Inventories, Net and Significant Suppliers

6 Months Ended

Jun. 30, 2014

Inventories, Net and Significant Suppliers

Inventories, net were as follows:



(In thousands)	June 30, 2014			December 31, 2013
Raw materials	$	19,235		$	18,990
Components	14,742			18,623
Work in process	3,874			2,017
Finished goods	53,015			59,393
Reserve for excess and obsolete inventory	(2,090		)	(2,714		)
Inventories, net	$	88,776		$	96,309

Reserve for Excess and Obsolete Inventory

Changes in the reserve for excess and obsolete inventory were as follows:



(In thousands)	Six Months Ended June 30,
(In thousands)	2014			2013
Balance at beginning of period	$	2,714		$	2,024
Additions charged to costs and expenses ⁽¹⁾	1,369			1,022
Sell through ⁽²⁾	(473		)	(219		)
Write-offs/FX effects	(1,520		)	(905		)
Balance at end of period	$	2,090		$	1,922


⁽¹⁾	The additions charged to costs and expenses do not include inventory directly written-off that was scrapped during production totaling $0.2 million and $0.1 million for the six months ended June 30, 2014 and 2013, respectively. These amounts are production waste and are not included in management’s reserve for excess and obsolete inventory.


⁽²⁾	These amounts represent the reversal of reserves associated with inventory items that were sold during the period. Sell through is the result of differences between our judgment concerning the saleability of inventory items during the excess and obsolete inventory review process and our subsequent experience.

Significant Supplier

We purchase integrated circuits, components and finished goods from multiple sources. We had purchases from the following significant supplier that totaled more than 10% of our total inventory purchases as follows:



	Three Months Ended June 30,
	2014				2013
	$ (thousands)		% of Total Inventory Purchases		$ (thousands)		% of Total Inventory Purchases
Maxim Integrated Products International Limited	$	9,148	11.9	%	$	—	—	%



	Six Months Ended June 30,
	2014				2013
	$ (thousands)		% of Total Inventory Purchases		$ (thousands)		% of Total Inventory Purchases
Maxim Integrated Products International Limited	$	17,202	12.4	%	$	—	—	%

Related Party Vendor

We purchase certain printed circuit board assemblies from a related party vendor. The vendor is considered a related party for financial reporting purposes because our Senior Vice President of Manufacturing owns 40% of this vendor. Inventory purchases from this vendor were as follows:



	Three Months Ended June 30,
	2014				2013
	$ (thousands)		% of Total Inventory Purchases		$ (thousands)		% of Total Inventory Purchases
Related party vendor	$	2,507	3.3	%	$	2,469	3.0	%



	Six Months Ended June 30,
	2014				2013
	$ (thousands)		% of Total Inventory Purchases		$ (thousands)		% of Total Inventory Purchases
Related party vendor	$	4,230	3.0	%	$	4,685	3.2	%

The total accounts payable to this vendor were the following:



	June 30, 2014				December 31, 2013
	$ (thousands)		% of Accounts Payable		$ (thousands)		% of Accounts Payable
Related party vendor	$	2,533	3.6	%	$	2,439	4.2	%

Our payable terms and pricing with this vendor are consistent with the terms offered by other vendors in the ordinary course of business. The accounting policies that we apply to our transactions with our related party vendor are consistent with those applied in transactions with independent third parties. Corporate management routinely monitors purchases from our related party vendor to ensure these purchases remain consistent with our business objectives.

- Definition

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

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