2. Balance Sheet Details

Marketable Securities

The Company’s portfolio of available-for-sale securities by contractual maturity consists of the following (in thousands):


June 30, 2014	Maturity in Years		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale:
Government agency securities		1 or less	$	1,150	$	0	$	0	$	1,150
Municipal bonds		1 or less		975		1		0		976
Certificates of deposit		1 or less		3,220		0		0		3,220
Corporate debentures / bonds		1 or less		8,152		5		0		8,157

Total short-term marketable securities				13,497		6		0		13,503

			$	13,497	$	6	$	0	$	13,503


December 31, 2013	Maturity in Years		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale:
Government agency securities		1 or less	$	2,350	$	1	$	0	$	2,351
Municipal bonds		1 or less		2,828		1		0		2,829
Certificates of deposit		1 or less		3,360		0		0		3,360
Corporate debentures / bonds		1 or less		10,635		3		0		10,638

Total short-term marketable securities				19,173		5		0		19,178

Available-for-sale:
Certificates of deposit		1 to 2		1,300		0		0		1,300
Corporate debentures / bonds		1 to 2		2,143		0		0		2,143

Total long-term marketable securities				3,443		0		0		3,443

			$	22,616	$	5	$	0	$	22,621

The Company’s available-for-sale securities are carried on the condensed consolidated balance sheet at fair market value with the related unrealized gains and losses included in accumulated other comprehensive income (loss) on the condensed consolidated balance sheet, which is a separate component of stockholders’ equity. Realized gains and losses on the sale of available-for-sale marketable securities are determined using the specific-identification method.

The Company has a credit facility with one of its banks to allow margin borrowings based on and collateralized by the Company’s investments in cash equivalents and marketable securities held by that bank. Borrowings under the facility incur an interest rate at the bank’s base rate plus 1%. At June 30, 2014, the Company had approximately $2.6 million in cash equivalents and marketable securities held at this bank, and the Company’s unused borrowing capacity at June 30, 2014 under the credit facility was $1.9 million. Any monies borrowed and interest incurred are payable on demand, and there is no express expiration date to the credit facility. During the three and six months ended June 30, 2014, the Company did not borrow against the facility, and had no outstanding borrowings under this facility at June 30, 2014. Under the terms of the credit facility, the bank may liquidate any of the Company’s cash equivalents or marketable securities held at any time in order to recoup the outstanding balance of the facility.

As of June 30, 2014, the Company recorded a net unrealized gain of $6,000. The Company’s net unrealized gain is the result of market conditions affecting its fixed-income, debt and equity securities, which are included in accumulated other comprehensive income (loss) in the condensed consolidated balance sheet for the period then ended.

Inventories

Inventories consist of the following (in thousands):


	June 30, 2014		December 31, 2013
Finished goods	$	21,261	$	20,870
Raw materials and components		4,761		6,923

	$	26,022	$	27,793

During the six months ended June 30, 2014, the Company recorded inventory write-downs of $3.0 million related to excess and obsolete inventory and reductions to the carrying value of inventories as a result of lower of cost or market valuations.

Accrued Expenses

Accrued expenses consist of the following (in thousands):


	June 30, 2014		December 31, 2013
Royalties	$	2,655	$	4,243
Payroll and related expenses		3,437		4,828
Product warranty		1,580		2,244
Market development funds and price protection		2,258		3,059
Professional fees		1,656		1,040
Deferred revenue		2,411		2,999
Restructuring		3,855		610
Other		5,234		4,248

	$	23,086	$	23,271

Accrued Warranty Obligations

Accrued warranty obligations consist of the following (in thousands):


	Three Months Ended June 30, 2014			Three Months Ended June 30, 2013			Six Months Ended June 30, 2014			Six Months Ended June 30, 2013
Warranty liability at beginning of period	$	1,367		$	2,664		$	2,244		$	2,329
Additions charged to operations		794			1,708			1,199			3,363
Deductions from/use of liability		(581	)		(1,921	)		(1,863	)		(3,241	)

Warranty liability at end of period	$	1,580		$	2,451		$	1,580		$	2,451

The Company generally provides one to three years of warranty coverage for products following the date of purchase and the Company accrues the estimated cost of warranty coverage as a component of cost of net revenues in the condensed consolidated statements of operations at the time revenue is recognized. The Company accrues warranty costs based on estimates of future warranty-related replacement, repairs or rework of products. In estimating its future warranty obligations, the Company considers various relevant factors, including the historical frequency and volume of claims, and the cost to replace or repair products under warranty.