

Net increase (decrease) in cash and cash equivalents

    (49,650 )     599  

Cash and cash equivalents, beginning of period

    126,266       101,213  

Cash and cash equivalents, end of period

  $ 76,616     $ 101,812  
                 

Supplemental disclosures for cash flow information:

               

Cash paid for taxes and interest

  $ 3,070     $ 981  

Supplemental disclosures of non-cash investing and financing activities:

               

Liability accrued for property and equipment purchases

  $ 1,003     $ 783  

Liability accrued for dividends and dividend equivalents

  $ 9,648     $ 6,359  

Fair value of contingent consideration related to an acquisition

  $ -     $ 2,507  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 
6

 

 

MONOLITHIC POWER SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1. BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared by Monolithic Power Systems, Inc. (the “Company” or “MPS”) in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted in accordance with these rules and regulations. The information in this report should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 2, 2015.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The financial statements contained in this Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 or for any other future periods.

 

Summary of Significant Accounting Policies

 

There have been no changes to the Company’s significant accounting policies during the three and nine months ended September 30, 2015 as compared to the significant accounting policies described in the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2014.

 

Recent Accounting Pronouncements

  

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-09,  Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard’s core principle is that an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB approved a one-year deferral of the effective date. The standard will be effective for annual reporting periods beginning after December 15, 2017. Entities have the option of using either a full retrospective or a modified retrospective application in the adoption of this standard. The Company is evaluating the transition method and the impact of the adoption on its consolidated financial position, results of operations and cash flows.

 

In July 2015, the FASB issued ASU No 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory, which replaces the lower of cost or market test with a lower of cost or net realizable value test. The standard applies to inventories for which cost is determined by methods other than the last-in first-out and the retail inventory methods. The standard will be effective for annual reporting periods beginning after December 15, 2016. The Company is evaluating the impact of the adoption on its consolidated financial position, results of operations and cash flows.

 

2. STOCK-BASED COMPENSATION

 

Stock Plan

 

The Board of Directors adopted the 2014 Equity Incentive Plan (the “2014 Plan”) in April 2013, and the stockholders approved it in June 2013. In October 2014, the Board of Directors approved certain amendments to the 2014 Plan. The 2014 Plan became effective on November 13, 2014 and provides for the issuance of up to 5.5 million shares. The 2014 Plan will expire on November 13, 2024. As of September 30, 2015, 5.3 million shares remained available for future issuance.  

 

 
7

 

 

Stock-Based Compensation Expense

 

The Company recognized stock-based compensation expenses as follows (in thousands):

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2015

   

2014

   

2015

   

2014

 

Cost of revenue

  $ 303     $ 246     $ 829     $ 669  

Research and development

    2,932       2,388       8,055       6,638  

Selling, general and administrative

    7,240       6,225       20,307       17,565  

Total

  $ 10,475     $ 8,859     $ 29,191     $ 24,872  

 

Restricted Stock

 

The Company’s restricted stock units (“RSUs”) include time-based RSUs, performance-based RSUs (“PSUs”) and market-based RSUs (“MSUs”). Time-based RSUs generally vest over one to four years, subject to continued employment with the Company. PSUs vest over four years and MSUs vest over ten years, subject to the achievement of pre-determined performance goals and continued employment with the Company. A summary of the RSUs is presented in the table below:

 

   

Time-Based RSUs

   

Weighted-Average Grant Date Fair Value Per Share

   

PSUs

   

Weighted-Average Grant Date Fair Value Per Share

   

MSUs

   

Weighted-Average Grant Date Fair Value Per Share

   

Total

   

Weighted-Average Grant Date Fair Value Per Share

 
  (in thousands)           (in thousands)           (in thousands)         (in thousands)        

Outstanding at January 1, 2015

    589     $ 28.48       1,659     $ 28.11       1,800     $ 23.57       4,048     $ 26.14  

Granted (1)

    263     $ 49.59       659     $ 48.53       -     $ -       922     $ 48.83  

Performance adjustment (2)

    -     $ -       (70 )   $ 41.83       -     $ -       (70 )   $ 41.83  

Released

    (257 )   $ 25.58       (555 )   $ 23.56       -     $ -       (812 )   $ 24.20  

Forfeited

    (40 )   $ 35.12       (24 )   $ 28.27       -     $ -       (64 )   $ 32.54  

Outstanding at September 30, 2015

    555     $ 39.38       1,669     $ 37.11       1,800     $ 23.57       4,024     $ 31.37  

 


(1)

Amount for PSUs reflects the maximum number of shares that can be earned assuming the achievement of the highest level of performance conditions.

(2)

Amount for PSUs reflects the number of shares that have not been earned or may not be earned based on management’s probability assessment.

 

The intrinsic value related to awards released for the three months ended September 30, 2015 and 2014 was $6.6 million and $5.3 million, respectively. The intrinsic value related to awards released for the nine months ended September 30, 2015 and 2014 was $40.6 million and $23.8 million, respectively. As of September 30, 2015, the total intrinsic value of outstanding awards, including RSUs, PSUs and MSUs, was $206.0 million, based on the closing stock price of $51.20. As of September 30, 2015, unamortized compensation expense related to outstanding awards, including RSUs, PSUs and MSUs, was approximately $82.8 million with a weighted-average remaining recognition period of approximately five years.

 

2015 PSUs:

 

In February 2015, the Board of Directors granted to executive officers 172,000 shares of PSUs which represent a target number of RSUs to be awarded based on the Company’s average two-year (2015 and 2016) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as determined by the Semiconductor Industry Association (“2015 Executive PSUs”). The maximum number of 2015 Executive PSUs that an executive officer can ultimately earn is 300% of the target shares. 50% of the 2015 Executive PSUs will vest in February 2017 if the pre-determined performance goals are met and approved by the Compensation Committee. The remaining shares will vest over the following two years on a quarterly basis. The vesting is subject to the employees’ continued employment with the Company.

 

In February 2015, the Board of Directors granted to non-executive employees 58,000 shares of PSUs which represent a target number of RSUs to be awarded based on the Company’s 2016 revenue goals for certain regions or product line divisions, or the Company’s average two-year (2015 and 2016) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as determined by the Semiconductor Industry Association (“2015 Non-Executive PSUs”). The maximum number of 2015 Non-Executive PSUs that an employee can ultimately earn is either 200% or 300% of the target shares, depending on the job classification of the employee. 50% of the 2015 Non-Executive PSUs will vest in the first quarter of 2017 if the pre-determined performance goals are met and approved by the Compensation Committee. The remaining shares will vest over the following two years on an annual or quarterly basis. The vesting is subject to the employees’ continued employment with the Company.

 

 
8

 

 

Stock Options

 

A summary of stock option activity is presented in the table below:

 

   

Shares

   

Weighted-Average Exercise Price

   

Weighted-Average Remaining Contractual Term

   

Aggregate Intrinsic Value

 
   

(in thousands)

           

(in years)

   

(in thousands)

 

Outstanding at January 1, 2015

    590     $ 15.80       1.2     $ 20,039  

Exercised

    (438 )   $ 15.69                  

Forfeited and expired

    (1 )   $ 15.95                  

Outstanding at September 30, 2015

    151     $ 16.13       1.3     $ 5,294  

Options exercisable at September 30, 2015 and expected to vest

    151     $ 16.13       1.3     $ 5,294  

Options exercisable at September 30, 2015

    149     $ 16.19       1.2     $ 5,213  

 

Total intrinsic value of options exercised was $0.4 million and $2.3 million for the three months ended September 30, 2015 and 2014, respectively. Total intrinsic value of options exercised was $15.8 million and $14.1 million for the nine months ended September 30, 2015 and 2014, respectively. The net cash proceeds from the exercise of stock options were $6.9 million and $10.4 million for the nine months ended September 30, 2015 and 2014, respectively. As of September 30, 2015, unamortized compensation expense related to unvested options was not material.

 

Employee Stock Purchase Plan (“ESPP”)

  

For the three months ended September 30, 2015 and 2014, 26,000 and 34,000 shares, respectively, were issued under the ESPP. For the nine months ended September 30, 2015 and 2014, 56,000 and 78,000 shares, respectively, were issued under the ESPP. As of September 30, 2015, 4.7 million shares were available for future issuance.

 

The intrinsic value of shares issued was $0.2 million and $0.5 million for the three months ended September 30, 2015 and 2014, respectively. The intrinsic value of shares issued was $0.6 million and $0.9 million for the nine months ended September 30, 2015 and 2014, respectively. As of September 30, 2015, the unamortized expense was $0.2 million, which will be recognized through the first quarter of 2016. The Black-Scholes model was used to value the employee stock purchase rights with the following weighted-average assumptions:

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2015

   

2014

   

2015

   

2014

 

Expected term (years)

    0.5       0.5       0.5       0.5  

Expected volatility

    24.8 %     25.1 %     30.3 %     29.5 %

Risk-free interest rate

    0.2 %     0.1 %     0.2 %     0.1 %

Dividend yield

    1.6 %     1.4 %     1.4 %     0.7 %

 

Cash proceeds from the shares issued under the ESPP were $2.2 million and $2.1 million for the nine months ended September 30, 2015 and 2014, respectively.  

  

3. ACQUISITION

 

On July 22, 2014 (the “Acquisition Date”), the Company acquired 100% of the outstanding capital stock of Sensima Technology SA (“Sensima”), a company based in Switzerland that develops magnetic sensor technologies for angle measurements as well as three-dimensional magnetic field sensing. The acquisition creates new opportunities with customers by offering enhanced solutions in power management for key industries such as automotive, industrial and cloud computing. As a result of the acquisition, Sensima became a subsidiary of the Company and changed its name to MPS Tech Switzerland Sarl. Its results of operations have been included in the Company’s consolidated financial statements subsequent to the acquisition.

 

 
9

 

 

Purchase Consideration

 

The fair value of the purchase consideration consists of the following (in thousands):

 

Cash paid at the Acquisition Date

  $ 11,735  

Contingent consideration

    2,507  

Total

  $ 14,242  

 

Cash paid at the Acquisition Date included $1.2 million that was held in an escrow account for a one-year period, which was subject to Sensima’s satisfaction of certain representations and warranties. The full amount was released from the escrow account on July 22, 2015.

 

The contingent consideration arrangement requires the Company to pay up to an additional $8.9 million to former Sensima shareholders if Sensima achieves a new product introduction as well as certain product revenue and direct margin targets in 2016. The fair value of the contingent consideration at the Acquisition Date was $2.5 million, which was estimated based on a probability-weighted analysis of possible future cash flow outcomes. The fair value of the contingent consideration is recorded in other long-term liabilities in the Condensed Consolidated Balance Sheets and is remeasured at the end of each reporting period, with any changes in fair value recorded in operating expense in the Condensed Consolidated Statements of Operations. Actual amounts that will ultimately be paid may differ from the obligations recorded.

 

The Company incurred $0.6 million of transaction costs that were expensed as incurred to selling, general and administrative expenses.

   

Purchase Consideration Allocation

 

The fair value of assets acquired and liabilities assumed is as follows (in thousands):

 

Cash

  $ 145  

Other tangible assets acquired, net of liabilities assumed

    42  

Intangible assets:

       

Know-how

    1,018  

Developed technologies

    4,421  

IPR&D

    2,045  

Total identifiable net assets acquired

    7,671  

Goodwill

    6,571  

Total net assets acquired

  $ 14,242  

 

Intangible assets with finite lives included know-how and developed technologies with estimated useful lives of three to five years. The fair value of know-how was determined using the relief from royalty method, and the fair value of the developed technologies was determined using the income approach. Intangible assets with indefinite lives included in-process research and development (“IPR&D”), which consisted of incomplete R&D projects that had not reached technological feasibility as of the Acquisition Date. The fair value of the IPR&D assets was determined using the income approach. During the third quarter of 2015, management determined that the acquired IPR&D was completed and reclassified it as a finite-lived intangible asset with an estimated useful life of four years.

 

The goodwill arising from the acquisition was primarily attributed to synergies which will enable the Company to develop advanced solutions in power management by integrating Sensima’s magnetic sensor technologies. The goodwill is not expected to be deductible for tax purposes.

 

Equity Awards

 

On the Acquisition Date, the Board of Directors granted $1.7 million of time-based RSUs (or 40,000 shares) to key Sensima employees who became employees of the Company. These awards vest over four years. In addition, the Board of Directors granted $2.0 million of PSUs (or 47,000 shares) to these employees, with the right to earn up to a maximum of $8.0 million based on the achievement of certain cumulative Sensima product revenue targets during the performance period from the Acquisition Date to July 22, 2019. 50% of the awards subject to each revenue goal will vest immediately when the pre-determined revenue goal is met and approved by the Compensation Committee, and the remaining shares will vest over the following two years. The vesting is subject to the employees’ continued employment with the Company. These equity awards are considered arrangements for post-acquisition services and the related compensation expense is being recognized over the requisite service period.

 

 
10

 

 

Pro Forma Information (Unaudited)

 

Supplemental information of the Company’s results of operations on a pro forma basis, as if the Sensima acquisition had been consummated on January 1, 2014, is presented as follows (in thousands, except per-share amounts):

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30, 2014

   

September 30, 2014

 

Revenue

  $ 78,336     $ 206,882  

Net income

  $ 11,025     $ 24,886  

Diluted net income per share

  $ 0.28     $ 0.63  

 

These pro forma results are not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that would have been realized had the Company acquired Sensima during the periods presented. The pro forma results include adjustments primarily related to Sensima’s results of operations, amortization of intangible assets, stock-based compensation expense and the related tax effects.

 

4. BALANCE SHEET COMPONENTS

 

Inventories 

 

Inventories consist of the following (in thousands):  

 

   

September 30,

   

December 31,

 
   

2015

   

2014

 

Raw materials

  $ 16,840     $ 7,298  

Work in process

    23,083       18,950  

Finished goods

    27,386       14,670  

Total

  $ 67,309     $ 40,918  

 

Other Long-Term Assets

 

Other long-term assets consist of the following (in thousands):

 

   

September 30,

   

December 31,

 
   

2015

   

2014

 

Deferred compensation plan assets

  $ 8,971     $ 6,084  

Prepaid expense

    1,370       1,418  

Other

    1,150       955  

Total

  $ 11,491     $ 8,457  

 

 
11

 

 

Accrued Liabilities

 

Accrued liabilities consist of the following (in thousands): 

 

   

September 30,

   

December 31,

 
   

2015

   

2014

 

Dividends and dividend equivalents

  $ 8,525     $ 6,080  

Deferred revenue and customer prepayments

    4,083       3,908  

Stock rotation reserve

    2,667       1,757  

Commissions

    819       767  

Sales rebate

    446       586  

Warranty

    268       240  

Other

    1,895       1,365  

Total

  $ 18,703     $ 14,703  

 

A roll-forward of the warranty reserve is as follows (in thousands):

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2015

   

2014

   

2015

   

2014

 

Balance at beginning of period

  $ 205     $ 290     $ 240     $ 451  

Warranty provision for product sales

    91       78       246       207  

Settlements made

    -       -       (153 )     (74 )

Unused warranty provision

    (28 )     (128 )     (65 )     (344 )

Balance at end of period

  $ 268     $ 240     $ 268     $ 240  

 

Other Long-Term Liabilities

 

Other long-term liabilities consist of the following (in thousands):

 

   

September 30,

   

December 31,

 
   

2015

   

2014

 

Deferred compensation plan liabilities

  $ 9,020     $ 6,177  

Contingent consideration

    2,507       2,507  

Dividend equivalents

    1,727       580  

Other

    863       940  

Total

  $ 14,117     $ 10,204  

 

5. GOODWILL AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET

 

There have been no changes in the balance of goodwill during the three and nine months ended September 30, 2015.

 

Acquisition-related intangible assets consist of the following (in thousands):

 

   

As of September 30, 2015

 
   

Gross Amount

   

Accumulated Amortization

   

Net Amount

 

Subject to amortization:

                       

Know-how

  $ 1,018     $ (246 )   $ 772  

Developed technologies

    6,466       (1,672 )     4,794  

Total

  $ 7,484     $ (1,918 )   $ 5,566  

 

 
12

 

 

   

As of December 31, 2014

 
   

Gross Amount

   

Accumulated Amortization

   

Net Amount

 

Subject to amortization:

                       

Know-how

  $ 1,018     $ (93 )   $ 925  

Developed technologies

    4,421       (579 )     3,842  

Not subject to amortization:

                       

IPR&D

    2,045       -       2,045  

Total

  $ 7,484     $ (672 )   $ 6,812  

 

During the third quarter of 2015, management determined that the acquired IPR&D from the Sensima acquisition was completed and the products incorporating the technologies are ready to be commercially introduced. Accordingly, the acquired IPR&D was reclassified into developed technologies as a finite-lived intangible asset and is being amortized over its estimated useful life.

 

Amortization expense is recorded in cost of revenue in the Condensed Consolidated Statements of Operations and totaled $0.5 million and $1.2 million for the three and nine months ended September 30, 2015, respectively. Amortization expense totaled $0.3 million for both the three and nine months ended September 30, 2014.

 

As of September 30, 2015, the estimated future amortization expense was as follows (in thousands):

 

2015 (remaining three months)

  $ 513  

2016

    2,051  

2017

    2,051  

2018

    841  

2019

    110  

Total

  $ 5,566  

 

6. NET INCOME PER SHARE

 

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that would occur if outstanding securities or other contracts to issue common stock were exercised or converted into common stock, and calculated using the treasury stock method. 

 

The Company’s outstanding RSUs contain forfeitable rights to receive dividend equivalents, which are accrued quarterly during the vesting periods of the RSUs and are payable to the employees when the awards vest. Dividend equivalents accrued on the RSUs are forfeited if the employees do not fulfill their service requirement during the vesting periods. Accordingly, these awards are not treated as participating securities in the net income per share calculation. 

 

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per-share amounts):

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2015

   

2014

   

2015

   

2014

 

Numerator:

                               

Net income

  $ 11,201     $ 11,221     $ 25,063     $ 26,635  
                                 

Denominator:

                               

Weighted-average outstanding shares used to compute basic net income per share

    39,592       38,785       39,422       38,646  

Effect of dilutive securities

    1,097       942       1,254       972  

Weighted-average outstanding shares used to compute diluted net income per share

    40,689       39,727       40,676       39,618  
                                 

Net income per share:

                               

Basic

  $ 0.28     $ 0.29     $ 0.64     $ 0.69  

Diluted

  $ 0.28     $ 0.28     $ 0.62     $ 0.67  

 

 
13

 

 

For the three months ended September 30, 2015, there were no anti-dilutive common stock equivalents. For the nine months ended September 30, 2015, approximately 10,000 common stock equivalents were excluded from the calculation of diluted net income per share because their inclusion would have been anti-dilutive.  For the three and nine months ended September 30, 2014, there were no anti-dilutive common stock equivalents.

 

7. SEGMENT AND GEOGRAPHIC INFORMATION

 

The Company operates in one reportable segment that includes the design, development, marketing and sale of high-performance power solutions for the cloud computing, telecommunications, industrial and automotive, and consumer markets. The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis. The Company derives a majority of its revenue from sales to customers located outside North America, with geographic revenue based on the customers’ ship-to locations.

 

The Company sells its products primarily through third-party distributors, value-added resellers and directly to original equipment manufacturers, original design manufacturers, and electronic manufacturing service providers. The following table summarizes those customers with sales greater than 10% of the Company's total revenue:

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 

Customers

 

2015

   

2014

   

2015

   

2014

 

Distributor A

    24 %     26 %     24 %     26 %

Distributor B

    *       10 %     *       10 %

 


* Represents less than 10%. 

 

The following table summarizes those customers with accounts receivable balances greater than 10% of the Company’s total accounts receivable:

 

   

September 30,

   

December 31,

 

Customers

 

2015

   

2014

 

Distributor A

    30 %     31 %

Distributor B

    12 %     10 %

 

Both of the customers are third-party distributors. The Company’s agreements with these distributors were made in the ordinary course of business and may be terminated with or without cause by these distributors with advance notice. Although the Company may experience a short-term disruption in the distribution of its products and a short-term decline in revenue if its agreement with either of these distributors was terminated, the Company believes that such termination would not have a material adverse effect on its financial statements because it would be able to engage alternative distributors, resellers and other distribution channels to deliver its products to end customers within a few quarters following the termination of an agreement with the distributor.

 

The following is a summary of revenue by geographic regions (in thousands):

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 

Country or Region

 

2015

   

2014

   

2015

   

2014

 

China

  $ 58,716     $ 51,796     $ 157,968     $ 132,585  

Taiwan

    10,352       9,379       31,524       28,080  

Korea

    6,019       4,067       15,373       10,693  

Europe

    5,956       5,212       16,388       14,377  

Southeast Asia

    5,764       1,534       12,839       4,955  

Japan

    2,633       2,221       6,930       6,075  

United States

    1,673       4,079       4,932       9,913  

Other

    81       47       194       154  

Total

  $ 91,194     $ 78,335     $ 246,148     $ 206,832  

 

 
14

 

 

The following is a summary of revenue by product family (in thousands):

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 

Product Family

 

2015

   

2014

   

2015

   

2014

 

DC to DC products

  $ 82,718     $ 70,196     $ 222,210     $ 185,304  

Lighting control products

    8,476       8,139       23,938       21,528  

Total

  $ 91,194     $ 78,335     $ 246,148     $ 206,832  

 

The following is a summary of long-lived assets by geographic regions (in thousands):

 

   

September 30,

   

December 31,

 

Country

 

2015

   

2014

 

China

  $ 35,085     $ 37,147  

United States

    35,966       33,913  

Bermuda

    12,137       13,383  

Other

    528       339  

Total

  $ 83,716     $ 84,782  

 

8. LITIGATION

 

The Company and certain of its subsidiaries are parties to actions and proceedings in the ordinary course of business, including litigation regarding its shareholders and its intellectual property, challenges to the enforceability or validity of its intellectual property, claims that the Company’s products infringe on the intellectual property rights of others, and employment matters. These proceedings often involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to prosecute and defend. The Company defends itself vigorously against any such claims.

 

O2 Micro

 

In May 2012, the United States District Court for the Northern District of California (the “District Court”) issued an order finding O2 Micro International, Ltd. (“O2 Micro”) liable for approximately $9.1 million in attorneys’ fees and non-taxable costs, plus interest, in connection with the patent litigation that the Company won in 2010.  This award was in addition to the approximately $0.3 million in taxable costs that the District Court had earlier ordered O2 Micro to pay to the Company in connection with the same lawsuit.  In October 2012, O2 Micro appealed the District Court’s judgment to the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”). In August 2013, the Federal Circuit affirmed O2 Micro’s liability for the full amount of the award.  In September 2013, O2 Micro filed a petition for rehearing of that ruling, but the Federal Circuit denied O2 Micro’s petition for rehearing in October 2013. 

 

In November 2013, the Company received a cash payment of $9.5 million from O2 Micro. In January 2014, O2 Micro filed an appeal with the United States Supreme Court. Had O2 Micro been successful in obtaining a favorable ruling against the Company, the Company could have been liable to return a portion or all of the $9.5 million to O2 Micro. Accordingly, the Company recorded the $9.5 million as a current liability as of December 31, 2013.

  

In March 2014, the Supreme Court declined to hear the case. As O2 Micro had no further legal avenues to appeal, the Company released the current liability of $9.5 million and recorded the award as a litigation benefit in the Condensed Consolidated Statements of Operations in the first quarter of 2014. In addition, the Company incurred additional legal fees of $0.5 million in connection with the final resolution of the lawsuit.

 

 
15

 

 

9. CASH, CASH EQUIVALENTS AND INVESTMENTS

 

The following is a summary of the Company’s cash , cash equivalents and short-term and long-term investments (in thousands):

 

   

September 30,

   

December 31,

 
   

2015

   

2014

 

Cash, cash equivalents and investments:

               

Cash

  $ 45,481     $ 66,188  

Money market funds

    31,135       60,078  

Certificates of deposit

    22,008       22,778  

U.S. treasuries and government agency bonds

    131,039       89,674  

Auction-rate securities backed by student-loan notes

    5,364       5,389  

Total

  $ 235,027     $ 244,107  

 

   

September 30,

   

December 31,

 

Reported as:

 

2015

   

2014

 

Cash and cash equivalents

  $ 76,616     $ 126,266  

Short-term investments

    153,047       112,452  

Long-term investments

    5,364       5,389  

Total

  $ 235,027     $ 244,107  

 

The contractual maturities of the Company’s short-term and long-term available-for-sale investments are as follows (in thousands):

 

   

September 30,

   

December 31,

 
   

2015

   

2014

 

Due in less than 1 year

  $ 120,745     $ 91,335  

Due in 1 - 5 years

    32,302       21,117  

Due in greater than 5 years

    5,364       5,389  

Total

  $ 158,411     $ 117,841  

 

The following tables summarize unrealized gains and losses related to our investments in marketable securities designated as available-for sale (in thousands):

 

   

As of September 30, 2015

 
   

Adjusted Cost

   

Unrealized Gains

   

Unrealized Losses

   

Total Fair Value

   

Fair Value of Investments in Unrealized Loss Position

 

Money market funds

  $ 31,135     $ -     $ -     $ 31,135     $ -  

Certificates of deposit

    22,008       -       -       22,008       -  

U.S. treasuries and government agency bonds

    130,978       64       (3 )     131,039       23,640  

Auction-rate securities backed by student-loan notes

    5,570       -       (206 )     5,364       5,364  

Total

  $ 189,691     $ 64     $ (209 )   $ 189,546     $ 29,004  

 

   

As of December 31, 2014

 
   

Adjusted Cost

   

Unrealized Gains

   

Unrealized Losses

   

Total Fair Value

   

Fair Value of Investments in Unrealized Loss Position

 

Money market funds

  $ 60,078     $ -     $ -     $ 60,078     $ -  

Certificates of deposit

    22,778       -       -       22,778       -  

U.S. treasuries and government agency bonds

    89,689       14       (29 )     89,674       35,062  

Auction-rate securities backed by student-loan notes

    5,570       -       (181 )     5,389       5,389  

Total

  $ 178,115     $ 14     $ (210 )   $ 177,919     $ 40,451  

 

 
16

 

 

10. FAIR VALUE MEASUREMENTS  

 

The following table details the fair value measurement of the financial assets and liabilities (in thousands):

 

   

Fair Value Measurement at September 30, 2015

 
           

Quoted Prices in Active Markets for Identical Assets

   

Significant Other Observable Inputs

   

Significant Unobservable Inputs

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 

Assets:

                               

Money market funds

  $ 31,135     $ 31,135     $ -     $ -  

Certificates of deposit

    22,008       -       22,008       -  

U.S. treasuries and government agency bonds

    131,039       -       131,039       -  

Auction-rate securities backed by student-loan notes

    5,364       -       -       5,364  

Mutual funds under deferred compensation plan

    3,502       3,502       -       -  

Total

  $ 193,048     $ 34,637     $ 153,047     $ 5,364  
                                 

Liabilities:

                               

Contingent consideration

  $ 2,507     $ -     $ -     $ 2,507  

Total

  $ 2,507     $ -     $ -     $ 2,507  

 

   

Fair Value Measurement at December 31, 2014

 
           

Quoted Prices in Active Markets for Identical Assets

   

Significant Other Observable Inputs

   

Significant Unobservable Inputs

 
   

Total

   

Level 1

   

Level 2

   

Level 3

 

Assets:

                               

Money market funds

  $ 60,078     $ 60,078     $ -     $ -  

Certificates of deposit

    22,778       -       22,778       -  

U.S. treasuries and government agency bonds

    89,674       -       89,674       -  

Auction-rate securities backed by student-loan notes

    5,389       -       -       5,389  

Mutual funds under deferred compensation plan

    2,236       2,236       -       -  

Total

  $ 180,155     $ 62,314     $ 112,452     $ 5,389  
                                 

Liabilities:

                               

Contingent consideration

  $ 2,507     $ -     $ -     $ 2,507  

Total

  $ 2,507     $ -     $ -     $ 2,507  

 

The Company’s level 3 assets consist of government-backed student loan auction-rate securities, with interest rates that reset through a Dutch auction every 7 to 35 days and which became illiquid in 2008. The following table provides a rollforward of the fair value of the auction-rate securities (in thousands):

 

Balance at January 1, 2015

  $ 5,389  

Change in unrealized loss included in other comprehensive income

    (25 )

Ending balance at September 30, 2015

  $ 5,364  

 

The Company determined the fair value of the auction-rate securities using a discounted cash flow model with the following assumptions:

 

   

September 30,

   

December 31,

 
   

2015

   

2014

 

Time-to-liquidity (months)

    24         24    

Expected return

    2.5%         2.9%    

Discount rate

  3.9% - 6.9%     4.0% - 7.0%  

 

 
17

 

 

The Company’s level 3 liabilities consist of the contingent consideration related to the acquisition of Sensima in July 2014. The arrangement requires the Company to pay up to $8.9 million to Sensima’s former shareholders if Sensima achieves a new product introduction as well as certain product revenue and direct margin targets in 2016. The fair value of the contingent consideration at the Acquisition Date was $2.5 million, which was estimated based on a probability-weighted analysis of possible future cash flow outcomes. Based on management’s assessment, there were no changes in the fair value of the contingent consideration for the three and nine months ended September 30, 2015.

 

11. DEFERRED COMPENSATION PLAN

 

The Company has a non-qualified, unfunded deferred compensation plan, which provides certain key employees, including executive management, with the ability to defer the receipt of compensation in order to accumulate funds for retirement on a tax deferred basis. The Company does not make contributions to the plan or guarantee returns on the investments. The Company is responsible for the plan’s administrative expenses. Participants’ deferrals and investment gains and losses remain as the Company’s liabilities and the underlying assets are subject to claims of general creditors. As of September 30, 2015 and December 31, 2014, the plan assets totaled $9.0 million and $6.1 million, and the plan liabilities totaled $9.0 million and $6.2 million, respectively.

 

12. INCOME TAXES

 

The income tax provision for the three months ended September 30, 2015 was $2.1 million, or 15.8% of pre-tax income. The effective tax rate differed from the federal statutory rate primarily because foreign income was taxed at lower rates, and because of the benefit that the Company realized from stock option exercises and the release of RSUs. In addition, the effective tax rate was impacted by changes in the valuation allowance and true-up adjustments.

 

The income tax provision for the nine months ended September 30, 2015 was $5.1 million, or 16.9% of pre-tax income. The Company recorded a one-time net charge of $2.7 million to the income tax provision related to the resolution of the income tax audits in the second quarter of 2015 (see “Income Tax Audits” below for further discussion). In addition to the impact of this charge, the effective tax rate differed from the federal statutory rate primarily because foreign income was taxed at lower rates, and because of the benefit that the Company realized from stock option exercises and the release of RSUs, and from the release of an income tax reserve where the statute of limitations expired. In addition, the effective tax rate was impacted by changes in the valuation allowance and true-up adjustments.

 

The income tax provision (benefit) for the three and nine months ended September 30, 2014 was $(0.6) million, or (5.4)% of pre-tax income, and $0.2 million, or 0.7% of pre-tax income, respectively. The effect tax rate differed from the federal statutory rate primarily because foreign income was taxed at lower rates, and because of the benefit that the Company realized from the release of a reserve where the statute of limitations expired, and from the benefit realized as a result of stock option exercises and the release of RSUs.

 

On July 27, 2015, in   Altera Corp. v. Commissioner , the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision has yet to be issued by the Tax Court due to other outstanding issues related to the case. At this time, the U.S. Department of the Treasury has not withdrawn the requirement from its regulations to include stock-based compensation. Due to the uncertainty surrounding the status of the current regulations, questions related to the scope of potential benefits, and the risk of the Tax Court’s decision being overturned upon appeal, the Company has not recorded any adjustments as of September 30, 2015. The Company will continue to monitor developments related to this opinion and the potential impact on its financial statements.

 

Unrecognized Tax Benefits

 

As of September 30, 2015, the Company had $11.2 million of unrecognized tax benefits, $2.4 million of which would affect its effective tax rate if recognized after considering the valuation allowance. As of December 31, 2014, the Company had $16.4 million of unrecognized tax benefits, $4.8 million of which would affect its effective tax rate if recognized after considering the valuation allowance.

 

Uncertain tax positions relate to the allocation of income and deductions among the Company’s global entities and to the determination of the research and development tax credit. It is reasonably possible that over the next twelve-month period, the Company may experience increases or decreases in its unrecognized tax benefits. However, it is not possible to determine either the magnitude or the range of increases or decreases at this time.

 

 
18

 

 

The Company recognizes interest and penalties, if any, related to uncertain tax positions in its income tax provision. As of September 30, 2015 and December 31, 2014, the Company has approximately $0.1 million and $0.5 million of accrued interest related to uncertain tax positions, respectively, which were recorded in long-term tax liabilities in the Condensed Consolidated Balance Sheets.

 

Income Tax Audits

 

The Company is subject to examination of its income tax returns by the IRS and other tax authorities. The Company’s U.S. Federal income tax returns for the years ended December 31, 2005 through December 31, 2007 were under examination by the IRS. In April 2011, the Company received from the IRS a Notice of Proposed Adjustment ("NOPA") relating to a cost-sharing agreement entered into by the Company and its international subsidiaries on January 1, 2004. In the NOPA, the IRS objected to the Company’s allocation of certain litigation expenses between the Company and its international subsidiaries and the amount of "buy-in payments" made by the international subsidiaries to the Company in connection with the cost-sharing agreement, and proposed to increase the Company’s U.S. taxable income according to a few alternative methodologies. In February 2012, the Company received a revised NOPA from the IRS (“Revised NOPA”). In this Revised NOPA, the IRS raised the same issues as in the NOPA issued in April 2011 but under a different methodology. Under the Revised NOPA, the largest potential federal income tax payment, if the IRS were to prevail on all matters in dispute, was $10.5 million, plus interest and penalties, if any. The Company responded to the Revised NOPA in May 2012. In June 2013, the IRS responded and continued to disagree with the Company’s rebuttal. The Company met with the IRS Office of Appeals in 2014 and both parties engaged in continuous discussions for a resolution of the matter in the first quarter of 2015. Meanwhile, the Company granted the IRS an extension of the statute of limitations for taxable years 2005 through 2007 to September 30, 2015. 

 

The IRS also audited the research and development credits carried forward into year 2005 and the credits generated in the years 2005 through 2007. The Company received a NOPA from the IRS in February 2011, proposing to reduce the research and development credits generated in years 2005 through 2007 and the carryforwards, which would then reduce the value of such credits carried forward to subsequent tax years.

 

In April 2015, the Company reached a final resolution with the IRS in connection with the income tax audits for the years 2005 through 2007. Under the agreement, the Company made a one-time buy-in payment of $1.2 million for taxes related primarily to the revaluation of a license for certain intellectual property rights of the Company to one of its international subsidiaries.  This buy-in payment is final and no additional payment will be required with respect to the intellectual property license for the years under examination or for a previous or subsequent tax year. In addition, the Company made an interest payment of $1.0 million as well as a tax payment of $0.1 million for the tax years 2008 to 2013 in the third quarter of 2015.  There were no penalties assessed on the Company as a result of the audits.

 

For the second quarter of 2015, the Company's income tax provision included a one-time net charge of approximately $2.7 million reflecting the taxes and interest, partially offset by the reversal of previously accrued tax liabilities and valuation allowances. Of the $2.7 million charge, approximately $1.6 million was related to taxes and $1.1 million was related to interest.

 

 
19

 

 

13. ACCUMULATED OTHER COMPREHENSIVE INCOME

 

The following table summarizes the changes in accumulated other comprehensive income (in thousands):

 

   

Unrealized Losses on Auction-Rate Securities

   

Unrealized Gains (Losses) on Other Available-for-Sale Securities

   

Foreign Currency Translation Adjustments

   

Total

 

Balance as of January 1, 2015

  $ (181 )   $ (15 )   $ 6,007     $ 5,811  

Other comprehensive income before reclassifications

    5       32       249       286  

Amounts reclassified from accumulated other comprehensive income

    -       (1 )     -       (1 )

Net current period other comprehensive income

    5       31       249       285  

Balance as of March 31, 2015

    (176 )     16       6,256       6,096  

Other comprehensive income (loss) before reclassifications

    (19 )     7       105       93  

Amounts reclassified from accumulated other comprehensive income

    -       (3 )     -       (3 )

Net current period other comprehensive income (loss)

    (19 )     4       105       90  

Balance as of June 30, 2015

    (195 )     20       6,361       6,186  

Other comprehensive income (loss) before reclassifications

    (11 )     42       (3,132 )     (3,101 )

Amounts reclassified from accumulated other comprehensive income

    -       (1 )     -       (1 )

Net current period other comprehensive income (loss)

    (11 )     41       (3,132 )     (3,102 )

Balance as of September 30, 2015

  $ (206 )   $ 61     $ 3,229     $ 3,084  

 

The amounts reclassified from accumulated other comprehensive income were recorded in interest and other income (expense), net, in the Condensed Consolidated Statement of Operations.

 

14. STOCK REPURCHASE PROGRAM

 

In July 2013, the Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to $100 million in the aggregate of its common stock through June 30, 2015. In April 2015, the Board of Directors approved an extension of the program through December 31, 2015. All shares are retired upon repurchase. The following table summarizes the repurchase activities under the program (in thousands, except per-share amounts):

 

   

Shares

Repurchased

   

Average Price

Per Share

   

Total

Amount

 

Cumulative balance at January 1, 2015

    1,715     $ 36.04     $ 61,813  

Repurchases

    203     $ 51.33       10,405  

Cumulative balance at March 31, 2015

    1,918     $ 37.66       72,218  

Repurchases

    148     $ 52.19       7,724  

Cumulative balance at June 30, 2015

    2,066     $ 38.70       79,942  

Repurchases

    284     $ 47.93       13,606  

Cumulative balance at September 30, 2015

    2,350     $ 39.82     $ 93,548  

 

As of September 30, 2015, $6.5 million remained available for future repurchases under the program.

 

15. DIVIDENDS AND DIVIDEND EQUIVALENTS

 

In June 2014, the Board of Directors approved a dividend program pursuant to which the Company intends to pay quarterly cash dividends on its common stock. Stockholders of record as of the last day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are generally payable on the 15th of the following month. The Board of Directors declared the following cash dividends in 2015 (in thousands, except per-share amounts):

 

   

Dividend Declared

   

Total

 
   

per Share

   

Amount

 

First quarter

  $ 0.20     $ 7,854  

Second quarter