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Inventories, Net and Significant Suppliers

9 Months Ended

Sep. 30, 2012

Inventories, Net and Significant Suppliers [Abstract]

Inventories, Net and Significant Suppliers

Note 4: Inventories, Net and Significant Suppliers

Inventories, net consisted of the following on September 30, 2012 and December 31, 2011:


(In thousands)	September 30, 2012			December 31, 2011
Raw materials	$	16,156		$	17,014
Components		15,702			21,819
Work in process		2,326			1,071
Finished goods		40,238			54,447
Reserve for excess and obsolete inventory		(2,307	)		(3,447	)

Inventories, net	$	72,115		$	90,904

Reserve for Excess and Obsolete Inventory

Changes in the reserve for excess and obsolete inventory during the three months ended September 30, 2012 and 2011 were composed of the following:


(In thousands) Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses⁽¹⁾		Sell Through⁽²⁾			Write-offs/ FX Effects			Balance at End of Period
Reserve for excess and obsolete inventory:
Three Months Ended September 30, 2012	$	3,037	$	505	$	(566	)	$	(669	)	$	2,307
Three Months Ended September 30, 2011	$	2,525	$	1,243	$	(289	)	$	(502	)	$	2,977

Changes in the reserve for excess and obsolete inventory during the nine months ended September 30, 2012 and 2011 were composed of the following:


(In thousands) Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses⁽¹⁾		Sell Through⁽²⁾			Write-offs/ FX Effects			Balance at End of Period
Reserve for excess and obsolete inventory:
Nine months Ended September 30, 2012	$	3,447	$	1,891	$	(1,124	)	$	(1,907	)	$	2,307
Nine months Ended September 30, 2011	$	2,135	$	2,992	$	(896	)	$	(1,254	)	$	2,977

⁽¹⁾

The additions charged to costs and expenses does not include inventory directly written-off that was scrapped during production totaling $0.02 million and $0.2 million for the three months ended September 30, 2012 and 2011, respectively, and $0.3 million and $0.6 million for the nine months ended September 30, 2012 and 2011, respectively. These amounts are production waste and are not included in management’s reserve for excess and obsolete inventory.

⁽²⁾

This column represents the gross book value of inventory items sold during the period that had been previously written down to zero net book value. Sell through is the result of differences between our judgment concerning the salability of inventory items during the excess and obsolete inventory review process and our subsequent experience.

Inventory write-downs for excess and obsolescence are a normal part of our business and result primarily from product life cycle estimation variances.

See Note 2 under the caption Inventories in our Annual Report on Form 10-K for further information regarding our accounting principles.

Significant Suppliers

We purchase integrated circuits, components and finished goods from multiple sources. The total integrated circuit purchases from Samsung were greater than 10% of our total inventory purchases for the three and nine months ended September 30, 2011.

During the three months ended September 30, 2011, the amount purchased from this supplier was the following:


	Three Months Ended September 30,
	2012				2011
	$ (thousands)		% of Total Inventory Purchases		$ (thousands)		% of Total Inventory Purchases
Samsung		—		—	$	8,069		10.3	%

During the nine months ended September 30, 2011, the amount purchased from this supplier was the following:


	Nine months Ended September 30,
	2012				2011
	$ (thousands)		% of Total Inventory Purchases		$ (thousands)		% of Total Inventory Purchases
Samsung		—		—	$	24,017		11.2	%

The total accounts payable to this supplier on December 31, 2011 was the following:


	September 30, 2012				December 31, 2011
	$ (thousands)		% of Accounts Payable		$ (thousands)		% of Accounts Payable
Samsung		—		—	$	1,725		3.1	%

We have identified alternative sources of supply for these integrated circuits, components, and finished goods; however, there can be no assurance that we will be able to continue to obtain these inventory purchases on a timely basis. We generally maintain inventories of our integrated circuits, which may be utilized to mitigate, but not eliminate, delays resulting from supply interruptions. An extended interruption, shortage or termination in the supply of any of the components used in our products, a reduction in their quality or reliability, or a significant increase in the prices of components, would have an adverse effect on our operating results, financial condition and cash flows.

Related Party Vendor

We purchase certain printed circuit board assemblies (“PCBAs”) from a related party vendor. The vendor is considered a related party for financial reporting purposes because the Senior Vice President of Manufacturing of Enson Assets Limited (“Enson”) owns 40% of this vendor. Our purchases from this vendor for the three and nine months ended September 30, 2012 totaled approximately $2.5 million and $6.0 million, or 4.3% and 3.6% of total inventory purchases, respectively. Our purchases from this vendor for the three and nine months ended September 30, 2011 totaled approximately $2.4 million and $6.3 million, or 3.1% and 2.9% of total inventory purchases, respectively. Payable amounts outstanding to this vendor were approximately $1.9 million and $1.9 million on September 30, 2012 and December 31, 2011, respectively. Our payment 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 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.