Financial Instruments | NOTE 5 – FINANCIAL INSTRUMENTS The Company has investments in debt securities which include corporate bonds and notes, treasury and agency notes and bills, commercial paper, certificates of deposit, and in equity securities consisting of money market funds and common equity securities of a publicly traded Japanese company. The Company classifies its debt securities as available-for-sale, which are accounted for at fair value with unrealized gains and losses recognized in accumulated other comprehensive gain or loss on the Condensed Consolidated Balance Sheets. Under ASU 2016-01 (Topic 321), equity securities are measured at fair value with unrealized gains and losses being recognized in other income and expense, net, on the Condensed Consolidated Statement of Operations. The following is a summary of marketable securities at March 31, 2019 and December 31, 2018 (in thousands): March 31, 2019 Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Values Marketable securities Corporate bonds and notes $ 22,114 $ — $ (122 ) $ 21,992 Treasury and agency notes and bills 6,000 — (28 ) 5,972 Total debt securities 28,114 — (150 ) 27,964 Money market funds 21,340 — — 21,340 Marketable equity securities 5,662 — (2,626 ) 3,036 Total equity securities 27,002 — (2,626 ) 24,376 Total marketable securities $ 55,116 $ — $ (2,776 ) $ 52,340 Reported in: Cash and cash equivalents $ 21,340 Short-term investments 31,000 Total marketable securities $ 52,340 December 31, 2018 Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Values Marketable securities Corporate bonds and notes $ 28,623 $ — $ (275 ) $ 28,348 Commercial paper 2,999 — — 2,999 Treasury and agency notes and bills 6,000 — (53 ) 5,947 Total debt securities 37,622 — (328 ) 37,294 Money market funds 11,499 — — 11,499 Marketable equity securities 5,662 — (2,217 ) 3,445 Total equity securities 17,161 — (2,217 ) 14,944 Total marketable securities $ 54,783 $ — $ (2,545 ) $ 52,238 Reported in: Cash and cash equivalents $ 11,499 Short-term investments 40,739 Total marketable securities $ 52,238 At March 31, 2019 and December 31, 2018, the Company had $107.5 million and $154.4 million, respectively, in cash, cash equivalents and short-term investments. These balances include $55.2 million and $102.1 million in cash held in operating accounts not included in the tables above at March 31, 2019 and December 31, 2018, respectively. Debt Securities The gross realized gains and losses on sales of marketable debt securities were not significant during the three months ended March 31, 2019 and 2018, respectively. Unrealized losses on marketable debt securities were $0.2 million and $0.3 million, net of tax, as of March 31, 2019 and December 31, 2018, respectively. These amounts were related to temporary fluctuations in value of available-for-sale securities and were due primarily to changes in interest rates and market and credit conditions of the underlying securities. Certain investments with a temporary decline in value are not considered to be other-than-temporarily impaired as of March 31, 2019 because the Company has the intent and ability to hold these investments to allow for recovery, does not anticipate having to sell these securities with unrealized losses and continues to receive interest at the maximum contractual rate. For the three months ended March 31, 2019 and 2018, respectively, the Company did not record any impairment charges related to its marketable debt securities. The following table summarizes the fair value and gross unrealized losses related to individual available-for-sale securities at March 31, 2019 and December 31, 2018, which have been in a continuous unrealized loss position, aggregated by investment category and length of time (in thousands): Less Than 12 Months 12 Months or More Total March 31, 2019 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate bonds and notes $ — $ — $ 21,992 $ (122 ) $ 21,992 $ (122 ) Treasury and agency notes and bills — — 5,972 (28 ) 5,972 (28 ) Total $ — $ — $ 27,964 $ (150 ) $ 27,964 $ (150 ) Less Than 12 Months 12 Months or More Total December 31, 2018 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate bonds and notes $ 5,488 $ (2 ) $ 22,860 $ (273 ) $ 28,348 $ (275 ) Commercial paper 2,999 — — — 2,999 — Treasury and agency notes and bills — — 5,947 (53 ) 5,947 (53 ) Total $ 8,487 $ (2 ) $ 28,807 $ (326 ) $ 37,294 $ (328 ) The estimated fair value of marketable debt securities by contractual maturity at March 31, 2019 is shown below (in thousands). Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties. Estimated Fair Value Due in one year or less $ 23,989 Due in one to two years 3,975 Total $ 27,964 Equity Securities There were no realized gains or losses on sales of equity securities during the three months ended March 31, 2019 and 2018. The Company had unrealized losses of $0.4 million on marketable equity securities during the three months ended March 31, 2019, and none for the three months ended March 31, 2018. Cumulative unrealized losses on the investment amounted to $2.6 million through March 31, 2019. On September 19, 2018, the Company purchased seven million common shares of Onkyo Corporation (“Onkyo”), a publicly traded Japanese company, pursuant to the Capital Alliance Agreement (“Agreement”) entered into between the two parties on September 3, 2018. Upon making the investment, the Company held a 6.3% ownership interest in Onkyo and had one representative appointed to the board of directors of a subsidiary of Onkyo in November 2018. The Company also expects to have one representative appointed to serve on the board of directors of Onkyo effective with its next scheduled shareholders meeting in June 2019. The Agreement contemplates that the parties will negotiate a business alliance agreement aimed at collaborating on certain new product development within IOT, AI and wireless audio. Onkyo is a long-term customer of the Company. Derivatives In the first quarter of 2019 , the Company began to use derivative financial instruments to manage foreign currency exchange rate risk. The Company does not enter into derivative transactions for trading purposes. Cash flows from the derivative programs are classified as cash flows from operating activities in the Condensed Consolidated Statement Cash Flows The Company’s derivative financial instruments consist of deliverable and non-deliverable foreign currency forward contracts, which are used primarily to hedge balance sheet and certain expenditure exposures. These instruments are generally short-term in nature, with typical maturities of less than one year, and are subject to fluctuations in foreign exchange rates. Fair values for derivative financial instruments are based on prices computed using third-party valuation models and are classified as Level 2 in accordance with the three-level hierarchy of fair value measurements. All the significant inputs to the third-party valuation models are observable in active markets. Inputs include current market-based parameters such as forward rates, yield curves and credit default swap pricing. For additional information related to the three-level hierarchy of fair value measurements, s ee “ Under the Company’s policy election, these derivatives are not designated as hedge instruments, which are measured and reported at fair value. Changes in the fair value of these undesignated derivatives are reported in other income and expense, net, on the Condensed Consolidated Statements of Operations. Realized losses and changes in the estimated fair value of the derivatives were not significant in the three months ended March 31, 2019. The Company did not engage in derivative contracts in 2018. The notional and fair values of all derivative instruments were as follows (in thousands): Undesignated derivatives (foreign exchange contracts) March 31, 2019 December 31, 2018 Liabilities Accrued liabilities $ (37 ) $ — Total fair value $ (37 ) $ — Total notional value $ 2,743 $ — |