The Company and summary of significant accounting policies (Policies) | 12 Months Ended |
Dec. 31, 2014 |
The Company and summary of significant accounting policies [Abstract] | |
Use of estimates | Use of estimates |
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The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates involve those required in the assessment of the allowance for sales returns, doubtful accounts and/or potential excess obsolete inventory, stock-based compensation and valuation of deferred tax assets. Actual results could differ from those estimates. |
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Basis of presentation | Basis of presentation |
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The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. |
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Foreign currency translation | Foreign currency translation |
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The Company's operations through foreign subsidiaries use the local currency as their functional currency. All assets and liabilities of the subsidiaries are translated at rates of exchange as of the balance sheet date. Revenues and expenses are translated at the average rate of exchange for the period. Gains and losses resulting from foreign currency translation are recorded as a separate component of other comprehensive income in stockholders' equity. Foreign currency transaction gains and losses are recorded in interest and other income and have not been material. |
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Cash, cash equivalents, short-term and long-term investments | Cash, cash equivalents, short-term and long-term investments |
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The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of cash deposited in money market, certificate of deposit, and checking accounts. |
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The Company accounts for its investments under the provisions of Accounting Standards Codification (“ASC”) 320 “Investments - Debt and Equity Securities.” Investments in highly liquid financial instruments with remaining maturities greater than three months and maturities of less than one year are classified as short-term investments. Financial instruments with remaining maturities greater than one year are classified as long-term investments. Investments in related party companies are included in “Other Assets” in the Consolidated Balance Sheets. All investments are classified as available-for-sale and are reported at fair value using the specific identification method with net unrealized gain/(loss) reported, net of tax as other comprehensive gain/(loss) in stockholders' equity. The fair value of the Company's available-for-sale securities are based on quoted market prices or other methodologies for those investments with no quoted market prices at the balance sheet dates. |
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The Company's financial instruments also include accounts receivable, accounts payable and debts, and are carried at cost, which approximates the fair value of these instruments. |
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Fair value of financial instruments | Fair value of financial instruments |
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The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: |
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Level 1 – Quoted prices in active markets for identical assets or liabilities. |
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Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
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Level 3 – Inputs that are generally unobservable and typically reflect management's estimate of assumptions that market participants would use in pricing the asset or liability. |
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The Company's valuation techniques used to measure the fair value of money market funds and certain marketable equity securities were derived from quoted prices in active markets for identical assets or liabilities. |
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In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company has not elected the fair value option for any eligible financial instruments. |
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Allowance for doubtful accounts | Allowance for doubtful accounts |
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The Company performs periodic credit evaluations of its customers' financial condition. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability or unwillingness of customers to make required payments. When the Company becomes aware that a specific customer is unable to meet its financial obligations, for example, as a result of bankruptcy or deterioration in the customer's operating results or financial position, the Company records a specific allowance to reflect the level of credit risk in the customer's outstanding receivable balance. In addition, the Company records additional allowances based on historical sales returns. The Company is not able to predict changes in the financial condition of customers, and if circumstances related to customers deteriorate, estimates of the recoverability of trade receivables could be materially affected and the Company may be required to record additional allowances. Alternatively, if the Company provides more allowances than the Company needs, the Company may reverse a portion of such provisions in future periods based on actual collection experience. |
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Inventories | Inventories |
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Inventories are stated at the lower of cost or market, with cost being determined using standard cost, which approximates actual cost on a first-in, first-out basis. Market value is determined as the lower of replacement cost or net realizable value. We regularly review our inventories for obsolescence and reserves are established when necessary. Provisions are made for excess and obsolete inventory based on historical usage and management's estimates of future demand. Inventory reserves, once established, are only reversed upon sale or disposition of related inventory. Inventory reserves were $2.4 million, $2.4 million and $1.9 million for the years ended December 31, 2014, 2013 and 2012, respectively. |
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Property and equipment | Property and equipment |
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Property and equipment is stated at cost less accumulated depreciation and impairment charges. Depreciation is computed using the straight-line method using estimated useful lives of 25 years for buildings, two to 10 years for machinery and equipment and five years for furniture and fixtures. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the estimated life of the assets, generally two to four years, or the lease term. Depreciation and amortization expenses were $2.8 million, $2.2 million and $1.6 million for the years ended December 31, 2014, 2013 and 2012, respectively. |
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Impairment of Long-lived Assets | Impairment of Long-lived Assets |
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The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If an impairment is indicated, the asset is written down to its estimated fair value based on fair market values. |
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Revenue recognition | Revenue recognition |
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The Company recognizes revenue upon shipment of its products to its customers, provided that the Company has received a purchase order, the price is fixed, collection of the resulting receivable is reasonably assured and transfer of title and risk of loss has occurred. Subsequent to the sale of its products, the Company has no obligation to provide any modification or customization upgrades, enhancements or post contract customer support. |
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Allowances are provided for estimated returns. A provision for estimated sales return allowances is recorded at the time revenue is recognized based on historical returns, current economic trends and changes in customer demand. Such allowances are adjusted periodically to reflect actual and anticipated experience. Such adjustments, which are recorded against revenue in the period, have generally not been material. The Company accrued $0.08 million, $0.06 million and $0.02 million for warranty reserves as of December 31, 2014, 2013 and 2012, respectively. |
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Shipping and handling expenses | Shipping and handling expenses |
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Shipping and handling expenses are included in cost of revenue. |
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Research and development expenses | Research and development expenses |
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Research and development costs are charged to expense as incurred. |
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Advertising expenses | Advertising expenses |
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Advertising costs are charged to expense as incurred and have not been material in 2014, 2013 and 2012. |
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Sales taxes | Sales taxes |
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The Company accounts for taxes charged to its customers and collected on behalf of taxing authorities on a net basis. |
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Income taxes | Income taxes |
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The Company accounts for income taxes in accordance with ASC 740 which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized. |
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The Company applies ASC 740 which utilizes a two-step approach wherein a tax benefit is recognized if a position is more-likely-than-not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is greater than 50% likely to be realized. The Company has elected to include interest and penalties related to its tax contingencies in income tax expense. The Company files a U.S. federal tax return and a return with the State of California. The Company has determined that its major tax jurisdictions are the United States, California, Taiwan and China. |
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The Company follows the provisions of ASC 740-10-25, Income Taxes: Recognition ("ASC 740-10-25"). The total amount of unrecognized tax benefits as of December 31, 2014, 2013 and 2012 were $1.1 million, $0.7 million and $0 respectively. The Company does not anticipate any significant change to its unrecognized tax positions over the next 12 months. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate were $0.4 million, $0.3 million and $0 as of December 31, 2014, 2013 and 2012, respectively. The increase in unrecognized tax benefits during the year ended December 31, 2014 was mainly due to the increase in additional state income tax liabilities. The increase in unrecognized tax benefits during the year ended December 31, 2014 was mainly due to the increase in additional state income tax liabilities. The increase in unrecognized tax benefits during the year ended December 31, 2013 was mainly due to the increase in the valuation of the Company's research credit for federal and state income taxes purposes. |
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A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits for the years ended December 31, 2014 and 2013 are as follows: |
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Balance at January 1, 2013 | $ | - | |
Additions for tax positions of the current year | | 683 | |
Balance at December 31, 2013 | $ | 683 | |
Additions for tax positions of the prior year | | 280 | |
Additions for tax positions of the current year | | 117 | |
Balance at December 31, 2014 | $ | 1,080 | |
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The Company recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes. During the years ended December 31, 2014, 2013 and 2012, the Company recognized approximately $0.1 million, $0.1 million and $0, respectively, for interest and penalties. |
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Deferred tax assets pertaining to windfall tax benefits on the exercise of share awards and the corresponding credit to additional paid-in capital are recorded if the related tax deduction reduces tax payable. The Company has elected the “with-and-without approach excluding indirect tax effects” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit reduced taxes payable in the current year. Under this approach, the windfall tax benefits would be recognized in additional paid-in capital only if an incremental tax benefit is realized after considering all other tax benefits presently available to the Company without considering available income tax credits. The Company's deferred tax assets as of December 31, 2014 and 2013 do not include $.06 million and $1.8 million, respectively, of excess tax benefits from employee stock option exercises that are a component of its net operating loss carryovers. Stockholder's equity will be increased by the same amount if and when such excess tax benefits are ultimately realized. |
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The Company files income tax returns in the United States (federal), Taiwan, China and in various state and local jurisdictions. The Company is no longer subject to federal income tax examinations by tax authorities for years prior to 2011, California State and China income tax examination by tax authorities for years prior to 2010, and Taiwan income tax examinations by tax authorities for years prior to 2008. The Company is not currently under examination by any federal, state or local jurisdiction. It is not anticipated that unrecognized tax benefits will significantly change in the next twelve months. |
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Stock-based compensation | Stock-based compensation |
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The Company estimates the fair value of the share-based payment awards on the date of grant using an option pricing model. The value of awards that are ultimately expected to vest is recognized as an expense over the requisite employee service period. |
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Comprehensive income | Comprehensive income |
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Comprehensive income is defined as the change in equity of a company from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive income consists of cumulative translation adjustments and unrealized gains on short-term investments and is disclosed in the consolidated statements of stockholders' equity. |
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Recent accounting pronouncements | Recent accounting pronouncements |
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In May 2014, the FASB issued a new financial accounting standard which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is not permitted. The Company is currently evaluating the impact of this accounting standard on its consolidated financial statements. |
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In July 2013, the FASB issued guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss or tax carryforward exists. The FASB concluded that an unrecognized tax benefit should be presented as a reduction of a deferred tax asset except in certain circumstances the unrecognized tax benefit should be presented as a liability and should not be combined with deferred tax assets. The amendment is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. |
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In March 2013, the FASB issued guidance to clarify when to release cumulative foreign currency translation adjustments when an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. The amendment is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013 and should be applied prospectively to derecognition events occurring after the effective date. Early adoption is permitted. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. |
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In February 2013, the FASB issued guidance requiring presentation of amounts reclassified from each component of accumulated other comprehensive income. In addition, disclosure is required of the effects of significant reclassifications on income statement line items either on the face of the statement where net income is presented or as a separate disclosure in the notes to the financial statements. For public entities, this guidance is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. |
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