10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________

FORM 10-Q

________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     .

Commission File Number 1-34020

________________________________

MICREL, INCORPORATED

(Exact name of Registrant as specified in its charter)

________________________________

California	94-2526744
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2180 Fortune Drive, San Jose, CA	95131
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (408) 944-0800

________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes  ¨    No  x

As of March 31, 2015 there were 56,865,368 shares of common stock, no par value, outstanding.

MICREL, INCORPORATED

INDEX TO

REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	3
	Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2015 and 2014	4
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 4.	Controls and Procedures	23
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	24
	Signature	25

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MICREL, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share amounts)

	March 31, 2015			December 31, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	28,371		$	21,183
Restricted cash	45			44
Short-term investments	65,697			65,428
Accounts receivable, less allowances: 2015, $1,084; 2014, $1,058	28,427			30,523
Inventories	41,294			44,136
Prepaid taxes	5,910			5,633
Prepaid expenses and other	2,149			1,612
Deferred income taxes	21,508			22,356
Total current assets	193,401			190,915
LONG-TERM INVESTMENTS	1,436			1,436
PROPERTY, PLANT AND EQUIPMENT, NET	58,550			60,453
LONG-TERM PREPAID TAXES	955			1,711
GOODWILL	8,655			8,655
INTANGIBLE ASSETS, NET	9,424			9,792
DEFERRED INCOME TAXES	2,887			2,707
OTHER ASSETS	1,425			1,511
TOTAL ASSETS	$	276,733		$	277,180
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	12,212		$	17,376
Accrued liabilities	12,044			12,869
Deferred income on shipments to distributors	23,436			22,947
Total current liabilities	47,692			53,192
LONG-TERM INCOME TAXES PAYABLE	3,592			3,511
LONG-TERM DEFERRED INCOME TAXES	868			807
OTHER LONG-TERM LIABILITIES	160			162
Total liabilities	52,312			57,672
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS’ EQUITY:
Preferred stock, no par value - authorized: 5,000,000 shares; issued and outstanding: none	—			—
Common stock, no par value - authorized: 250,000,000 shares; issued and outstanding: 2015 - 56,865,368 shares; 2014 - 56,435,555 shares	4,995			—
Accumulated other comprehensive loss	(61		)	(83		)
Retained earnings	219,487			219,591
Total shareholders’ equity	224,421			219,508
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	276,733		$	277,180

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

MICREL, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended
	March 31,
	2015			2014
NET REVENUES	$	57,955		$	59,857
COST OF REVENUES (1)	28,606			28,638
GROSS PROFIT	29,349			31,219
OPERATING EXPENSES:
Research and development (1)	13,964			15,481
Selling, general and administrative (1)	11,375			12,436
Total operating expenses	25,339			27,917
INCOME FROM OPERATIONS	4,010			3,302
INTEREST AND OTHER INCOME (EXPENSE):
Interest income	83			103
Other expense, net	(71		)	(72		)
Total interest and other income, net	12			31
INCOME BEFORE PROVISION FOR INCOME TAXES	4,022			3,333
PROVISION FOR INCOME TAXES	1,300			1,044
NET INCOME	$	2,722		$	2,289
NET INCOME PER SHARE:
Basic	$	0.05		$	0.04
Diluted	$	0.05		$	0.04
WEIGHTED AVERAGE SHARES USED IN COMPUTING PER SHARE AMOUNTS:
Basic	56,617			56,388
Diluted	58,282			57,208
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.05		$	0.05

(1) Share-based compensation expense included in:

Cost of revenues	$	274	$	234
Research and development	861		690
Selling, general and administrative	982		798

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

MICREL, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2015			2014
NET INCOME	$	2,722		$	2,289
Other comprehensive income:
Unrealized gains on investments	35			122
Income tax provision	(13		)	(42		)
Other comprehensive income, net of taxes	22			80
COMPREHENSIVE INCOME	$	2,744		$	2,369

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

MICREL, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,722		$	2,289
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,443			3,469
Share-based compensation expense	2,117			1,722
Excess tax benefits from share-based awards	(760		)	(267		)
Loss on disposal of assets	20			—
Deferred income taxes	717			(849		)
Changes in operating assets and liabilities:
Accounts receivable	2,096			(6,497		)
Inventories	2,836			1,204
Prepaid taxes	605			1,641
Prepaid expenses and other assets	(710		)	12
Accounts payable	(3,060		)	1,213
Income taxes payable	81			117
Accrued liabilities and other long-term liabilities	(632		)	409
Deferred income on shipments to distributors	489			1,963
Net cash provided by operating activities	9,964			6,426
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(3,255		)	(1,321		)
Purchases of investments	(17,934		)	(17,265		)
Proceeds from sales and maturities of investments	17,700			18,778
Net cash provided by (used in) investing activities	(3,489		)	192
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock	5,117			2,351
Repurchases of common stock	(1,878		)	(3,000		)
Payment of cash dividends	(2,826		)	(2,814		)
Purchase of stock for withholding taxes on vested restricted stock	(460		)	(252		)
Excess tax benefits from share-based awards	760			267
Net cash provided by (used in) financing activities	713			(3,448		)
NET INCREASE IN CASH AND CASH EQUIVALENTS	7,188			3,170
CASH AND CASH EQUIVALENTS - Beginning of period	21,183			23,787
CASH AND CASH EQUIVALENTS - End of period	$	28,371		$	26,957

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

MICREL, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Information - The accompanying condensed consolidated financial statements of Micrel, Incorporated and its wholly-owned subsidiaries (together “Micrel” or the “Company”) as of March 31, 2015 and for the three months ended March 31, 2015 and 2014 are unaudited. In the opinion of management, the condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair statement of its financial position, operating results, comprehensive income and cash flows for the interim periods presented. Operating results and cash flows for interim periods are not necessarily indicative of results for the entire year. The Condensed Consolidated Balance Sheet as of December 31, 2014 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles (“GAAP”) in the United States of America. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. These financial statements should also be read in conjunction with the Company’s critical accounting policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Net Income Per Share- Basic net income per share is computed by dividing net income by the number of weighted-average common shares outstanding. Diluted net income per share reflects potential dilution from outstanding stock options and restricted stock units (“RSUs”) using the treasury stock method. Reconciliation of weighted-average shares used in computing basic and diluted net income per share is as follows (in thousands):

	Three Months Ended
	March 31,
	2015	2014
Shares used in computing basic net income per share	56,617	56,388
Dilutive effect of stock options and restricted stock units	1,665	820
Shares used in computing diluted net income per share	58,282	57,208

For the three months ended March 31, 2015 and 2014, 0.3 million and 4.7 million shares underlying stock options, respectively, have been excluded from the weighted-average number of common shares outstanding for the diluted net income per share computations as they were anti-dilutive.

2. RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update to change the requirements for reporting discontinued operations. This guidance modifies the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity's operations and financial results. The guidance requires expanded disclosures for discontinued operations for the assets, liabilities, revenues, and expenses of discontinued operations, and also requires an entity to disclose the pretax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting. This accounting standards update became effective for the Company beginning in the first quarter of 2015 and its adoption did not have an impact on the Company's consolidated financial statements.

In May 2014, the FASB issued an accounting standards update on the recognition of revenue from contracts with customers. The guidance modifies the financial reporting of revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires enhanced disclosures for the nature, amount, timing, and uncertainty of revenue that is recognized. In April 2015, the FASB proposed to defer the effective date of this standard. Under the proposal, the Company is required to adopt this standard for its interim and annual periods beginning after December 15, 2017. Early adoption is permitted for interim and annual periods beginning after December 15, 2016. The guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

7

MICREL, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In June 2014, the FASB issued an accounting standards update on the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The Company is required to adopt this standard for its interim and annual periods beginning after December 15, 2015. Early adoption is permitted. The guidance may be applied on a prospective or retrospective basis. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

3. SHARE-BASED COMPENSATION

Share-based compensation expense is measured at the grant date based on the fair value of the award and is recognized over the employee’s requisite service period. The following table summarizes total share-based compensation expense included in the Condensed Consolidated Statements of Income (in thousands):

	Three Months Ended
	March 31,
	2015			2014
Cost of revenues	$	274		$	234
Research and development	861			690
Selling, general and administrative	982			798
Pre-tax share-based compensation expense	2,117			1,722
Less income tax effect	(741		)	(549		)
Net share-based compensation expense	$	1,376		$	1,173

During the three months ended March 31, 2015 and 2014, the Company granted 0.4 million and 0.2 million stock options, respectively, at weighted average fair values of $4.04 and $2.79 per share, respectively. The fair value of the Company’s stock options granted under the Company’s option plans was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Three Months Ended
	March 31,
	2015		2014
Expected term (years)	6.1		6.1
Stock volatility	30.1	%	31.0	%
Risk-free interest rate	1.6	%	2.1	%
Dividends during expected term	1.3	%	1.8	%

The Company also grants RSUs to its employees. In the three months ended March 31, 2015 and 2014, the Company granted 0.4 million and 0.2 million RSUs, respectively, at weighted average fair values of $14.39 and $9.81 per share, respectively.

At March 31, 2015, there was $5.1 million of total unrecognized share-based compensation expense related to non-vested stock option awards and $14.5 million related to non-vested RSUs, which are expected to be recognized over a weighted-average period of 2.7 and 3.1 years, respectively. Total share-based compensation expense capitalized as part of inventory at both March 31, 2015 and December 31, 2014 was $0.2 million.

8

MICREL, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

4. INVESTMENTS

Investments purchased with a remaining maturity of less than three months are classified as cash equivalents. Investments are classified either as short-term or as long-term based on the timing of their maturities and the Company’s ability and intent with regard to those securities (expectations of sales and redemptions). Short-term investments at March 31, 2015 consisted primarily of liquid corporate debt securities, commercial paper, municipal securities and U.S. government agencies securities with maturities ranging from less than one month to less than two years and were classified as available-for-sale securities. Long-term investments at March 31, 2015 consisted of auction-rate notes secured by student loans and were classified as available-for-sale securities. Available-for-sale securities are stated at fair value with unrealized gains and losses included in accumulated other comprehensive loss, a component of shareholders' equity. Unrealized losses are charged against income when a decline in the fair market value of an individual security is determined to be other than temporary. Realized gains and losses on investments are included in other income or expense.

A summary of the Company’s short-term investments at March 31, 2015 and December 31, 2014 was as follows (in thousands):

	March 31, 2015									December 31, 2014
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate Debt Securities	$	49,116	$	3	$	(37	)	$	49,082	$	43,327	$	3	$	(68	)	$	43,262
Commercial Paper	9,480		3		(2		)	9,481		14,975		5		(3		)	14,977
Municipal Securities	5,131		1		—			5,132		5,191		3		—			5,194
U.S. Government Agencies Securities	2,000		2		—			2,002		2,000		—		(5		)	1,995
Total	$	65,727	$	9	$	(39	)	$	65,697	$	65,493	$	11	$	(76	)	$	65,428

At March 31, 2015, the Company had no short-term investments that have been in a significant continuous unrealized loss position for more than twelve months.

A summary of the Company’s long-term investments at March 31, 2015 and December 31, 2014 was as follows (in thousands):

	March 31, 2015									December 31, 2014
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Auction-rate Notes	$	1,500	$	—	$	(64	)	$	1,436	$	1,500	$	—	$	(64	)	$	1,436

At March 31, 2015, the Company had $1.5 million of auction-rate notes. Auction-rate notes are securities that are structured with short-term interest rate reset dates of generally less than ninety days, but with contractual maturities that can be in excess of ten years. At the end of each reset period, which occurs every seven days for the securities held by the Company, investors can sell or continue to hold the securities at par. As a result of sell orders exceeding buy orders, auctions for the student loan-backed notes held by the Company have failed at March 31, 2015. To date the Company has collected all interest receivable on all of its auction-rate notes when due and expects to continue to do so in the future. The principal associated with failed auctions will not be accessible until a successful auction occurs, a buyer is found outside of the auction process, the issuers redeem the securities, the issuers repay principal over time from cash flows prior to final maturity or final payments come due according to a remaining contractual maturity of 33 years. The Company has classified all auction-rate notes as long-term investments at March 31, 2015 and December 31, 2014. In the event of a failed auction, the notes bear interest at a predetermined maximum rate based on the credit rating of notes as determined by one or more nationally recognized statistical rating organizations. For the auction-rate notes held by the Company at March 31, 2015, the maximum interest rate is generally one month LIBOR plus 1.5% based on the notes' rating as of that date.

9

MICREL, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

To determine the fair value of financial instruments, the Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are described below:

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s short-term investments are classified within Level 2 of the fair value hierarchy because they are valued using quoted market prices for similar securities, broker or dealer quotations, or other observable inputs.

The types of instruments valued based on unobservable inputs consist of the auction-rate notes held by the Company. Such instruments are classified within Level 3 of the fair value hierarchy. The Company estimated the fair value of these auction-rate notes using a combination of observable transactions for similar securities and a discounted cash flow model incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions include estimates for interest rates, timing and amount of cash flows and expected holding periods of the auction-rate notes. Based on this assessment of fair value, at March 31, 2015, the Company determined there was a cumulative decline in the fair value of its auction-rate notes and recorded less than $0.1 million ($0.1 million pre-tax) temporary impairment of these notes to accumulated other comprehensive income, a component of shareholders’ equity.

10

MICREL, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Financial assets measured at fair value on a recurring basis at March 31, 2015 were as follows (in thousands):

	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Money Market Funds (1)	$	9,704	$	—	$	—	$	9,704
Corporate Debt Securities (2)	—		49,082		—		49,082
Commercial Paper (2)	—		9,481		—		9,481
Municipal Securities (2)	—		5,132		—		5,132
U.S. Government Agencies Securities (2)	—		2,002		—		2,002
Auction-rate Notes (3)	—		—		1,436		1,436
Total	$	9,704	$	65,697	$	1,436	$	76,837

Financial assets measured at fair value on a recurring basis at December 31, 2014 were as follows (in thousands):

	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Money Market Funds (1)	$	4,725	$	—	$	—	$	4,725
Corporate Debt Securities (2)	—		43,262		—		43,262
Commercial Paper (2)	—		14,977		—		14,977
Municipal Securities (2)	—		5,194		—		5,194
U.S. Government Agencies Securities (2)	—		1,995		—		1,995
Auction-rate Notes (3)	—		—		1,436		1,436
Total	$	4,725	$	65,428	$	1,436	$	71,589

__________

(1) Included in cash and cash equivalents

(2) Included in short-term investments

(3) Included in long-term investments

There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy.

For the three months ended March 31, 2015, the changes in the Company’s Level 3 securities (consisting of auction-rate notes) were as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Beginning balance, December 31, 2014	$	1,436
Transfers in and/or out of Level 3	—
Total unrealized gains, before tax, included in other comprehensive income	—
Sales	—
Ending balance, March 31, 2015	$	1,436

11

MICREL, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

5. INVENTORIES

Inventories consisted of the following (in thousands):

	March 31, 2015		December 31, 2014
Finished goods	$	13,733	$	15,395
Work in process	26,397		27,500
Raw materials	1,164		1,241
Total inventories	$	41,294	$	44,136

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following (in thousands):

	Life	March 31, 2015			December 31, 2014
Machinery and equipment	5 years	$	190,006		$	189,335
Land	—	8,101			8,101
Buildings and improvements	*	54,517			54,483
Computer equipment and software	3 years	11,158			11,094
Office furniture and fixtures	5 years	1,534			1,528
		265,316			264,541
Accumulated depreciation		(206,766		)	(204,088		)
Total property, plant and equipment, net		$	58,550		$	60,453

__________

* Buildings are depreciated over 10 years to 30 years. Leasehold improvements are depreciated over the shorter of the useful life or respective lease terms.

Depreciation expense for the three months ended March 31, 2015 and 2014 was $2.8 million and $2.7 million, respectively.

7. INTANGIBLE ASSETS

The Company reviews its purchased intangible assets with finite lives for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability of these intangible assets is assessed based on the estimated undiscounted future cash flows expected to result from the use of the asset. If the undiscounted future cash flows are less than the carrying amount, the purchased intangible assets with finite lives are considered to be impaired. The amount of the impairment is measured as the difference between the carrying amount of these assets and their fair value.

The Company's business acquisitions have included the purchase of in-process research and development assets that are not amortizable until the underlying project is complete. The Company assesses that its in-process research and development project is complete when all material research and development costs have been incurred and no significant risks remain. The Company reviews the carrying value of indefinite-lived intangible assets for impairment at least annually during the last quarter of its fiscal year, or more frequently if it believes indicators of impairment exist.

12

MICREL, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table sets forth the components of intangible assets as follows (in thousands):

	March 31, 2015							December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Net  Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net  Carrying Amount
Developed and core technology	$	7,443	$	(2,017	)	$	5,426	$	7,443	$	(1,810	)	$	5,633
Customer relationships	3,800		(1,322		)	2,478		3,800		(1,181		)	2,619
Trademarks	610		(390		)	220		610		(370		)	240
In-process research and development	1,300		—			1,300		1,300		—			1,300
	$	13,153	$	(3,729	)	$	9,424	$	13,153	$	(3,361	)	$	9,792

The above intangible assets acquired in connection with the Discera acquisition in 2013 in the amount of $2.7 million, the PhaseLink acquisition in 2012 in the amount of $8.3 million and other acquired intangible assets in the amount of $2.1 million are amortized over their estimated useful lives ranging from one to ten years using the straight-line method. Total intangible amortization expense for the three months ended March 31, 2015 and 2014 was $0.4 million and $0.5 million, respectively. The Company expects to complete the acquired in-process development projects for Phaselink and Discera in the remainder of 2015 and begin amortizing the related developed technology intangible assets prior to the end of 2015.

The estimated future amortization expense of intangible assets at March 31, 2015 was as follows (in thousands):

Year Ending December 31,
2015 (remaining nine months)	$	1,168
2016	1,510
2017	1,281
2018	1,223
2019	1,140
Thereafter	3,102
	$	9,424

8. ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):

	March 31, 2015		December 31, 2014
Accrued compensation	$	6,596	$	7,050
Accrued commissions	1,469		1,605
Accrued restructuring	41		360
Other accrued liabilities	3,938		3,854
Total accrued liabilities	$	12,044	$	12,869

9. BORROWING ARRANGEMENTS

Under the terms of an unsecured credit facility with Bank of the West that expires on April 30, 2015, the Company has a $5.0 million line of credit available for general working capital needs, which includes a $5.0 million letter of credit sub-facility including a $2.0 million foreign exchange sub-facility. Interest rates under the facility are based on one of three interest rates, at the Company’s option: (1) a variable alternate base rate plus 1.0%, the alternate base rate being the greater of (x) Bank of the West’s prime rate, (y) the Fed Funds Rate plus 0.5% or (z) daily adjusted one-month LIBOR plus 1.0%; (2) floating one-month LIBOR plus 2.0% or (3) fixed LIBOR for one, two, three or six month periods, plus 2.0%. The credit agreement includes certain restrictive covenants and, at March 31, 2015, the Company was in compliance with such covenants. At March 31, 2015, the Company had no borrowings under the line of credit facility.

13

MICREL, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Company's borrowing arrangements include a provision for the issuance of commercial or standby letters of credit by the bank on behalf of the Company. The letters of credit are issued to guarantee payments for the Company's workers compensation program. At March 31, 2015, there was $0.3 million in letters of credit outstanding.

10. MAJOR CUSTOMERS

During the three months ended March 31, 2015, distributors A and B accounted for 24% and 19% of total net revenues, respectively. During the three months ended March 31, 2014, distributors A and B accounted for 28% and 23% of total net revenues, respectively. These distributors sell Micrel's products to many customers across various end markets.

At March 31, 2015, distributors A, C and B accounted for 26%, 16%, and 14% respectively, of total accounts receivable. At December 31, 2014, distributors A, C and B accounted for 24%, 15% and 13%, respectively, of total accounts receivable.

11. SEGMENT REPORTING

The Company currently operates in one segment: the design, manufacturing, marketing and sale of semiconductor products.

The Company generates revenue from four product groups:  Linear and Power; Timing and Communications; LAN; and Foundry.  The following table sets forth the net revenues attributable to our four product groups as a percentage of total net revenues:

	Three Months Ended
Net Revenues by Product Group	March 31,
	2015		2014
Net Revenues:
Linear and Power	53	%	55	%
Timing and Communications	24		22
LAN	21		20
Foundry	2		3
Total net revenues	100	%	100	%

The Company recorded revenue from customers throughout the United States, Canada and Mexico (collectively referred to as “North America”); the United Kingdom, Italy, Germany, France, Israel, Sweden, Hungary, Austria, Finland, Switzerland and other European countries (collectively referred to as “Europe”); Korea, Taiwan, Singapore, China, Japan, Hong Kong, Malaysia and other Asian countries (collectively referred to as “Asia”). Revenues by major geographic area are based on the geographic location of the original equipment manufacturers (“OEMs”) or the distributors who have purchased the Company's products. The geographic locations of the Company's distributors may be different from the geographic locations of the end customers.

The following table sets forth the net revenues by geographic region as a percentage of total net revenues, for the periods presented:

	Three Months Ended
Net Revenues by Geographic Region	March 31,
	2015		2014
Net Revenues:
North America	23	%	27	%
Asia	62	%	57	%
Europe	15	%	16	%
Total net revenues	100	%	100	%

14

MICREL, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

12. COMMITMENTS AND CONTINGENCIES

From time to time, claims have been filed by or have arisen against the Company in its normal course of business. Generally, litigation is subject to inherent uncertainties, and the Company can provide no assurance that it will prevail in any particular lawsuit. Accordingly, litigation could result in substantial costs and diversion of resources and could have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

At March 31, 2015, the Company has not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on the assessment that liabilities are not probable. Further, ranges of possible losses in these matters cannot be reasonably estimated at this time.

13. SHARE REPURCHASE PROGRAM

On August 20, 2014, the Company announced that its Board of Directors authorized the repurchase of $25.0 million of the Company’s common stock, which increased the total approval for repurchase since February 2010 to $145.0 million. Under our stock repurchase program, at March 31, 2015, we have remaining authorization to repurchase $29.0 million of our common stock.

Shares of common stock purchased pursuant to the repurchase program are canceled from outstanding shares upon repurchase. Share repurchases are recorded as a reduction to common stock to the extent available. Any amounts repurchased which are in excess of the existing total common stock balance are recorded as a reduction of retained earnings. Share repurchases are intended to reduce the number of outstanding shares of common stock to increase shareholder value and offset dilution from the Company’s stock incentive plans and ESPP. During the three months ended March 31, 2015, the Company repurchased 0.1 million shares of its common stock for an aggregate price of $1.7 million, excluding $0.2 million of cash paid in the three months ended March 31, 2015 for the settlement of shares repurchased in December 2014.

14. INCOME TAXES

The income tax provision for the three months ended March 31, 2015 and 2014, as a percentage of income before taxes was 32.3% and 31.3%, respectively.

At March 31, 2015, the gross liability for uncertain tax positions was $7.9 million and the net liability, reduced for the federal effects of potential state tax exposures, was $6.2 million. If these uncertain tax positions are sustained upon tax authority audit, or otherwise become certain, a net $3.6 million would favorably affect the Company’s tax provision in such future periods. The remaining $2.6 million would increase deferred tax assets on which a valuation allowance is placed and would be expected to also increase the valuation allowance by a corresponding amount. The $3.6 million liability is included in long-term income taxes payable. The Company does not anticipate a significant change to unrecognized tax benefits for uncertain income tax positions within the next 12 months.

The Company continues to recognize interest and penalties related to unrecognized tax benefits as part of the income tax provision. At March 31, 2015 and December 31, 2014, the Company had $0.3 million and $0.3 million, respectively, accrued for interest and none accrued for penalties in both periods. These accruals are included as a component of long-term income taxes payable.

The Company is required to file U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company may be subject to examination by the Internal Revenue Service (“IRS”) for calendar years 2010 and forward. Significant state tax jurisdictions include California and Texas, and generally, the Company is subject to routine examination for years 2008 and forward in these jurisdictions. In addition, any research and development credit carryforwards that were generated in prior years and utilized in these years may also be subject to examination by respective state taxing authorities. Generally, the Company is subject to routine examination for years 2007 and forward in various foreign tax jurisdictions in which it operates.

15

MICREL, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Deferred tax assets and liabilities result primarily from temporary differences between book and tax bases of assets and liabilities and state research and development credit carryforwards. The Company had net deferred tax assets of $23.5 million at March 31, 2015. The Company must regularly assess the likelihood that future taxable income levels will be sufficient to ultimately realize the tax benefits of these net deferred tax assets. The Company currently believes that future taxable income levels will be sufficient to realize the tax benefits of these deferred tax assets except for a valuation allowance of $12.7 million and $12.2 million that was established against state deferred tax assets at March 31, 2015 and December 31, 2014, respectively. Should the Company determine that future realization of these tax benefits is not more likely than not, additional valuation allowances would be established which would increase the Company's tax provision in the period of such determination.

Included in net deferred tax assets are credit carryforwards. The Company has available state research and development credit carryforwards of approximately $22.9 million, for which a full valuation allowance has been provided for. The state research credit carryforwards are not subject to expiration and may be carried forward indefinitely until utilized.

15. DIVIDENDS

On January 27, 2015, the Company’s Board of Directors declared a cash dividend of $0.05 per share of common stock. The aggregate payment of $2.8 million was paid on February 25, 2015 to shareholders of record as of February 11, 2015.

16. RESTRUCTURING CHARGES

In 2014, the Company continued its efforts to reduce operating expenses. Therefore, in the third quarter of 2014, the Company recorded restructuring charges of $0.5 million related to workforce reductions and facility closure. In the fourth quarter of 2014, the Company recorded restructuring charges of $0.5 million related to workforce reductions.

In the fourth quarter of 2013, the Company recorded restructuring charges of $1.4 million related to workforce reductions.

The Company paid $0.3 million related to severance costs for the three months ended March 31, 2015. The following table summarizes the activity related to the accrual for restructuring charges for the three months ended March 31, 2015 by event (in thousands):

	Plan Initiated in Q4'13			Plan Initiated in Q3'14			Plan Initiated in Q4'14			Total
Balance at December 31, 2014	$	20		$	71		$	269		$	360
Payments	(20		)	(38		)	(261		)	(319		)
Balance at March 31, 2015	$	—		$	33		$	8		$	41

17. SUBSEQUENT EVENTS

On April 21, 2015, the Company’s Board of Directors declared a cash dividend of $0.05 per outstanding share of common stock payable on May 21, 2015 to shareholders of record at the close of business on May 7, 2015. This dividend will be recorded in the second quarter of 2015 and is expected to be approximately $2.8 million.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements contained in this Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding our expectations, hopes, intentions or strategies regarding the future.  Forward-looking statements include, but are not limited to statements regarding: future revenues and dependence on product sales; the levels of international sales; the effect of global market conditions on revenue levels, profitability and results of operations; future products or product development; statements regarding fluctuations in our results of operations; future returns and price adjustments and allowance; future uncollectible amounts and doubtful accounts allowance; future research and development spending and our product development strategy; our markets, product features and performance; product demand and inventory to service such demand; competitive threats and pricing pressure; the effect of dependence on third parties; our future use and protection of intellectual property; future expansion or utilization of manufacturing capacity; future expenditures; current or future acquisitions; the ability to meet anticipated short term and long term cash requirements; effect of changes in market interest rates on investments; our need and ability to attract and retain certain personnel; the cost and outcome of litigation and its effect on us; the future realization of tax benefits; and share-based incentive awards and expectations regarding future share-based compensation expense. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “believe,” “estimate,” “may,” “can,” “will,” “could,” “would,” “intend,” “objective,” “plan,” “expect,” “likely,” “potential,” “possible” or “anticipate” or the negative of these terms or other comparable terminology and similar expressions. All forward-looking statements included in this document are based on information available to us on the date of this Report, and we assume no obligation to update any such forward-looking statements, including those risks discussed under “Risk Factors” and elsewhere in this Report, except as required by applicable law. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements. Additional factors that may affect operating results are contained within the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Overview.

We design, develop, manufacture and market a range of high-performance analog, power and mixed-signal integrated circuits (“ICs”). We currently ship thousands of proprietary and industry-standard products. These products address a wide range of end markets including industrial and automotive, wireline communications, enterprise and cloud infrastructure and mobility. We also manufacture custom analog and mixed-signal circuits and provide wafer foundry services for customers which produce electronic systems utilizing semiconductor manufacturing processes as well as micro-electrical mechanical system (“MEMS”) technologies.

On January 20, 2015, we announced that our Board of Directors had formed a Transaction Committee comprised of three independent directors to undertake a comprehensive review of strategic alternatives which could enhance value for shareholders. We have engaged a financial advisor and outside counsel in connection with the process. There can be no assurance that our review of strategic alternatives will result in any transaction.

Our high performance linear and power products are characterized by high power density and small form factors. Recently, the demand for high performance linear and power circuits has been fueled by the growth of portable communications and computing devices, including for example, cellular handsets and tablet devices. The growth of internet connected devices continues to increase the power and data throughput requirements of the cloud and communication infrastructure equipment. We offer an extensive linear and power management product portfolio for the networking and communications infrastructure markets including cloud and enterprise servers, network switches and routers, storage area networks, wireless base stations, and the Internet of Everything. In addition, we offer products that serve the solid state drive market and are seeing strength in the emergence of solid state drives. We also offer an extensive portfolio of load switches and MOSFET drivers for industrial applications such as DC brushless motors.

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Our timing and communications devices are used primarily in communications infrastructure markets, such as enterprise, data center, storage area networks, LTE, OTN and metropolitan networks. This product portfolio consists of system timing and clock generation and distribution as well as high speed physical media devices and fiber optic modules products. We use innovative silicon and packaging approaches and proprietary process technology to address the challenges of form factor size reductions, performance, integration and ease of use that are important for system developers. In 2012, we acquired PhaseLink, a private company based in Taiwan and in San Jose, California, in order to complement our high performance clock generation and distribution products for the communication market and to expand our product offerings into the consumer, automotive and industrial markets. PhaseLink provides high performance integrated timing solutions to system and oscillator manufacturers. In September 2013, we acquired specific net assets of Discera, which invented and implemented micro-electrical mechanical systems (“MEMS”) resonators to compete with standard quartz based oscillators and clock generators. We acquired Discera to complement our high performance clock and timing products, to expand our reach into mobile, cloud, industrial and automotive markets, as well as to extend our in-house MEMS process capabilities. With these acquisitions and our organic product development, we now offer a comprehensive portfolio of frequency control clock synthesizers and generators as well as clock conditioning and distribution products.

Our family of local area network (“LAN”) solutions products targets the automotive, industrial automation and control, communications and smart home control markets. This product portfolio consists of physical layer transceivers (“PHY”), media access controllers (“MAC”), switches, application specific standard products (“ASSP”) and system-on-a-chip (“SoC”) products that support transmission speeds up to one Gigabit per second. We continue to transition our LAN solutions portfolio to higher value switch, ASSP and SoC products. These solutions enable our customers to develop cloud-enabled end-points and IP-adaptation devices with relatively low investment of time and resources and take advantage of emerging cloud-based services and Internet of Things (“IoT”) infrastructure. Emerging high value markets in automotive and industrial contributed over 50% of our LAN revenue in 2014.

Our foundry business offers foundry services to IC and MEMS designers and manufacturers seeking a production solution compatible with their specific application and/or technology needs. We offer various combinations of design, process and wafer foundry services including MEMS manufacturing capability. We fabricate wafers for customers using our standard processes, their existing processes or customized processes we develop for them.

We currently operate in one segment: the design, manufacturing, marketing and sale of semiconductor products.

We generate revenue from four product groups:  Linear and Power, Timing and Communications, LAN, and Foundry.  The following table sets forth the net revenues attributable to our four product groups as a percentage of total net revenues, for the periods presented.

Net Revenues by Product Group	Three Months Ended March 31,
	2015		2014
Net Revenues:
Linear and Power	53	%	55	%
Timing and Communications	24		22
LAN	21		20
Foundry	2		3
Total net revenues	100	%	100	%

Our products address a wide range of end markets. Net revenues by end market categorization are based on the estimated predominant category of the OEM or distributor purchasing the parts. The eventual end market where our products are incorporated may differ, especially for parts sold through distribution channels. Our industrial products address a wide range of end markets such as automotive, control and automation, electronic instrumentation, financial terminals, security, medical and metering. Our wireline communication products are deployed within carrier infrastructure such as LTE/4G, optical transport networking (OTN) and fiber to the home (FTTH) networks. Our Enterprise/Cloud Infrastructure products are used in storage, switches, routers and servers for datacenters and enterprise networks. Our mobility products are suited for IoT devices and low power battery powered mobile devices such as smart phones and tablets. Our Other products are primarily silicon foundry services and custom products. The following table presents our estimated revenues by end market as a percentage of total net revenues.

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Net Revenues by End Market	Three Months Ended March 31,
	2015		2014
As a Percentage of Total Net Revenues:
Industrial and Automotive	54	%	54	%
Wireline Communications	17		18
Enterprise / Cloud Infrastructure	17		16
Mobility	10		10
Other	2		2
Total net revenues	100	%	100	%

Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies and estimates for the three months ended March 31, 2015, compared with our critical accounting policies and estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2014.

Results of Operations

The following table sets forth certain operating data as a percentage of total net revenues for the periods indicated:

	Three Months Ended March 31,
	2015		2014
Net revenues	100.0	%	100.0	%
Cost of revenues	49.4		47.8
Gross profit	50.6		52.2
Operating expenses:
Research and development	24.1		25.9
Selling, general and administrative	19.6		20.8
Total operating expenses	43.7		46.7
Income from operations	6.9		5.5
Interest and other income, net	—		0.1
Income before income taxes	6.9		5.6
Provision for income taxes	2.2		1.8
Net income	4.7	%	3.8	%

Net Revenues. For the three months ended March 31, 2015, net revenues decreased 3.2% to $58.0 million from $59.9 million for the same period in the prior year. The decrease resulted primarily from the decreased demand for our products serving the wireline communications end market and industrial and automotive end market, which was partially offset by an increase in demand for our products serving the mobility end market.

Customer demand for semiconductors can change quickly and unexpectedly. Historically, our revenue levels have been highly dependent on the amount of new orders for products to be delivered to the customer within the same quarter. Within the semiconductor industry, orders that are booked and shipped within the same quarter are called “turns fill” orders. When the turns fill level exceeds approximately 35% of quarterly revenues, it can be very difficult to predict near term revenues and income. The resulting lack of visibility into demand also makes it difficult to match product build with future demand as our lead times to build our products may be substantially longer than order lead times.

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International sales represented 77% of net revenues for the three months ended March 31, 2015 compared to 73% of net revenues for the three months ended March 31, 2014. Sales to customers in Asia represented 62% of net revenues for the three months ended March 31, 2015, compared to 57% of net revenues for the three months ended March 31, 2014. The trend for our customers to move their electronics manufacturing to Asian countries has resulted in increased pricing pressure for us and other semiconductor manufacturers. The increased concentration of electronics procurement and manufacturing in the Asia Pacific region has led, and may continue to lead, to continued price pressure for our products in the future.

Gross Profit. Gross profit is affected by a variety of factors including the volume of product sales, product mix, manufacturing capacity utilization, inventory write-downs and recoveries, product yields and average selling prices. Our gross profit margin was 50.6% for the three months ended March 31, 2015, compared to 52.2% for the three months ended March 31, 2014. Our gross profit continues to be negatively impacted by average selling price erosion, product mix and lower capacity utilization.

Research and Development Expenses. Research and development (“R&D”) expenses as a percentage of net revenues represented 24.1% for the three months ended March 31, 2015, compared to 25.9% for the three months ended March 31, 2014. On a dollar basis, R&D expenses decreased $1.5 million, or 9.8%, to $14.0 million for the three months ended March 31, 2015 from $15.5 million for the three months ended March 31, 2014. This decrease was primarily due to restructuring and other cost reduction initiatives implemented in 2014.

We believe that the development and introduction of new products is critical to our future success and expect to continue our investment in research and development activities in the future.

Selling, General and Administrative Expenses. As a percentage of net revenues, selling, general and administrative (“SG&A”) expenses represented 19.6% for the three months ended March 31, 2015, compared to 20.8% for the three months ended March 31, 2014. On a dollar basis, SG&A expenses decreased $1.0 million, or 8.5%, to $11.4 million for the three months ended March 31, 2015 from $12.4 million for the three months ended March 31, 2014. This decrease was primarily due to restructuring and other cost reduction initiatives implemented in 2014.

Share-Based Compensation. Our results of operations for the three months ended March 31, 2015 and 2014 included $2.1 million and $1.7 million, respectively, of non-cash expense related to the fair value of share-based compensation awards. Share-based compensation expense is included in the statements of income in cost of revenues, R&D expenses and SG&A expenses (see Note 3 of Notes to Condensed Consolidated Financial Statements).

Interest and Other Income, net. Interest and other income, net was a net income of less than $0.1 million for the three months ended March 31, 2015 and 2014. Interest income reflects income from short-term and long-term investments and money market funds.

Provision for Income Taxes. For the three months ended March 31, 2015, the provision for income taxes was $1.3 million, or 32.3% of income before taxes, compared to $1.0 million, or 31.3% of income before taxes for the three months ended March 31, 2014.

The income tax provision for these interim periods differs from taxes computed at the federal statutory rate primarily due to the tax effects of share-based compensation and federal qualified production activity deductions.

Liquidity and Capital Resources

Since inception, our principal sources of funding have been our cash from operations, bank borrowings and sales of common stock. Principal sources of liquidity at March 31, 2015 consisted of cash, cash equivalents and short-term investments of $94.1 million and a $5.0 million unsecured credit facility from a commercial bank.

We generated $10.0 million in cash from operating activities during the three months ended March 31, 2015. Significant cash flows included cash provided by net income of $2.7 million plus additions for non-cash activities of $6.3 million (consisting primarily of $3.4 million in depreciation and amortization, $2.1 million in share-based compensation expense, and a $0.7 million increase in deferred income taxes), combined with a $2.8 million decrease in inventories and $2.1 million decrease in accounts receivable, which were offset in part by a $3.1 million decrease in accounts payable.

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We generated $6.4 million in cash from operating activities during the three months ended March 31, 2014. Significant cash flows included cash provided by net income of $2.3 million plus additions for non-cash activities of $4.1 million (consisting primarily of $3.5 million in depreciation and amortization and $1.7 million in share-based compensation expense, partially offset by a $0.8 million increase in deferred income taxes) combined with a $1.6 million decrease in prepaid taxes, a $2.0 million increase in deferred income on shipments to distributors, $1.2 million increase in accounts payable and a $1.2 million decrease in inventories which were offset in part by a $6.5 million increase in accounts receivable.

We used $3.5 million of cash for investing activities during the three months ended March 31, 2015, primarily comprised of $17.9 million for the purchase of investments and $3.3 million of purchases of property, plant and equipment, offset by $17.7 million in proceeds from the sales and maturities of investments.

We received $0.2 million of cash for investing activities during the three months ended March 31, 2014, primarily comprised of $18.8 million in proceeds from the sales and maturities of investments, partially offset by $17.3 million in purchases of investments and $1.3 million of purchases of property, plant and equipment.

We received $0.7 million of cash for financing activities during the three months ended March 31, 2015, primarily comprised of $5.1 million in proceeds from employee stock transactions, partially offset by $2.8 million for the payment of cash dividends and $1.9 million for the repurchases of our common stock.

We used $3.4 million of cash for financing activities during the three months ended March 31, 2014, primarily for the repurchases of $3.0 million of our common stock and $2.8 million for the payment of cash dividends, which were partially offset by $2.4 million in proceeds from employee stock transactions.

We currently intend to spend approximately $4.0 million to $8.0 million to purchase capital equipment and make facility improvements during the remainder of 2015 primarily for manufacturing equipment and additional research and development related software and equipment.

On April 21, 2015, our Board of Directors declared a cash dividend of $0.05 per outstanding share of common stock payable on May 21, 2015 to shareholders of record at the close of business on May 7, 2015. This dividend will be recorded in the second quarter of 2015 and is expected to be approximately $2.8 million.

On August 20, 2014, we announced that our Board of Directors authorized the repurchase of $25.0 million of our common stock, which increased the total approval for repurchase since February 2010 to $145.0 million. Under our stock repurchase program, at March 31, 2015, we have remaining authorization to repurchase $29.0 million of our common stock. During the three months ended March 31, 2015, we repurchased 0.1 million shares of our common stock for an aggregate price of $1.7 million, excluding $0.2 million of cash paid in the three months ended March 31, 2015 for the settlement of shares repurchased in December 2014.

We believe that our cash from operations, existing cash balances and our short-term investments will be sufficient to meet our cash requirements for at least the next twelve months. In the longer term, we believe future cash requirements will continue to be met by our cash from operations, credit arrangements and future debt or equity financings as required.

At March 31, 2015, we held $1.5 million in principal of senior auction-rate notes secured by student loans. Auctions for these auction-rate notes have failed at March 31, 2015. The fair value of these notes, $1.4 million, has been classified as long-term investments at March 31, 2015. The funds associated with failed auctions will not be accessible until a successful auction occurs, a buyer is found outside of the auction process, the issuers redeem the securities or the underlying securities have matured. For additional information regarding our investments, see Note 4 of Notes to the Condensed Consolidated Financial Statements.

At March 31, 2015, we had cash, cash equivalents and short-term investments of $94.1 million, of which $11.4 million was held by our foreign subsidiaries. Some of these available cash, cash equivalents and short-term investments are held in accounts managed by third-party financial institutions and consist of invested cash and cash in our operating accounts. The invested cash is invested in interest bearing funds managed by third-party financial institutions. To date, we have not experienced loss or lack of access to our invested cash or cash equivalents with the exception of investments in auction-rate notes; however, we can provide no assurances that access to our invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

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Recently Issued Accounting Standards

Please refer to Note 2 of Notes to Condensed Consolidated Financial Statements for a discussion of the expected impact of recently issued accounting standards.

Contractual Obligations and Commitments

At March 31, 2015, we had the following contractual obligations and commitments (in thousands):

	Payments Due By Period
	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Operating leases	$	2,033	$	904	$	991	$	138	$	—
Open purchase orders	14,270		14,270		—		—		—
Software licenses purchase obligations	1,183		718		310		155		—
Total	$	17,486	$	15,892	$	1,301	$	293	$	—

Open purchase orders are defined as agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable pricing provisions; and the approximate timing of the transactions.

Borrowing agreements consisted of a $5.0 million unsecured credit facility for general working capital needs, which includes a $5.0 million letter of credit sub-facility including a $2.0 million foreign exchange sub-facility. At March 31, 2015, we had no borrowings under the credit facility. Our borrowing arrangements include a provision for the issuance of commercial or standby letters of credit by the bank on our behalf, which are issued to guarantee payments for our workers compensation program. At March 31, 2015, there was $0.3 million in letters of credit outstanding.

At March 31, 2015, we had $6.2 million of net unrecognized tax benefits consisting of $3.6 million included in long-term income taxes payable and $2.6 million recorded as a reduction to deferred tax assets. We do not anticipate a significant change to the $3.6million long-term uncertain income tax positions within the next twelve months. Due to the high degree of uncertainty regarding the settlement of these liabilities, we are unable to estimate the year in which the future cash flows may occur and therefore have not included them in the above table.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements and have not entered into any transactions involving unconsolidated, limited purpose entities or commodity contracts.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At March 31, 2015, we had $1.5 million in principal of senior auction-rate notes secured by student loans remaining. Auctions for these auction-rate notes have failed at March 31, 2015. The funds associated with failed auctions will not be accessible until a successful auction occurs, a buyer is found outside of the auction process, the issuers redeem the securities, or the issuers repay principal over time from cash flows prior to final maturity or final payments come due according to a remaining contractual maturity of 33 years. As a result, we may have limited or no ability to liquidate our investment and fully recover the carrying value of our investment in the near term. At March 31, 2015, we have recorded less than $0.1 million ($0.1 million pre-tax) temporary impairment of these securities to accumulated other comprehensive loss, a component of shareholders’ equity. If it is determined that the fair value of these securities is other than temporarily impaired, we would record a loss, which could be material, in our statements of income in the period such other-than-temporary decline in fair value is determined. We currently have the ability and intent to hold these investments until a recovery of the auction process occurs or the issuers redeem the securities, or until maturity if neither of those occurs.

At March 31, 2015, we had no fixed-rate long-term debt subject to interest rate risk.

22

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2015 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal controls over financial reporting that occurred during the quarter ended March 31, 2015 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information included in Note 12 of Notes to Condensed Consolidated Financial Statements under the caption “Commitments and Contingencies” in Item 1 of Part I is incorporated herein by reference.

ITEM 1A. RISK FACTORS

This Quarterly Report on Form 10-Q should be read in conjunction with the descriptions of risks associated with our business, financial condition and results of our operations as set forth in Item 1A - Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. There have been no material changes to the risk factors previously disclosed in our Annual report on Form 10-K for the fiscal year ended December 31, 2014.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On August 20, 2014, we announced that our Board of Directors authorized the repurchase of another $25.0 million of our common stock, which increased the total approval for repurchase since February 2010 to $145.0 million. After taking into account repurchases already completed, the total available for repurchase, at March 31, 2015, was $29.0 million.

23

The authorization will stay in effect until the authorized aggregate amount is expended or the authorization is modified by the Board of Directors. The timing and amount of any repurchase of shares is determined by our management, based on our evaluation of market conditions, cash on hand and other factors. Share repurchases are recorded as a reduction of common stock to the extent available. Any amounts in excess of common stock are recorded as a reduction of retained earnings. Repurchases of our common stock during the first quarter of 2015 were as follows:

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program	Maximum Dollar Value of Shares that May Yet be Purchased Under the Program (in thousands)
January 2015	110,400	$	13.94	110,400	$	29,117
February 2015	11,300	14.02		11,300	28,959
March 2015	—	—		—	28,959
Total First Quarter 2015	121,700	13.95		121,700

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No.	Description
31	Certifications of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certifications of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Exchange Act.

24

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			MICREL, INCORPORATED
			(Registrant)
Date:	April 23, 2015	By	/s/ Robert E. DeBarr
			Robert E. DeBarr
			Chief Financial Officer and Vice President of Finance and Human Resources
			(Authorized Officer andPrincipal Financial Officer)

25

EXHIBIT INDEX

Exhibit No.	Description
31	Certifications of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certifications of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Exchange Act.

26

EX-31

EXHIBIT 31

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Raymond D. Zinn, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Micrel, Incorporated;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial control to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 23, 2015	By	/s/ Raymond D. Zinn
			Raymond D. Zinn
			President, Chief Executive Officer and Director
			(Principal Executive Officer)

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert E. DeBarr, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Micrel, Incorporated;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial control to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 23, 2015	By	/s/ Robert E. DeBarr
			Robert E. DeBarr
			Chief Financial Officer and Vice President of Finance and Human Resources
			(Principal Financial and Accounting Officer)

EX-32

EXHIBIT 32

Certification of Chief Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Micrel, Incorporated (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	April 23, 2015	By	/s/ Raymond D. Zinn
			Raymond D. Zinn
			Chief Executive Officer

Certification of Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Micrel, Incorporated (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	April 23, 2015	By	/s/ Robert E. DeBarr
			Robert E. DeBarr
			Chief Financial Officer

XML

Major Customers

3 Months Ended

Mar. 31, 2015

Risks and Uncertainties [Abstract]

MAJOR CUSTOMERS

MAJOR CUSTOMERS

During the three months ended March 31, 2015, distributors A and B accounted for 24% and 19% of total net revenues, respectively. During the three months ended March 31, 2014, distributors A and B accounted for 28% and 23% of total net revenues, respectively. These distributors sell Micrel's products to many customers across various end markets.

At March 31, 2015, distributors A, C and B accounted for 26%, 16%, and 14% respectively, of total accounts receivable. At December 31, 2014, distributors A, C and B accounted for 24%, 15% and 13%, respectively, of total accounts receivable.

XML

Segment Reporting (Details)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Segment Reporting Information [Line Items]
Segment Revenue by Percent	100.00%	100.00%
Linear and Power [Member]
Segment Reporting Information [Line Items]
Segment Revenue by Percent	53.00%	55.00%
Timing and Communications [Member]
Segment Reporting Information [Line Items]
Segment Revenue by Percent	24.00%	22.00%
LAN [Member]
Segment Reporting Information [Line Items]
Segment Revenue by Percent	21.00%	20.00%
Foundry [Member]
Segment Reporting Information [Line Items]
Segment Revenue by Percent	2.00%	3.00%

XML

Condensed Consolidated Statements of Income (Unaudited) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Income Statement [Abstract]
NET REVENUES	$ 57,955,000		$ 59,857,000
COST OF REVENUES	28,606,000	[1]	28,638,000	[1]
GROSS PROFIT	29,349,000		31,219,000
OPERATING EXPENSES:
Research and development	13,964,000	[1]	15,481,000	[1]
Selling, general and administrative	11,375,000	[1]	12,436,000	[1]
Total operating expenses	25,339,000		27,917,000
INCOME FROM OPERATIONS	4,010,000		3,302,000
INTEREST AND OTHER INCOME (EXPENSE) :
Interest income	83,000		103,000
Other expense, net	(71,000)		(72,000)
Total interest and other income, net	12,000		31,000
INCOME BEFORE PROVISION FOR INCOME TAXES	4,022,000		3,333,000
PROVISION FOR INCOME TAXES	1,300,000		1,044,000
NET INCOME	$ 2,722,000		$ 2,289,000
NET INCOME PER SHARE:
Basic (Per Share)	$ 0.05		$ 0.04
Diluted (Per Share)	$ 0.05		$ 0.04
WEIGHTED AVERAGE SHARES USED IN COMPUTING PER SHARE AMOUNTS:
Basic (Shares)	56,617		56,388
Diluted (Shares)	58,282		57,208
CASH DIVIDENDS DECLARED PER COMMON SHARE	$ 0.05		$ 0.05

[1] Share-based compensation expense included in:Cost of revenues$274 $234Research and development861 690Selling, general and administrative982 798

XML

Share-Based Compensation

3 Months Ended

Mar. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

Share-based compensation expense is measured at the grant date based on the fair value of the award and is recognized over the employee’s requisite service period. The following table summarizes total share-based compensation expense included in the Condensed Consolidated Statements of Income (in thousands):

	Three Months Ended
	March 31,
	2015			2014
Cost of revenues	$	274		$	234
Research and development	861			690
Selling, general and administrative	982			798
Pre-tax share-based compensation expense	2,117			1,722
Less income tax effect	(741		)	(549		)
Net share-based compensation expense	$	1,376		$	1,173

During the three months ended March 31, 2015 and 2014, the Company granted 0.4 million and 0.2 million stock options, respectively, at weighted average fair values of $4.04 and $2.79 per share, respectively. The fair value of the Company’s stock options granted under the Company’s option plans was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Three Months Ended
	March 31,
	2015		2014
Expected term (years)	6.1		6.1
Stock volatility	30.1	%	31.0	%
Risk-free interest rate	1.6	%	2.1	%
Dividends during expected term	1.3	%	1.8	%

The Company also grants RSUs to its employees. In the three months ended March 31, 2015 and 2014, the Company granted 0.4 million and 0.2 million RSUs, respectively, at weighted average fair values of $14.39 and $9.81 per share, respectively.

At March 31, 2015, there was $5.1 million of total unrecognized share-based compensation expense related to non-vested stock option awards and $14.5 million related to non-vested RSUs, which are expected to be recognized over a weighted-average period of 2.7 and 3.1 years, respectively. Total share-based compensation expense capitalized as part of inventory at both March 31, 2015 and December 31, 2014 was $0.2 million.

XML

Subsequent Events

3 Months Ended

Mar. 31, 2015

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

On April 21, 2015, the Company’s Board of Directors declared a cash dividend of $0.05 per outstanding share of common stock payable on May 21, 2015 to shareholders of record at the close of business on May 7, 2015. This dividend will be recorded in the second quarter of 2015 and is expected to be approximately $2.8 million.

XML

Income Taxes (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Income tax provision as percentage of income before taxes	32.30%	31.30%
Unrecognized tax benefits for uncertain tax positions	$ 7,900,000
Net amount, unrecognized tax benefits for uncertain tax positions reduced for the federal effects of potential state tax exposures	6,200,000
Increase in deferred tax assets, uncertain tax positions	2,600,000
Liability for uncertain tax positions in long term taxes payable	3,592,000		3,511,000
Interest and penalties related to income tax	300,000		300,000
Current deferred tax assets, net	23,500,000
Deferred tax valuation allowance	12,700,000		12,200,000
State and Local Jurisdiction [Member]
Deferred Tax Assets, Tax Credit Carryforwards, Research	$ 22,900,000

XML

Segment Reporting

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

SEGMENT REPORTING

SEGMENT REPORTING

The Company currently operates in one segment: the design, manufacturing, marketing and sale of semiconductor products.

The Company generates revenue from four product groups:  Linear and Power; Timing and Communications; LAN; and Foundry.  The following table sets forth the net revenues attributable to our four product groups as a percentage of total net revenues:

	Three Months Ended
Net Revenues by Product Group	March 31,
	2015		2014
Net Revenues:
Linear and Power	53	%	55	%
Timing and Communications	24		22
LAN	21		20
Foundry	2		3
Total net revenues	100	%	100	%

The Company recorded revenue from customers throughout the United States, Canada and Mexico (collectively referred to as “North America”); the United Kingdom, Italy, Germany, France, Israel, Sweden, Hungary, Austria, Finland, Switzerland and other European countries (collectively referred to as “Europe”); Korea, Taiwan, Singapore, China, Japan, Hong Kong, Malaysia and other Asian countries (collectively referred to as “Asia”). Revenues by major geographic area are based on the geographic location of the original equipment manufacturers (“OEMs”) or the distributors who have purchased the Company's products. The geographic locations of the Company's distributors may be different from the geographic locations of the end customers.

The following table sets forth the net revenues by geographic region as a percentage of total net revenues, for the periods presented:

	Three Months Ended
Net Revenues by Geographic Region	March 31,
	2015		2014
Net Revenues:
North America	23	%	27	%
Asia	62	%	57	%
Europe	15	%	16	%
Total net revenues	100	%	100	%

XML

Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	$ 13,153	$ 13,153
Accumulated Amortization	(3,729)	(3,361)
Net Carrying Amount	9,424	9,792
Developed and core technology [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	7,443	7,443
Accumulated Amortization	(2,017)	(1,810)
Net Carrying Amount	5,426	5,633
Customer relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	3,800	3,800
Accumulated Amortization	(1,322)	(1,181)
Net Carrying Amount	2,478	2,619
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	610	610
Accumulated Amortization	(390)	(370)
Net Carrying Amount	220	240
In-process research and development [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	1,300	1,300
Accumulated Amortization	0	0
Net Carrying Amount	$ 1,300	$ 1,300

XML

Dividends (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Dividends, Common Stock [Abstract]
Board of Directors declared a cash dividend per share of common stock	$ 0.05
Payments of Ordinary Dividends, Common Stock	$ 2,826	$ 2,814

XML

Share-Based Compensation (Details Textual) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Share-Based Compensation (Textual) [Abstract]
Stock options granted	0.4	0.2
Weighted average fair value of options granted	$ 4.04	$ 2.79
Unrecognized share-based compensation related to non-vested stock option awards	$ 5.1
Weighted-average period for unrecognized share-based compensation	2 years 8 months 0 days
Total share-based compensation capitalized as part of inventory	0.2		0.2
Restricted Stock Units (RSUs) [Member]
Share-Based Compensation (Textual) [Abstract]
Stock options granted	0.4	0.2
Weighted average fair values of restricted stock units granted	$ 14.39	$ 9.81
Unrecognized share-based compensation related to non-vested stock option awards	$ 14.5
Weighted-average period for unrecognized share-based compensation	3 years 1 month 0 days

XML

Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based compensation expense

The following table summarizes total share-based compensation expense included in the Condensed Consolidated Statements of Income (in thousands):

	Three Months Ended
	March 31,
	2015			2014
Cost of revenues	$	274		$	234
Research and development	861			690
Selling, general and administrative	982			798
Pre-tax share-based compensation expense	2,117			1,722
Less income tax effect	(741		)	(549		)
Net share-based compensation expense	$	1,376		$	1,173

Stock options granted under the Company's option plans

The fair value of the Company’s stock options granted under the Company’s option plans was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Three Months Ended
	March 31,
	2015		2014
Expected term (years)	6.1		6.1
Stock volatility	30.1	%	31.0	%
Risk-free interest rate	1.6	%	2.1	%
Dividends during expected term	1.3	%	1.8	%

XML

Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Reconciliation of weighted-average shares used in computing net income per share

Reconciliation of weighted-average shares used in computing basic and diluted net income per share is as follows (in thousands):

	Three Months Ended
	March 31,
	2015	2014
Shares used in computing basic net income per share	56,617	56,388
Dilutive effect of stock options and restricted stock units	1,665	820
Shares used in computing diluted net income per share	58,282	57,208

XML

Property, Plant and Equipment (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Property, Plant and Equipment (Textual) [Abstract]
Depreciation	$ 2.8	$ 2.7

XML

Restructuring (Tables)

3 Months Ended

Mar. 31, 2015

Restructuring and Related Activities [Abstract]

Restructuring and Related Costs

The following table summarizes the activity related to the accrual for restructuring charges for the three months ended March 31, 2015 by event (in thousands):

	Plan Initiated in Q4'13			Plan Initiated in Q3'14			Plan Initiated in Q4'14			Total
Balance at December 31, 2014	$	20		$	71		$	269		$	360
Payments	(20		)	(38		)	(261		)	(319		)
Balance at March 31, 2015	$	—		$	33		$	8		$	41

XML

Investments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Short Term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 65,727	$ 65,493
Gross Unrealized Gains	9	11
Gross Unrealized Losses	(39)	(76)
Fair Value	65,697	65,428
Short Term Investments [Member] | Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	49,116	43,327
Gross Unrealized Gains	3	3
Gross Unrealized Losses	(37)	(68)
Fair Value	49,082	43,262
Short Term Investments [Member] | Commercial Paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	9,480	14,975
Gross Unrealized Gains	3	5
Gross Unrealized Losses	(2)	(3)
Fair Value	9,481	14,977
Short Term Investments [Member] | Municipal Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	5,131	5,191
Gross Unrealized Gains	1	3
Gross Unrealized Losses	0	0
Fair Value	5,132	5,194
Short Term Investments [Member] | US Government Agencies Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	2,000	2,000
Gross Unrealized Gains	2	0
Gross Unrealized Losses	0	(5)
Fair Value	2,002	1,995
Long Term Investments [Member] | Auction Rate Notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost	1,500	1,500
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(64)	(64)
Fair Value	$ 1,436	$ 1,436

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Intangible Assets (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
2015 (remaining nine months)	$ 1,168
2016	1,510
2017	1,281
2018	1,223
2019	1,140
Thereafter	3,102
Net Carrying Amount	$ 9,424	$ 9,792

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets

The following table sets forth the components of intangible assets as follows (in thousands):

	March 31, 2015							December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Net  Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net  Carrying Amount
Developed and core technology	$	7,443	$	(2,017	)	$	5,426	$	7,443	$	(1,810	)	$	5,633
Customer relationships	3,800		(1,322		)	2,478		3,800		(1,181		)	2,619
Trademarks	610		(390		)	220		610		(370		)	240
In-process research and development	1,300		—			1,300		1,300		—			1,300
	$	13,153	$	(3,729	)	$	9,424	$	13,153	$	(3,361	)	$	9,792

Schedule of future amortization expenses

The estimated future amortization expense of intangible assets at March 31, 2015 was as follows (in thousands):

Year Ending December 31,
2015 (remaining nine months)	$	1,168
2016	1,510
2017	1,281
2018	1,223
2019	1,140
Thereafter	3,102
	$	9,424

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Investments (Details 2) (Fair Value Measurements Using Significant Unobservable Inputs (Level 3) [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) [Member]
Schedule of changes in Level 3 securities
Beginning balance	$ 1,436
Transfers in and/or out of Level 3	0
Sales	0
Ending balance	$ 1,436

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Interim Financial Information

Interim Financial Information - The accompanying condensed consolidated financial statements of Micrel, Incorporated and its wholly-owned subsidiaries (together “Micrel” or the “Company”) as of March 31, 2015 and for the three months ended March 31, 2015 and 2014 are unaudited. In the opinion of management, the condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair statement of its financial position, operating results, comprehensive income and cash flows for the interim periods presented. Operating results and cash flows for interim periods are not necessarily indicative of results for the entire year. The Condensed Consolidated Balance Sheet as of December 31, 2014 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles (“GAAP”) in the United States of America. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. These financial statements should also be read in conjunction with the Company’s critical accounting policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014

Net Income Per Common and Equivalent Share

Net Income Per Share- Basic net income per share is computed by dividing net income by the number of weighted-average common shares outstanding. Diluted net income per share reflects potential dilution from outstanding stock options and restricted stock units (“RSUs”) using the treasury stock method. Reconciliation of weighted-average shares used in computing basic and diluted net income per share is as follows (in thousands):

	Three Months Ended
	March 31,
	2015	2014
Shares used in computing basic net income per share	56,617	56,388
Dilutive effect of stock options and restricted stock units	1,665	820
Shares used in computing diluted net income per share	58,282	57,208

For the three months ended March 31, 2015 and 2014, 0.3 million and 4.7 million shares underlying stock options, respectively, have been excluded from the weighted-average number of common shares outstanding for the diluted net income per share computations as they were anti-dilutive.

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Statement of Comprehensive Income [Abstract]
NET INCOME	$ 2,722	$ 2,289
Other comprehensive income:
Unrealized gains on investments	35	122
Income tax provision	(13)	(42)
Other comprehensive income, net of taxes	22	80
COMPREHENSIVE INCOME	$ 2,744	$ 2,369

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Information - The accompanying condensed consolidated financial statements of Micrel, Incorporated and its wholly-owned subsidiaries (together “Micrel” or the “Company”) as of March 31, 2015 and for the three months ended March 31, 2015 and 2014 are unaudited. In the opinion of management, the condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair statement of its financial position, operating results, comprehensive income and cash flows for the interim periods presented. Operating results and cash flows for interim periods are not necessarily indicative of results for the entire year. The Condensed Consolidated Balance Sheet as of December 31, 2014 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles (“GAAP”) in the United States of America. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. These financial statements should also be read in conjunction with the Company’s critical accounting policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Net Income Per Share- Basic net income per share is computed by dividing net income by the number of weighted-average common shares outstanding. Diluted net income per share reflects potential dilution from outstanding stock options and restricted stock units (“RSUs”) using the treasury stock method. Reconciliation of weighted-average shares used in computing basic and diluted net income per share is as follows (in thousands):

	Three Months Ended
	March 31,
	2015	2014
Shares used in computing basic net income per share	56,617	56,388
Dilutive effect of stock options and restricted stock units	1,665	820
Shares used in computing diluted net income per share	58,282	57,208

For the three months ended March 31, 2015 and 2014, 0.3 million and 4.7 million shares underlying stock options, respectively, have been excluded from the weighted-average number of common shares outstanding for the diluted net income per share computations as they were anti-dilutive.

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Investments

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

INVESTMENTS

INVESTMENTS

Investments purchased with a remaining maturity of less than three months are classified as cash equivalents. Investments are classified either as short-term or as long-term based on the timing of their maturities and the Company’s ability and intent with regard to those securities (expectations of sales and redemptions). Short-term investments at March 31, 2015 consisted primarily of liquid corporate debt securities, commercial paper, municipal securities and U.S. government agencies securities with maturities ranging from less than one month to less than two years and were classified as available-for-sale securities. Long-term investments at March 31, 2015 consisted of auction-rate notes secured by student loans and were classified as available-for-sale securities. Available-for-sale securities are stated at fair value with unrealized gains and losses included in accumulated other comprehensive loss, a component of shareholders' equity. Unrealized losses are charged against income when a decline in the fair market value of an individual security is determined to be other than temporary. Realized gains and losses on investments are included in other income or expense.

A summary of the Company’s short-term investments at March 31, 2015 and December 31, 2014 was as follows (in thousands):

	March 31, 2015									December 31, 2014
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate Debt Securities	$	49,116	$	3	$	(37	)	$	49,082	$	43,327	$	3	$	(68	)	$	43,262
Commercial Paper	9,480		3		(2		)	9,481		14,975		5		(3		)	14,977
Municipal Securities	5,131		1		—			5,132		5,191		3		—			5,194
U.S. Government Agencies Securities	2,000		2		—			2,002		2,000		—		(5		)	1,995
Total	$	65,727	$	9	$	(39	)	$	65,697	$	65,493	$	11	$	(76	)	$	65,428

At March 31, 2015, the Company had no short-term investments that have been in a significant continuous unrealized loss position for more than twelve months.

A summary of the Company’s long-term investments at March 31, 2015 and December 31, 2014 was as follows (in thousands):

	March 31, 2015									December 31, 2014
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Auction-rate Notes	$	1,500	$	—	$	(64	)	$	1,436	$	1,500	$	—	$	(64	)	$	1,436

At March 31, 2015, the Company had $1.5 million of auction-rate notes. Auction-rate notes are securities that are structured with short-term interest rate reset dates of generally less than ninety days, but with contractual maturities that can be in excess of ten years. At the end of each reset period, which occurs every seven days for the securities held by the Company, investors can sell or continue to hold the securities at par. As a result of sell orders exceeding buy orders, auctions for the student loan-backed notes held by the Company have failed at March 31, 2015. To date the Company has collected all interest receivable on all of its auction-rate notes when due and expects to continue to do so in the future. The principal associated with failed auctions will not be accessible until a successful auction occurs, a buyer is found outside of the auction process, the issuers redeem the securities, the issuers repay principal over time from cash flows prior to final maturity or final payments come due according to a remaining contractual maturity of 33 years. The Company has classified all auction-rate notes as long-term investments at March 31, 2015 and December 31, 2014. In the event of a failed auction, the notes bear interest at a predetermined maximum rate based on the credit rating of notes as determined by one or more nationally recognized statistical rating organizations. For the auction-rate notes held by the Company at March 31, 2015, the maximum interest rate is generally one month LIBOR plus 1.5% based on the notes' rating as of that date.

To determine the fair value of financial instruments, the Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are described below:

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s short-term investments are classified within Level 2 of the fair value hierarchy because they are valued using quoted market prices for similar securities, broker or dealer quotations, or other observable inputs.

The types of instruments valued based on unobservable inputs consist of the auction-rate notes held by the Company. Such instruments are classified within Level 3 of the fair value hierarchy. The Company estimated the fair value of these auction-rate notes using a combination of observable transactions for similar securities and a discounted cash flow model incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions include estimates for interest rates, timing and amount of cash flows and expected holding periods of the auction-rate notes. Based on this assessment of fair value, at March 31, 2015, the Company determined there was a cumulative decline in the fair value of its auction-rate notes and recorded less than $0.1 million ($0.1 million pre-tax) temporary impairment of these notes to accumulated other comprehensive income, a component of shareholders’ equity.

Financial assets measured at fair value on a recurring basis at March 31, 2015 were as follows (in thousands):

	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Money Market Funds (1)	$	9,704	$	—	$	—	$	9,704
Corporate Debt Securities (2)	—		49,082		—		49,082
Commercial Paper (2)	—		9,481		—		9,481
Municipal Securities (2)	—		5,132		—		5,132
U.S. Government Agencies Securities (2)	—		2,002		—		2,002
Auction-rate Notes (3)	—		—		1,436		1,436
Total	$	9,704	$	65,697	$	1,436	$	76,837

Financial assets measured at fair value on a recurring basis at December 31, 2014 were as follows (in thousands):

	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Money Market Funds (1)	$	4,725	$	—	$	—	$	4,725
Corporate Debt Securities (2)	—		43,262		—		43,262
Commercial Paper (2)	—		14,977		—		14,977
Municipal Securities (2)	—		5,194		—		5,194
U.S. Government Agencies Securities (2)	—		1,995		—		1,995
Auction-rate Notes (3)	—		—		1,436		1,436
Total	$	4,725	$	65,428	$	1,436	$	71,589

__________

(1) Included in cash and cash equivalents

(2) Included in short-term investments

(3) Included in long-term investments

There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy.

For the three months ended March 31, 2015, the changes in the Company’s Level 3 securities (consisting of auction-rate notes) were as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Beginning balance, December 31, 2014	$	1,436
Transfers in and/or out of Level 3	—
Total unrealized gains, before tax, included in other comprehensive income	—
Sales	—
Ending balance, March 31, 2015	$	1,436

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Recently Issued Accounting Standards

3 Months Ended

Mar. 31, 2015

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

RECENTLY ISSUED ACCOUNTING STANDARDS

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update to change the requirements for reporting discontinued operations. This guidance modifies the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity's operations and financial results. The guidance requires expanded disclosures for discontinued operations for the assets, liabilities, revenues, and expenses of discontinued operations, and also requires an entity to disclose the pretax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting. This accounting standards update became effective for the Company beginning in the first quarter of 2015 and its adoption did not have an impact on the Company's consolidated financial statements.

In May 2014, the FASB issued an accounting standards update on the recognition of revenue from contracts with customers. The guidance modifies the financial reporting of revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires enhanced disclosures for the nature, amount, timing, and uncertainty of revenue that is recognized. In April 2015, the FASB proposed to defer the effective date of this standard. Under the proposal, the Company is required to adopt this standard for its interim and annual periods beginning after December 15, 2017. Early adoption is permitted for interim and annual periods beginning after December 15, 2016. The guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

In June 2014, the FASB issued an accounting standards update on the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The Company is required to adopt this standard for its interim and annual periods beginning after December 15, 2015. Early adoption is permitted. The guidance may be applied on a prospective or retrospective basis. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

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Investments (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014
Schedule of financial assets measured at fair value on a recurring basis
Total	$ 76,837		$ 71,589
Corporate Debt Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	49,082	[1]	43,262	[1]
Commercial Paper [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	9,481	[1]	14,977	[1]
Auction rate notes [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	1,436	[2]	1,436	[2]
Money Market Funds [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	9,704	[3]	4,725	[3]
Municipal Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	5,132	[1]	5,194	[1]
US Government Agencies Debt Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	2,002	[1]	1,995	[1]
Quoted Prices in Active Markets for Identical Assets Level 1 [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	9,704		4,725
Quoted Prices in Active Markets for Identical Assets Level 1 [Member] | Corporate Debt Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[1]	0	[1]
Quoted Prices in Active Markets for Identical Assets Level 1 [Member] | Commercial Paper [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[1]	0	[1]
Quoted Prices in Active Markets for Identical Assets Level 1 [Member] | Auction rate notes [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[2]	0	[2]
Quoted Prices in Active Markets for Identical Assets Level 1 [Member] | Money Market Funds [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	9,704	[3]	4,725	[3]
Quoted Prices in Active Markets for Identical Assets Level 1 [Member] | Municipal Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[1]	0	[1]
Quoted Prices in Active Markets for Identical Assets Level 1 [Member] | US Government Agencies Debt Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[1]	0	[1]
Significant Other Observable Inputs Level 2 [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	65,697		65,428
Significant Other Observable Inputs Level 2 [Member] | Corporate Debt Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	49,082	[1]	43,262	[1]
Significant Other Observable Inputs Level 2 [Member] | Commercial Paper [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	9,481	[1]	14,977	[1]
Significant Other Observable Inputs Level 2 [Member] | Auction rate notes [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[2]	0	[2]
Significant Other Observable Inputs Level 2 [Member] | Money Market Funds [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[3]	0	[3]
Significant Other Observable Inputs Level 2 [Member] | Municipal Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	5,132	[1]	5,194	[1]
Significant Other Observable Inputs Level 2 [Member] | US Government Agencies Debt Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	2,002		1,995	[1]
Significant Unobservable Inputs Level 3 [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	1,436		1,436
Significant Unobservable Inputs Level 3 [Member] | Corporate Debt Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[1]	0	[1]
Significant Unobservable Inputs Level 3 [Member] | Commercial Paper [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[1]	0	[1]
Significant Unobservable Inputs Level 3 [Member] | Auction rate notes [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	1,436	[2]	1,436	[2]
Significant Unobservable Inputs Level 3 [Member] | Money Market Funds [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[3]	0	[3]
Significant Unobservable Inputs Level 3 [Member] | Municipal Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	0	[1]	0	[1]
Significant Unobservable Inputs Level 3 [Member] | US Government Agencies Debt Securities [Member]
Schedule of financial assets measured at fair value on a recurring basis
Total	$ 0	[1]	$ 0	[1]

[1] Included in short-term investments

[2] Included in long-term investments

[3] Included in cash and cash equivalents

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Investments (Tables)

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Summary of short-term investments

A summary of the Company’s short-term investments at March 31, 2015 and December 31, 2014 was as follows (in thousands):

	March 31, 2015									December 31, 2014
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate Debt Securities	$	49,116	$	3	$	(37	)	$	49,082	$	43,327	$	3	$	(68	)	$	43,262
Commercial Paper	9,480		3		(2		)	9,481		14,975		5		(3		)	14,977
Municipal Securities	5,131		1		—			5,132		5,191		3		—			5,194
U.S. Government Agencies Securities	2,000		2		—			2,002		2,000		—		(5		)	1,995
Total	$	65,727	$	9	$	(39	)	$	65,697	$	65,493	$	11	$	(76	)	$	65,428

Summary of long-term investments

A summary of the Company’s long-term investments at March 31, 2015 and December 31, 2014 was as follows (in thousands):

	March 31, 2015									December 31, 2014
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Auction-rate Notes	$	1,500	$	—	$	(64	)	$	1,436	$	1,500	$	—	$	(64	)	$	1,436

Schedule of financial assets measured at fair value on a recurring basis

Financial assets measured at fair value on a recurring basis at March 31, 2015 were as follows (in thousands):

	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Money Market Funds (1)	$	9,704	$	—	$	—	$	9,704
Corporate Debt Securities (2)	—		49,082		—		49,082
Commercial Paper (2)	—		9,481		—		9,481
Municipal Securities (2)	—		5,132		—		5,132
U.S. Government Agencies Securities (2)	—		2,002		—		2,002
Auction-rate Notes (3)	—		—		1,436		1,436
Total	$	9,704	$	65,697	$	1,436	$	76,837

Financial assets measured at fair value on a recurring basis at December 31, 2014 were as follows (in thousands):

	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Money Market Funds (1)	$	4,725	$	—	$	—	$	4,725
Corporate Debt Securities (2)	—		43,262		—		43,262
Commercial Paper (2)	—		14,977		—		14,977
Municipal Securities (2)	—		5,194		—		5,194
U.S. Government Agencies Securities (2)	—		1,995		—		1,995
Auction-rate Notes (3)	—		—		1,436		1,436
Total	$	4,725	$	65,428	$	1,436	$	71,589

Schedule of changes in Level 3 securities

For the three months ended March 31, 2015, the changes in the Company’s Level 3 securities (consisting of auction-rate notes) were as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Beginning balance, December 31, 2014	$	1,436
Transfers in and/or out of Level 3	—
Total unrealized gains, before tax, included in other comprehensive income	—
Sales	—
Ending balance, March 31, 2015	$	1,436

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Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2015

Accrued Liabilities, Current [Abstract]

Schedule of accrued liabilities

Accrued liabilities consisted of the following (in thousands):

	March 31, 2015		December 31, 2014
Accrued compensation	$	6,596	$	7,050
Accrued commissions	1,469		1,605
Accrued restructuring	41		360
Other accrued liabilities	3,938		3,854
Total accrued liabilities	$	12,044	$	12,869

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Share-Based Compensation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Share-based compensation expense
Share-based compensation expense	$ 2,117	$ 1,722
Less income tax effect	(741)	(549)
Net share-based compensation expense	1,376	1,173
Cost of revenues [Member]
Share-based compensation expense
Share-based compensation expense	274	234
Research and development [Member]
Share-based compensation expense
Share-based compensation expense	861	690
Selling, general and administrative [Member]
Share-based compensation expense
Share-based compensation expense	$ 982	$ 798

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Share Repurchase Program (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended	3 Months Ended
	Aug. 20, 2014	Mar. 31, 2015	Dec. 31, 2014
Share Repurchase Program [Abstract]
Stock Repurchase Program, Additional Authorized Amount	$ 25.0
Share Repurchase Program, Authorized Amount		145.0
Remaining Authorized Repurchase Amount		29.0
Stock Repurchased During Period, Shares		0.1
Stock Repurchased During Period, Value		1.7
Share Repurchases Pending Cash Settlement Amount			$ 0.2

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Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Schedule of accrued liabilities
Accrued compensation	$ 6,596	$ 7,050
Accrued commissions	1,469	1,605
Accrued restructuring	41	360
Other accrued liabilities	3,938	3,854
Total accrued liabilities	$ 12,044	$ 12,869

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Property, Plant and Equipment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Property, plant and equipment
Property, plant and equipment, Gross	$ 265,316	$ 264,541
Accumulated depreciation	(206,766)	(204,088)
Total property, plant and equipment, net	58,550	60,453
Machinery and Equipment [Member]
Property, plant and equipment
Property, Plant and Equipment, Useful Life	5 years
Property, plant and equipment, Gross	190,006	189,335
Land [Member]
Property, plant and equipment
Property, Plant and Equipment, Useful Life	0 years
Property, plant and equipment, Gross	8,101	8,101
Buildings and Improvements [Member]
Property, plant and equipment
Property, plant and equipment, Gross	54,517	54,483
Computer Equipment and Software [Member]
Property, plant and equipment
Property, Plant and Equipment, Useful Life	3 years
Property, plant and equipment, Gross	11,158	11,094
Office Furniture and Fixtures [Member]
Property, plant and equipment
Property, Plant and Equipment, Useful Life	5 years
Property, plant and equipment, Gross	$ 1,534	$ 1,528
Minimum [Member] | Buildings and Improvements [Member]
Property, plant and equipment
Property, Plant and Equipment, Useful Life	10 years
Maximum [Member] | Buildings and Improvements [Member]
Property, plant and equipment
Property, Plant and Equipment, Useful Life	30 years

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Allowances for accounts receivable	$ 1,084	$ 1,058
Preferred stock, par value
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	56,865,368	56,435,555
Common stock, shares outstanding	56,865,368	56,435,555

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Intangible Assets

3 Months Ended

Mar. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

INTANGIBLE ASSETS

The Company reviews its purchased intangible assets with finite lives for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability of these intangible assets is assessed based on the estimated undiscounted future cash flows expected to result from the use of the asset. If the undiscounted future cash flows are less than the carrying amount, the purchased intangible assets with finite lives are considered to be impaired. The amount of the impairment is measured as the difference between the carrying amount of these assets and their fair value.

The Company's business acquisitions have included the purchase of in-process research and development assets that are not amortizable until the underlying project is complete. The Company assesses that its in-process research and development project is complete when all material research and development costs have been incurred and no significant risks remain. The Company reviews the carrying value of indefinite-lived intangible assets for impairment at least annually during the last quarter of its fiscal year, or more frequently if it believes indicators of impairment exist.

The following table sets forth the components of intangible assets as follows (in thousands):

	March 31, 2015							December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Net  Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net  Carrying Amount
Developed and core technology	$	7,443	$	(2,017	)	$	5,426	$	7,443	$	(1,810	)	$	5,633
Customer relationships	3,800		(1,322		)	2,478		3,800		(1,181		)	2,619
Trademarks	610		(390		)	220		610		(370		)	240
In-process research and development	1,300		—			1,300		1,300		—			1,300
	$	13,153	$	(3,729	)	$	9,424	$	13,153	$	(3,361	)	$	9,792

The above intangible assets acquired in connection with the Discera acquisition in 2013 in the amount of $2.7 million, the PhaseLink acquisition in 2012 in the amount of $8.3 million and other acquired intangible assets in the amount of $2.1 million are amortized over their estimated useful lives ranging from one to ten years using the straight-line method. Total intangible amortization expense for the three months ended March 31, 2015 and 2014 was $0.4 million and $0.5 million, respectively. The Company expects to complete the acquired in-process development projects for Phaselink and Discera in the remainder of 2015 and begin amortizing the related developed technology intangible assets prior to the end of 2015.

The estimated future amortization expense of intangible assets at March 31, 2015 was as follows (in thousands):

Year Ending December 31,
2015 (remaining nine months)	$	1,168
2016	1,510
2017	1,281
2018	1,223
2019	1,140
Thereafter	3,102
	$	9,424

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Condensed Consolidated Statements of Income (Parenthetical) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Share-based compensation expense included in:
Cost of revenues	$ 28,606	[1]	$ 28,638	[1]
Research and development	13,964	[1]	15,481	[1]
Selling, general and administrative	11,375	[1]	12,436	[1]
Share-Based Compensation Expense
Share-based compensation expense included in:
Cost of revenues	274		234
Research and development	861		690
Selling, general and administrative	$ 982		$ 798

[1] Share-based compensation expense included in:Cost of revenues$274 $234Research and development861 690Selling, general and administrative982 798

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Restructuring (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Dec. 31, 2013
Restructuring Reserve [Roll Forward]
Beginning Balance	$ 360,000
Restructuring Charges		500,000	500,000	1,400,000
Payments for Restructuring	(319,000)
Ending Balance	41,000	360,000
Q42013 [Member]
Restructuring Reserve [Roll Forward]
Beginning Balance	20,000
Payments for Restructuring	(20,000)
Ending Balance	0
Q32014 [Member]
Restructuring Reserve [Roll Forward]
Beginning Balance	71,000
Payments for Restructuring	(38,000)
Ending Balance	33,000
Q42014 [Member]
Restructuring Reserve [Roll Forward]
Beginning Balance	269,000
Payments for Restructuring	(261,000)
Ending Balance	$ 8,000

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
CURRENT ASSETS:
Cash and cash equivalents	$ 28,371	$ 21,183
Restricted cash	45	44
Short-term investments	65,697	65,428
Accounts receivable, less allowances: 2015, $1,084; 2014, $1,058	28,427	30,523
Inventories	41,294	44,136
Prepaid taxes	5,910	5,633
Prepaid expenses and other	2,149	1,612
Deferred income taxes	21,508	22,356
Total current assets	193,401	190,915
LONG-TERM INVESTMENTS	1,436	1,436
PROPERTY, PLANT AND EQUIPMENT, NET	58,550	60,453
LONG-TERM PREPAID TAXES	955	1,711
GOODWILL	8,655	8,655
INTANGIBLE ASSETS, NET	9,424	9,792
DEFERRED INCOME TAXES	2,887	2,707
OTHER ASSETS	1,425	1,511
TOTAL ASSETS	276,733	277,180
CURRENT LIABILITIES:
Accounts payable	12,212	17,376
Accrued liabilities	12,044	12,869
Deferred income on shipments to distributors	23,436	22,947
Total current liabilities	47,692	53,192
LONG-TERM INCOME TAXES PAYABLE	3,592	3,511
LONG-TERM DEFERRED INCOME TAXES	868	807
OTHER LONG-TERM LIABILITIES	160	162
Total liabilities	52,312	57,672
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY:
Preferred stock, no par value - authorized: 5,000,000 shares; issued and outstanding: none	0	0
Common stock, no par value - authorized: 250,000,000 shares; issued and outstanding: 2015 - 56,865,368 shares; 2014 - 56,435,555 shares	4,995	0
Accumulated other comprehensive loss	(61)	(83)
Retained earnings	219,487	219,591
Total shareholders' equity	224,421	219,508
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 276,733	$ 277,180

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Borrowing Arrangements (Details) (USD $)	3 Months Ended
	Mar. 31, 2015
Borrowing Arrangements (Additional Textual) [Abstract]
Line of credit available for general working capital needs	$ 5,000,000
Letter of credit sub-facility	5,000,000
Foreign exchange sub-facility	2,000,000
Line of Credit Facility, Interest Rate Description	Interest rates under the facility are based on one of three interest rates, at the Company’s option: (1) a variable alternate base rate plus 1.0%, the alternate base rate being the greater of (x) Bank of the West’s prime rate, (y) the Fed Funds Rate plus 0.5% or (z) daily adjusted one-month LIBOR plus 1.0%; (2) floating one-month LIBOR plus 2.0% or (3) fixed LIBOR for one, two, three or six month periods, plus 2.0%.
Amount outstanding on the line of credit	0
Letter of Credit [Member]
Borrowing Arrangements (Additional Textual) [Abstract]
Letters of credit, outstanding	$ 300,000

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Inventories (Tables)

3 Months Ended

Mar. 31, 2015

Inventory Disclosure [Abstract]

Inventories

Inventories consisted of the following (in thousands):

	March 31, 2015		December 31, 2014
Finished goods	$	13,733	$	15,395
Work in process	26,397		27,500
Raw materials	1,164		1,241
Total inventories	$	41,294	$	44,136

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Restructuring

3 Months Ended

Mar. 31, 2015

Restructuring and Related Activities [Abstract]

RESTRUCTURING CHARGES

RESTRUCTURING CHARGES

In 2014, the Company continued its efforts to reduce operating expenses. Therefore, in the third quarter of 2014, the Company recorded restructuring charges of $0.5 million related to workforce reductions and facility closure. In the fourth quarter of 2014, the Company recorded restructuring charges of $0.5 million related to workforce reductions.

In the fourth quarter of 2013, the Company recorded restructuring charges of $1.4 million related to workforce reductions.

The Company paid $0.3 million related to severance costs for the three months ended March 31, 2015. The following table summarizes the activity related to the accrual for restructuring charges for the three months ended March 31, 2015 by event (in thousands):

	Plan Initiated in Q4'13			Plan Initiated in Q3'14			Plan Initiated in Q4'14			Total
Balance at December 31, 2014	$	20		$	71		$	269		$	360
Payments	(20		)	(38		)	(261		)	(319		)
Balance at March 31, 2015	$	—		$	33		$	8		$	41

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Inventories
Inventory, Finished Goods, Net of Reserves	$ 13,733	$ 15,395
Inventory, Work in Process, Net of Reserves	26,397	27,500
Inventory, Raw Materials, Net of Reserves	1,164	1,241
Total inventories	$ 41,294	$ 44,136

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Segment Reporting Geographic Information (Details)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Revenues from External Customers [Line Items]
Net Revenues by Geographic Region by Percentage	100.00%	100.00%
North America [Member]
Revenues from External Customers [Line Items]
Net Revenues by Geographic Region by Percentage	23.00%	27.00%
Asia [Member]
Revenues from External Customers [Line Items]
Net Revenues by Geographic Region by Percentage	62.00%	57.00%
Europe [Member]
Revenues from External Customers [Line Items]
Net Revenues by Geographic Region by Percentage	15.00%	16.00%

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Share-Based Compensation (Details 1)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Stock options granted under the Company's option plans
Expected term (years)	6 years 1 month 1 day	6 years 1 month 1 day
Stock volatility	30.10%	31.00%
Risk free interest rate	1.60%	2.10%
Dividends during expected term	1.30%	1.80%

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Significant Accounting Policies (Details) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Reconciliation of weighted-average shares used in computing basic and diluted net income per share
Shares used in computing basic net income per share	56,617	56,388
Dilutive effect of stock options and restricted stock units	1,665	820
Shares used in computing diluted net income per share	58,282	57,208

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Significant Accounting Policies (Details Textual) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Significant Accounting Policies (Textual) [Abstract]
Stock options excluded from the weighted-average number of common shares outstanding for the diluted net income per share computations as they were anti-dilutive	0.3	4.7

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Property, Plant and Equipment

3 Months Ended

Mar. 31, 2015

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following (in thousands):

	Life	March 31, 2015			December 31, 2014
Machinery and equipment	5 years	$	190,006		$	189,335
Land	—	8,101			8,101
Buildings and improvements	*	54,517			54,483
Computer equipment and software	3 years	11,158			11,094
Office furniture and fixtures	5 years	1,534			1,528
		265,316			264,541
Accumulated depreciation		(206,766		)	(204,088		)
Total property, plant and equipment, net		$	58,550		$	60,453

__________

* Buildings are depreciated over 10 years to 30 years. Leasehold improvements are depreciated over the shorter of the useful life or respective lease terms.

Depreciation expense for the three months ended March 31, 2015 and 2014 was $2.8 million and $2.7 million, respectively.

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Property, Plant and Equipment (Tables)

3 Months Ended

Mar. 31, 2015

Property, Plant and Equipment [Abstract]

Property, plant and equipment

Property, plant and equipment consisted of the following (in thousands):

	Life	March 31, 2015			December 31, 2014
Machinery and equipment	5 years	$	190,006		$	189,335
Land	—	8,101			8,101
Buildings and improvements	*	54,517			54,483
Computer equipment and software	3 years	11,158			11,094
Office furniture and fixtures	5 years	1,534			1,528
		265,316			264,541
Accumulated depreciation		(206,766		)	(204,088		)
Total property, plant and equipment, net		$	58,550		$	60,453

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Investments (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments, minimum maturity period	1 month
Short -term investments, maximum maturity period	2 years
Short-term interest rate reset dates of auction rate note securities	less than ninety days
Auction rate note securities with contractual maturities	excess of ten years
Reset period for the securities held	seven days
Remaining contractual maturity for final payments coming due	33 years
Auction rate notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Comprehensive income net of tax due to auction rate notes	0.1
Comprehensive income before tax due to auction rate notes	0.1
Maximum interest rate	one month LIBOR plus 1.5%

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Borrowing Arrangements

3 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

BORROWING ARRANGEMENTS

BORROWING ARRANGEMENTS

Under the terms of an unsecured credit facility with Bank of the West that expires on April 30, 2015, the Company has a $5.0 million line of credit available for general working capital needs, which includes a $5.0 million letter of credit sub-facility including a $2.0 million foreign exchange sub-facility. Interest rates under the facility are based on one of three interest rates, at the Company’s option: (1) a variable alternate base rate plus 1.0%, the alternate base rate being the greater of (x) Bank of the West’s prime rate, (y) the Fed Funds Rate plus 0.5% or (z) daily adjusted one-month LIBOR plus 1.0%; (2) floating one-month LIBOR plus 2.0% or (3) fixed LIBOR for one, two, three or six month periods, plus 2.0%. The credit agreement includes certain restrictive covenants and, at March 31, 2015, the Company was in compliance with such covenants. At March 31, 2015, the Company had no borrowings under the line of credit facility.

The Company's borrowing arrangements include a provision for the issuance of commercial or standby letters of credit by the bank on behalf of the Company. The letters of credit are issued to guarantee payments for the Company's workers compensation program. At March 31, 2015, there was $0.3 million in letters of credit outstanding.

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Inventories

3 Months Ended

Mar. 31, 2015

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

Inventories consisted of the following (in thousands):

	March 31, 2015		December 31, 2014
Finished goods	$	13,733	$	15,395
Work in process	26,397		27,500
Raw materials	1,164		1,241
Total inventories	$	41,294	$	44,136

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 2,722	$ 2,289
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,443	3,469
Share-based compensation expense	2,117	1,722
Excess tax benefits from stock-based awards	(760)	(267)
Loss on disposal of assets	20	0
Deferred income taxes	717	(849)
Changes in operating assets and liabilities
Accounts receivable	2,096	(6,497)
Inventories	2,836	1,204
Prepaid taxes	605	1,641
Prepaid expenses and other assets	(710)	12
Accounts payable	(3,060)	1,213
Income taxes payable	81	117
Accrued liabilities and other long-term liabilities	(632)	409
Deferred income on shipments to distributors	489	1,963
Net cash provided by operating activities	9,964	6,426
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(3,255)	(1,321)
Purchases of investments	(17,934)	(17,265)
Proceeds from sales and maturities of investments	17,700	18,778
Net cash provided by (used in) investing activities	(3,489)	192
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock	5,117	2,351
Repurchases of common stock	(1,878)	(3,000)
Payment of cash dividends	(2,826)	(2,814)
Purchase of stock for withholding taxes on vested restricted stock	(460)	(252)
Excess tax benefits from stock-based awards	760	267
Net cash provided by (used in) financing activities	713	(3,448)
NET INCREASE IN CASH AND CASH EQUIVALENTS	7,188	3,170
CASH AND CASH EQUIVALENTS - Beginning of period	21,183	23,787
CASH AND CASH EQUIVALENTS - End of period	$ 28,371	$ 26,957

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Major Customers (Details) (Customer Concentration Risk [Member])	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Sales [Member] | Distributor A [Member]
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	24.00%	28.00%
Sales [Member] | Distributor B [Member]
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	19.00%	23.00%
Accounts Receivable [Member] | Distributor A [Member]
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	26.00%		24.00%
Accounts Receivable [Member] | Distributor B [Member]
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	14.00%		13.00%
Accounts Receivable [Member] | Distributor C [Member]
Revenue, Major Customer [Line Items]
Concentration Risk, Percentage	16.00%		15.00%

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Intangible Assets (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 0.4	$ 0.5
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	1 year
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	10 years
Discera, Inc. [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	2.7
PhaseLink Acquisition [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	8.3
Other Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 2.1

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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2015

Schedule of Segment Revenue by Percent

The following table sets forth the net revenues attributable to our four product groups as a percentage of total net revenues:

	Three Months Ended
Net Revenues by Product Group	March 31,
	2015		2014
Net Revenues:
Linear and Power	53	%	55	%
Timing and Communications	24		22
LAN	21		20
Foundry	2		3
Total net revenues	100	%	100	%

Net Revenues by Geographic Region by Percent

The following table sets forth the net revenues by geographic region as a percentage of total net revenues, for the periods presented:

	Three Months Ended
Net Revenues by Geographic Region	March 31,
	2015		2014
Net Revenues:
North America	23	%	27	%
Asia	62	%	57	%
Europe	15	%	16	%
Total net revenues	100	%	100	%

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Subsequent Events (Details) (Dividend Declared [Member], Subsequent Event [Member], USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2015	Apr. 21, 2015
Dividend Declared [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Board of Directors declared a cash dividend payable per outstanding share of common stock		$ 0.05
Dividends to be paid in second quarter	$ 2.8

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

From time to time, claims have been filed by or have arisen against the Company in its normal course of business. Generally, litigation is subject to inherent uncertainties, and the Company can provide no assurance that it will prevail in any particular lawsuit. Accordingly, litigation could result in substantial costs and diversion of resources and could have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

At March 31, 2015, the Company has not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on the assessment that liabilities are not probable. Further, ranges of possible losses in these matters cannot be reasonably estimated at this time.

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Accrued Liabilities

3 Months Ended

Mar. 31, 2015

Accrued Liabilities, Current [Abstract]

ACCRUED LIABILITIES

ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):

	March 31, 2015		December 31, 2014
Accrued compensation	$	6,596	$	7,050
Accrued commissions	1,469		1,605
Accrued restructuring	41		360
Other accrued liabilities	3,938		3,854
Total accrued liabilities	$	12,044	$	12,869

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Dividends

3 Months Ended

Mar. 31, 2015

Dividends, Common Stock [Abstract]

DIVIDENDS

DIVIDENDS

On January 27, 2015, the Company’s Board of Directors declared a cash dividend of $0.05 per share of common stock. The aggregate payment of $2.8 million was paid on February 25, 2015 to shareholders of record as of February 11, 2015.

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Share Repurchase Program

3 Months Ended

Mar. 31, 2015

Share Repurchase Program [Abstract]

SHARE REPURCHASE PROGRAM

SHARE REPURCHASE PROGRAM

On August 20, 2014, the Company announced that its Board of Directors authorized the repurchase of $25.0 million of the Company’s common stock, which increased the total approval for repurchase since February 2010 to $145.0 million. Under our stock repurchase program, at March 31, 2015, we have remaining authorization to repurchase $29.0 million of our common stock.

Shares of common stock purchased pursuant to the repurchase program are canceled from outstanding shares upon repurchase. Share repurchases are recorded as a reduction to common stock to the extent available. Any amounts repurchased which are in excess of the existing total common stock balance are recorded as a reduction of retained earnings. Share repurchases are intended to reduce the number of outstanding shares of common stock to increase shareholder value and offset dilution from the Company’s stock incentive plans and ESPP. During the three months ended March 31, 2015, the Company repurchased 0.1 million shares of its common stock for an aggregate price of $1.7 million, excluding $0.2 million of cash paid in the three months ended March 31, 2015 for the settlement of shares repurchased in December 2014.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	MICREL INC
Entity Central Index Key	0000932111
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding	56,865,368

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Income Taxes

3 Months Ended

Mar. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The income tax provision for the three months ended March 31, 2015 and 2014, as a percentage of income before taxes was 32.3% and 31.3%, respectively.

At March 31, 2015, the gross liability for uncertain tax positions was $7.9 million and the net liability, reduced for the federal effects of potential state tax exposures, was $6.2 million. If these uncertain tax positions are sustained upon tax authority audit, or otherwise become certain, a net $3.6 million would favorably affect the Company’s tax provision in such future periods. The remaining $2.6 million would increase deferred tax assets on which a valuation allowance is placed and would be expected to also increase the valuation allowance by a corresponding amount. The $3.6 million liability is included in long-term income taxes payable. The Company does not anticipate a significant change to unrecognized tax benefits for uncertain income tax positions within the next 12 months.

The Company continues to recognize interest and penalties related to unrecognized tax benefits as part of the income tax provision. At March 31, 2015 and December 31, 2014, the Company had $0.3 million and $0.3 million, respectively, accrued for interest and none accrued for penalties in both periods. These accruals are included as a component of long-term income taxes payable.

The Company is required to file U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company may be subject to examination by the Internal Revenue Service (“IRS”) for calendar years 2010 and forward. Significant state tax jurisdictions include California and Texas, and generally, the Company is subject to routine examination for years 2008 and forward in these jurisdictions. In addition, any research and development credit carryforwards that were generated in prior years and utilized in these years may also be subject to examination by respective state taxing authorities. Generally, the Company is subject to routine examination for years 2007 and forward in various foreign tax jurisdictions in which it operates.

Deferred tax assets and liabilities result primarily from temporary differences between book and tax bases of assets and liabilities and state research and development credit carryforwards. The Company had net deferred tax assets of $23.5 million at March 31, 2015. The Company must regularly assess the likelihood that future taxable income levels will be sufficient to ultimately realize the tax benefits of these net deferred tax assets. The Company currently believes that future taxable income levels will be sufficient to realize the tax benefits of these deferred tax assets except for a valuation allowance of $12.7 million and $12.2 million that was established against state deferred tax assets at March 31, 2015 and December 31, 2014, respectively. Should the Company determine that future realization of these tax benefits is not more likely than not, additional valuation allowances would be established which would increase the Company's tax provision in the period of such determination.

Included in net deferred tax assets are credit carryforwards. The Company has available state research and development credit carryforwards of approximately $22.9 million, for which a full valuation allowance has been provided for. The state research credit carryforwards are not subject to expiration and may be carried forward indefinitely until utilized.