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Balance Sheet Data

9 Months Ended

Sep. 30, 2011

Basis of Presentation/Balance Sheet Data [Abstract]

3. Balance Sheet Data

Cash and Cash Equivalents

At September 30, 2011, cash and cash equivalents included bank balances and investments with original maturities less than 90 days. At September 30, 2011 and December 31, 2010, the Company’s cash equivalents were invested in highly liquid AAA money market funds that are required to comply with Rule 2a-7 of the Investment Company Act of 1940. Such funds utilize the amortized cost method of accounting, seek to maintain a constant $1.00 per share price, and are redeemable upon demand. The Company restricts its investments in AAA money market funds to those invested 100% in either short-term U.S. Government Agency securities or bank repurchase agreements collateralized by the these same securities. The fair values of these money market funds are established through quoted prices in active markets for identical assets (Level 1 inputs). The cash in the Company’s U.S. banks is fully insured by the Federal Deposit Insurance Corporation due to the balances being below the maximum insurable amounts.

At September 30, 2011, the Company had $16.9 million in cash and $4.8 million in cash equivalents and at December 31, 2010, the Company had $3.0 in cash and $21.0 in cash equivalents. The Company had $0.7 million of cash and cash equivalents in foreign bank accounts at September 30, 2011 and December 31, 2010, respectively. As of September 30, 2011, the Company has no intentions of repatriating the cash in its foreign bank accounts. If the Company decides to repatriate the cash in the foreign bank accounts, it may experience difficulty in doing so in a timely manner. The Company may also be exposed to foreign currency fluctuations and taxes if it repatriates these funds.

Investments

At September 30, 2011 and December 31, 2010, the Company’s short-term and long-term investments consisted of pre-refunded municipal bonds, U.S. government agency bonds, and AA or higher rated corporate bonds all classified as held-to-maturity.

At September 30, 2011, the Company had invested $23.1 million in pre-refunded municipal bonds, $13.6 million in U.S. government agency bonds and $10.3 million in AA rated or higher corporate bonds. The income and principal from the pre-refunded municipal bonds are secured by an irrevocable trust of U.S. Treasury securities. The bonds, classified as short-term investments, have original maturities greater than 90 days and mature in less than one year. At September 30, 2011, the Company had $5.4 million classified as long-term investment securities. The bonds classified as long-term investments have maturities greater than one year but less than two years. The Company’s bonds are recorded at the purchase price and carried at amortized cost. The net unrealized gains were $31 at September 30, 2011. Approximately 11% of the Company’s bonds were protected by bond default insurance at September 30, 2011.

At December 31, 2010, the Company had invested $19.2 million in pre-refunded municipal bonds, $19.0 million in U.S. government agency bonds, and $8.7 million in AA rated or higher corporate bonds, and classified $9.8 million as long-term investment securities.

The Company categorizes its financial instruments within a fair value hierarchy established in accounting and disclosures for fair value measurements. The fair value hierarchy is described under the Fair Value of Financial Instruments in Note 1. For the Level 2 investments, the Company uses quoted prices of similar assets in active markets.

Cash equivalents and investments measured at fair value were as follows at September 30, 2011 and December 31, 2010:


	September 30, 2011								December 31, 2010
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	4,788	$	—	$	—	$	4,788	$	21,032	$	—	$	—	$	21,032
Investments:
US government agency bonds		—		13,578		—		13,578		—		19,036		—		19,036
Municipal bonds		—		23,126		—		23,126		—		19,378		—		19,378
Corporate debt securities		—		10,285		—		10,285		—		8,756		—		8,756

Total	$	4,788	$	46,989		—	$	51,777	$	21,032	$	47,170		—	$	68,202

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at invoiced amount with standard net terms that range between 30 and 60 days. The Company extends credit to its customers based on an evaluation of a company’s financial condition and collateral is generally not required. The Company maintains an allowance for doubtful accounts for estimated uncollectible accounts receivable. The allowance is based on the Company’s assessment of known delinquent accounts, historical experience, and other currently available evidence of the collectability and the aging of accounts receivable. The Company’s allowance for doubtful accounts was $0.1 million at September 30, 2011 and $0.2 million at December 31, 2010. The provision for doubtful accounts is included in sales and marketing expense in the condensed consolidated statements of operations.

Inventories

Inventories are stated at the lower of cost or market and include material, labor and overhead costs using the first-in, first-out (“FIFO”) method of costing. Inventories as of September 30, 2011 and December 31, 2010 were composed of raw materials, sub-assemblies, finished goods and work-in-process. The Company had consigned inventory with customers of $0.8 million and $1.0 million at September 30, 2011 and December 31, 2010, respectively. The Company records allowances to reduce the value of inventory to the lower of cost or market, including allowances for excess and obsolete inventory. The allowance for inventory losses was $1.6 million and $1.0 million at September 30, 2011 and December 31, 2010, respectively.

Inventories consisted of the following at September 30, 2011 and December 31, 2010:


	September 30, 2011		December 31, 2010
Raw materials	$	9,910	$	7,613
Work in process		625		542
Finished goods		3,101		2,574

Inventories, net	$	13,636	$	10,729

Prepaid and Other Current Assets

Prepaid assets are stated at cost and are amortized over the useful lives (up to one year) of the assets.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets. The Company depreciates computer equipment over three to five years, office equipment, manufacturing and test equipment, and motor vehicles over five years, furniture and fixtures over seven years, and buildings over 30 years. Leasehold improvements are amortized over the shorter of the corresponding lease term or useful life. Depreciation expense and gains and losses on the disposal of property and equipment are included in cost of sales and operating expenses in the condensed consolidated statements of operations. Maintenance and repairs are expensed as incurred.

Property and equipment consists of the following at September 30, 2011 and December 31, 2010:


	September 30, 2011			December 31, 2010
Building	$	6,207		$	6,207
Computers and office equipment		7,542			4,450
Manufacturing and test equipment		8,653			7,707
Furniture and fixtures		1,169			1,127
Leasehold improvements		218			176
Motor vehicles		27			27

Total property and equipment		23,816			19,694
Less: Accumulated depreciation and amortization		(12,277	)		(10,376	)
Land		1,770			1,770

Property and equipment, net	$	13,309		$	11,088

Intangible Assets

The Company amortizes intangible assets with finite lives on a straight-line basis over the estimated useful lives, which range from one to eight years. The summary of other intangible assets, net as of September 30, 2011 and December 31, 2010 are as follows:


	September 30, 2011						December 31, 2010
	Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value
Customer contracts and relationships	$	16,763	$	10,088	$	6,675	$	16,763	$	8,743	$	8,020
Patents and technology		7,408		6,100		1,308		6,312		6,007		305
Trademarks and trade names		2,603		2,289		314		2,603		2,074		529
Other		3,017		2,044		973		1,714		1,703		11

	$	29,791	$	20,521	$	9,270	$	27,392	$	18,527	$	8,865

The $0.4 million increase in the net book value of intangible assets at September 30, 2011 compared to December 31, 2010 reflects $2.4 million of intangible assets contributed by Eclipse to PCTEL Secure in January 2011 offsetting amortization of $2.0 million for the nine months ended September 30, 2011. See Note 6 for information related to PCTEL Secure.

In December 2010, the Company recorded an impairment of intangible assets of $1.1 million. The impairment expense included $0.9 million for an impairment of the distribution rights and trade name acquired in the Wider settlement, and $0.2 million for a partial impairment of the technology and non-compete agreements acquired from Ascom. The 2010 revenues resulting from the products acquired from Ascom and the products related to the settlement with Wider were significantly lower than the Company’s revenue projections used in the original accounting valuations. The Company considered these revenue variances as a triggering event that the carrying value of the long lived intangible assets subject to amortization may not be fully recoverable and may be less than the fair value at December 31, 2010.

The Company’s scheduled amortization expense for 2011 and the next five years is as follows:


Fiscal Year	Amount
2011	$	2,747
2012	$	2,803
2013	$	2,478
2014	$	1,961
2015	$	1,250
Thereafter	$	25

The following table presents the fair value measurements of non-recurring assets for continuing operations at December 31, 2010:


	December 31, 2010
	Level 1		Level 2		Level 3		Total		Gain (Loss)
Intangible assets	$	—		—		8,865	$	8,865	$	(1,084	)

Total	$	—	$	—	$	8,865	$	8,865	$	(1,084	)

Liabilities

Accrued liabilities consist of the following at September 30, 2011 and December 31, 2010:


	September 30, 2011		December 31, 2010
Payroll, bonuses, and other employee benefits	$	2,576	$	1,615
Inventory receipts		1,097		2,444
Paid time off		989		846
Warranties		560		257
Due to Wider		199		194
Due to Sparco shareholders		198		198
Real estate taxes		121		148
Restructuring		109		324
Employee stock purchase plan		104		232
Deferred revenues		95		501
Professional fees		67		208
Other		463		579

Total	$	6,578	$	7,546

Long-term liabilities consist of the following:


	September 30, 2011		December 31, 2010
Executive deferred compensation plan	$	1,147	$	1,187
Income taxes		824		824
Deferred rent		65		94
Deferred revenues		—		6

	$	2,036	$	2,111