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 recognized in other income and expense, net, on the Condensed Consolidated Statement of Operations. The following is a summary of marketable securities at June 30, 2019 and December 31, 2018 (in thousands): June 30, 2019 Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Values Marketable securities Corporate bonds and notes $ 34,510 $ 14 $ (70 ) $ 34,454 Commercial paper 2,292 5 — 2,297 Treasury and agency notes and bills 6,000 — (9 ) 5,991 Total debt securities 42,802 19 (79 ) 42,742 Marketable equity securities 5,662 — (594 ) 5,068 Total equity securities 5,662 — (594 ) 5,068 Total marketable securities $ 48,464 $ 19 $ (673 ) $ 47,810 Reported in: Cash and cash equivalents $ — Short-term investments 47,810 Total marketable securities $ 47,810 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 June 30, 2019 and December 31, 2018, the Company had $98.3 million and $154.4 million, respectively, in cash, cash equivalents and short-term investments. These balances include $50.5 million and $102.1 million in cash held in operating accounts not included in the tables above at June 30, 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 and six months ended June 30, 2019 and 2018, respectively. Unrealized losses on marketable debt securities were $0.1 million and $0.3 million, net of tax, as of June 30, 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 June 30, 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 and six months ended June 30, 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 debt securities at June 30, 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 June 30, 2019 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate bonds and notes $ 11,477 $ (20 ) $ 16,044 $ (50 ) $ 27,521 $ (70 ) Treasury and agency notes and bills 5,991 (9 ) — — 5,991 (9 ) Total $ 17,468 $ (29 ) $ 16,044 $ (50 ) $ 33,512 $ (79 ) 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 June 30, 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 $ 27,258 Due in one to two years 15,484 Total $ 42,742 Equity Securities There were no realized gains or losses on sales of equity securities during the three and six months ended June 30, 2019 and 2018. On September 19, 2018, the Company purchased seven million common shares of Onkyo Corporation (“Onkyo”), a publicly traded Japanese company and a long-standing customer of the 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 Agreement contemplated that the parties would negotiate a business alliance agreement aimed at collaborating on certain new product development. On May 14, 2019, Sound United LLC announced that it had entered into a term sheet agreement to acquire Onkyo’s consumer audio division. Given the anticipated acquisition, the Company determined not to continue discussions on the business alliance and determined not to appoint a representative to serve on the board of directors of Onkyo. On July 5, 2019, the Company sold approximately 2.8 million shares of Onkyo stock . The Company intends to sell the remaining shares over time depending on market conditions. The Company had unrealized gains on its Onkyo investment of $2.0 million and $1.6 million during the three and six months ended June 30, 2019, respectively, and none for the three and six months ended June 30, 2018. Cumulative unrealized losses on the investment amounted to $0.6 million through June 30, 2019. Derivatives From time to time , the Company may 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 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, and 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 were not significant in the three and six months ended June 30, 2019. There were no derivative instruments outstanding as of June 30, 2019. |