MAXWELL TECHNOLOGIES INC, 10-Q filed on 8/1/2013
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2013
Jul. 24, 2013
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
MAXWELL TECHNOLOGIES INC 
 
Entity Central Index Key
0000319815 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2013 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q1 
 
Trading Symbol
mxwl 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
29,535,041 
Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Current assets :
 
 
Cash and cash equivalents
$ 34,124 
$ 28,739 
Trade and other accounts receivable, net of allowance for doubtful accounts of $167 and $157 at March 31, 2013 and December 31, 2012, respectively
32,819 
33,420 
Inventories
42,336 
41,620 
Prepaid expenses and other current assets
3,090 
3,228 
Total current assets
112,369 
107,007 
Property and equipment, net
36,165 
36,235 
Intangible assets, net
575 
669 
Goodwill
24,603 
25,416 
Pension asset
6,918 
6,939 
Other non-current assets
212 
206 
Total assets
180,842 
176,472 
Current liabilities:
 
 
Accounts payable and accrued liabilities
31,206 
27,181 
Accrued warranty
267 
269 
Accrued employee compensation
5,889 
4,743 
Deferred revenue
7,994 
6,408 
Short-term borrowings and current portion of long-term debt
8,973 
9,452 
Deferred tax liability
980 
980 
Total current liabilities
55,309 
49,033 
Deferred tax liability, long-term
1,376 
1,384 
Long-term debt, excluding current portion
85 
83 
Other long-term liabilities
979 
1,039 
Total liabilities
57,749 
51,539 
Commitments and contingencies (Note 10)
   
   
Stockholders' equity:
 
 
Common stock, $0.10 par value per share, 40,000 shares authorized; 29,562 and 29,162 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively
2,953 
2,913 
Additional paid-in capital
268,801 
267,623 
Accumulated deficit
(158,412)
(158,134)
Accumulated other comprehensive income
9,751 
12,531 
Total stockholders' equity
123,093 
124,933 
Total liabilities and stockholders' equity
$ 180,842 
$ 176,472 
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
 
 
Trade and other accounts receivable, allowance
$ 167 
$ 157 
Common stock, par value
$ 0.10 
$ 0.1000 
Common stock, shares authorized
40,000,000 
40,000,000 
Common stock, shares issued
29,562,000 
29,162,000 
Common stock, shares outstanding
29,562,000 
29,162,000 
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Income Statement [Abstract]
 
 
Revenue
$ 47,748 
$ 35,804 
Cost of revenue
29,518 
20,647 
Gross profit
18,230 
15,157 
Operating expenses:
 
 
Selling, general and administrative
11,502 
9,788 
Research and development
6,023 
5,570 
Total operating expenses
17,525 
15,358 
Income (loss) from operations
705 
(201)
Interest expense, net
(44)
(26)
Amortization of debt discount and prepaid debt costs
(15)
(11)
Income from operations before income taxes
646 
(238)
Income tax provision
924 
714 
Net loss
$ (278)
$ (952)
Net loss per share:
 
 
Basic (in dollars per share)
$ (0.01)
$ (0.03)
Diluted (in dollars per share)
$ (0.01)
$ (0.03)
Weighted average common shares outstanding:
 
 
Basic (in shares)
28,825 
28,122 
Diluted (in shares)
28,825 
28,122 
Condensed Consolidated Statements of Comprehensive Income Loss (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Statement of Other Comprehensive Income [Abstract]
 
 
Net loss
$ (278)
$ (952)
Other comprehensive income (loss), net of tax:
 
 
Foreign currency translation adjustment
(2,844)
2,453 
Defined benefit pension plan, net of tax:
 
 
Amortization of deferred loss, net of tax benefit of $7 and $8 for the three months ended March 31, 2013 and 2012, respectively
55 
46 
Amortization of prior service cost, net of tax benefit of $2 for each of the three months ended March 31, 2013 and 2012, respectively
9 
9 
Other comprehensive income (loss), net of tax
(2,780)
2,508 
Comprehensive income (loss)
$ (3,058)
$ 1,556 
Condensed Consolidated Statements of Comprehensive Income Loss (Unaudited) (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Statement of Other Comprehensive Income [Abstract]
 
 
Tax effect of Amortization of Net Loss Recognized in Net Periodic Benefit Cost
$ 7 
$ 8 
Tax effect of Amortization of Prior Service Cost Recognized in Net Periodic Benefit Cost
$ 2 
$ 2 
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
OPERATING ACTIVITIES:
 
 
Net loss
$ (278)
$ (952)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
Depreciation
2,118 
1,768 
Amortization of intangible assets
91 
134 
Amortization of debt discount and prepaid debt costs
15 
11 
Pension cost
5 
46 
Stock-based compensation expense
957 
1,286 
Provision for (recovery of) losses on accounts receivable
10 
(172)
Changes in operating assets and liabilities:
 
 
Trade and other accounts receivable
152 
(4,033)
Inventories
(880)
(5,782)
Prepaid expenses and other assets
77 
116 
Accounts payable and accrued liabilities and deferred revenue
5,624 
(1,444)
Accrued employee compensation
1,116 
(533)
Deferred income taxes
(8)
11 
Other long-term liabilities
(33)
(2,263)
Net cash used in operating activities
8,966 
(11,807)
INVESTING ACTIVITIES:
 
 
Purchase of property and equipment
(2,026)
(4,057)
Net cash used in investing activities
(2,026)
(4,057)
FINANCING ACTIVITIES:
 
 
Principal payments on long-term debt and short-term borrowings
(3,608)
(3,183)
Proceeds from long-term and short-term borrowings
3,318 
8,161 
Proceeds from sale of common stock, net of offering costs
0 
10,283 
Repurchase of shares
(20)
(286)
Proceeds from issuance of common stock under equity compensation plans
281 
1,319 
Net cash provided by financing activities
(29)
16,294 
Increase in cash and cash equivalents from operations
6,911 
430 
Effect of exchange rate changes on cash and cash equivalents
(1,526)
909 
Increase in cash and cash equivalents
5,385 
1,339 
Cash and cash equivalents, beginning of period
28,739 
29,289 
Cash and cash equivalents, end of period
$ 34,124 
$ 30,628 
Description of Business and Basis of Presentation
Description of Business and Basis of Presentation
Description of Business and Basis of Presentation
Description of Business
Maxwell Technologies, Inc. is a Delaware corporation originally incorporated in 1965 under the name Maxwell Laboratories, Inc. In 1983, the Company completed an initial public offering, and in 1996, changed its name to Maxwell Technologies, Inc. The Company is headquartered in San Diego, California, and has two manufacturing locations, in San Diego, California and Rossens, Switzerland. The Company is also in the process of opening a manufacturing facility in Peoria, Arizona. In addition, the Company has two contract manufacturers located in China. Maxwell operates as one operating segment called High Reliability, which is comprised of three product lines:
•
Ultracapacitors: The Company’s primary focus, ultracapacitors, are energy storage devices that possess a unique combination of high power density, extremely long operational life and the ability to charge and discharge very rapidly. The Company’s ultracapacitor cells and multi-cell packs and modules provide highly reliable energy storage and power delivery solutions for applications in multiple industries, including transportation, automotive, information technology, renewable energy and consumer and industrial electronics.
•
High-Voltage Capacitors: The Company’s CONDIS® high-voltage capacitors are extremely robust devices that are designed and manufactured to perform reliably for decades. These products include grading and coupling capacitors and capacitive voltage dividers that are used to ensure the safety and reliability of electric utility infrastructure and other applications involving transport, distribution and measurement of high-voltage electrical energy.
•
Radiation-Hardened Microelectronic Products: The Company’s radiation-hardened microelectronic products include high-performance, high-density power modules, memory modules and single board computers that incorporate our proprietary RADPAK® packaging and shielding technology and novel architectures that enable them to withstand environmental radiation effects and perform reliably in space.
The Company’s products are designed to perform reliably for the life of the products and systems into which they are integrated. The Company achieves high reliability through the application of proprietary technologies and rigorously controlled design, development, manufacturing and test processes.
Financial Statement Presentation
The accompanying condensed consolidated financial statements include the accounts of Maxwell Technologies, Inc. and its subsidiaries. All significant intercompany transactions and account balances have been eliminated in consolidation. The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with the instructions to Form 10-Q and the standards of accounting measurement set forth in the Interim Reporting Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Consequently, the Company has not necessarily included in this Form 10-Q all information and footnotes required for audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements in this Form 10-Q contain all adjustments (consisting only of normal recurring adjustments, except as otherwise indicated) necessary to present fairly the financial position, results of operations, and cash flows of Maxwell Technologies, Inc. for all periods presented. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for any subsequent period or for the entire year. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted in the accompanying interim consolidated financial statements. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures. These estimates include, but are not limited to, assessing the collectability of accounts receivable, applied and unapplied production costs, production capacities, the usage and recoverability of inventories and long-lived assets, including deferred income taxes, the incurrence of warranty obligations, impairment of goodwill and other intangible assets, estimation of the cost to complete certain projects, accruals for estimated losses from legal matters, and estimation of the value of stock-based compensation awards, including the probability that the performance criteria of restricted stock awards will be met.
Warranty Obligation
The Company provides warranties on all product sales. The majority of the Company’s warranties are for one to two years in the normal course of business. The Company accrues for the estimated warranty costs at the time of sale based on historical warranty experience plus any known or expected changes in warranty exposure.
Net Income (Loss) per Share
In accordance with the Earnings Per Share Topic of the FASB ASC, basic net income (loss) per share is calculated using the weighted average number of common shares outstanding during the period. Diluted net income per share includes the impact of additional common shares that would have been outstanding if potentially dilutive common shares were issued. Potentially dilutive securities are not considered in the calculation of diluted net loss per share, as their inclusion would be anti-dilutive. The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share data):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Numerator
 
 
 
 
Net loss
 
$
(278
)
 
$
(952
)
Denominator
 
 
 
 
Weighted-average common shares outstanding
 
28,825

 
28,122

Effect of potentially dilutive securities:
 
 
 
 
Options to purchase common stock
 
—

 
—

Restricted stock awards
 
—

 
—

Restricted stock unit awards
 
—

 
—

Employee stock purchase plan
 
—

 
—

Weighted-average common shares outstanding, assuming dilution
 
28,825

 
28,122

Net loss per share
 
 
 
 
Basic
 
$
(0.01
)
 
$
(0.03
)
Diluted
 
$
(0.01
)
 
$
(0.03
)

The following table summarizes instruments that may be convertible into common shares that are not included in the denominator used in the diluted net income (loss) per share calculation because to do so would be anti-dilutive (in thousands):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Outstanding options to purchase common stock
 
544

 
178

Restricted stock awards
 
442

 
230

Restricted stock unit awards
 
57

 
—

Employee stock purchase plan awards
 
—

 
—


Change in Additional Paid in Capital
For the three months ended March 31, 2013, additional paid in capital increased $1.2 million. This increase includes $1.2 million associated with the Company’s stock-based compensation plans, offset by $20,000 for the repurchase of shares that were withheld by the Company to satisfy employee tax liabilities upon the vesting of restricted stock awards.
Restatement of Previously issued Financial Statements (Notes)
Restatement of Previously issued Financial Statements
Restatement of Previously issued Financial Statements
Background on the Restatement
Audit Committee's Investigation
In January 2013, following receipt of information concerning potential revenue recognition issues, the Audit Committee of the Board of Directors engaged independent legal counsel and forensic accountants to conduct an investigation concerning the potential issues and to work with management to determine the potential impact on accounting for revenue. In February 2013, as a result of the findings of the Audit Committee's investigation to date, the Company determined that certain of its employees had engaged in conduct which resulted in revenue being recorded in periods prior to the criteria for revenue recognition under U.S. generally accepted accounting principles being satisfied.
The investigation revealed arrangements with three of the Company's distributors regarding extended payment terms, which allowed these distributors to pay the Company after they received payment from their customer, and with one of the Company's distributors regarding return rights and profit margin protection, for sales to such distributors with respect to certain transactions. In addition, arrangements were revealed with one non-distributor customer to honor transfer of title at a date later than the customer's purchase orders indicated. Based on the results of its investigation, the Audit Committee determined that these arrangements had not been communicated to the Company's finance and accounting department, or to the Company's CEO, and therefore, had not been considered when revenue was originally recorded. Based on the terms of the agreements with these customers as they were known to the Company's finance and accounting department, it had been the Company's policy to record revenue related to shipments as title passed at either shipment from the Company's facilities or receipt at the customer's facility, assuming all other revenue recognition criteria had been achieved. In addition to the arrangements noted above, the investigation uncovered an error on an individual transaction where a customer was given extended payment terms, which allowed them to pay the Company after they received payment from their customer, but those terms were not considered when revenue was originally recognized.
As a result of the arrangements discovered during the investigation, the Company does not believe that a fixed or determinable sales price existed at the time of shipment, nor was collection reasonably assured, at least with respect to certain transactions. In addition, revenue related to certain shipments to the one non-distributor customer was recorded before the actual transfer of title and the satisfaction of the Company's obligation to deliver the products. Therefore, revenue from these sales should not have been recognized at the time of shipment.
Based on the arrangements with customers revealed in the investigation that were not considered when revenue was originally recognized, the Company determined the following:
•
Beginning in the period in which the investigation revealed arrangements regarding extended payment terms for certain sales to three distributors, the Company determined it is appropriate to defer revenue recognition on all sales to these distributors from the period of shipment to the period in which payment is received. For these distributors, revenue recognition in the period in which payment is received was determined to be appropriate beginning in the fourth quarter of 2011.
•
Beginning in the period in which the investigation revealed return rights and profit margin protection for one distributor, the Company determined it appropriate to defer revenue recognition on all sales to this distributor until the distributor confirms with the Company that they are not entitled to any further returns or credits. For this distributor, the deferral of revenue on this basis was determined to be appropriate beginning in the fourth quarter of 2011. At such time as the distributor confirms with the Company that they are not entitled to any further returns or credits, which is currently anticipated to occur in the second half of the fiscal year 2013, previous sales for which revenue has been deferred, net of any credits or returns that may be made by the distributor, will be recognized as revenue.
•
For the arrangements with the non-distributor customer to honor transfer of title at a date later than the customer's purchase order indicated, the Company determined it appropriate to defer revenue recognition to the period in which the Company agreed to honor transfer of title.
•
For the individual transaction where a customer was given extended payment terms which were not considered when revenue was originally recognized in the first quarter of 2011, revenue recognition in the period in which payment was received, which was in the second quarter of 2011, was determined to be appropriate.
Management's Subsequent Internal Review
Once the audit committee investigation was complete, management of the Company conducted a review beginning with the first quarter of 2009 through the first quarter of 2013 to ensure that all sales arrangements had been detected and accounted for appropriately. During this review, the Company noted that there were a number of quarter end revenue cut-off errors wherein revenue was recorded prior to the transfer of title to the customer and the satisfaction of the Company's obligation to deliver the products. The Company has corrected these errors occurring in the first quarter of 2011 through the third quarter of 2012 by moving the revenue recognition for these items to the period in which delivery actually occurred.
Results of the Audit Committee's Investigation and Management's Internal Review
Based on the findings of the investigation, as previously reported in the Company's current report on Form 8-K dated March 7, 2013, the Audit Committee, in consultation with management and the Board of Directors, concluded that the Company's previously issued financial statements contained in its annual report on Form 10-K for the year ended December 31, 2011, and the quarterly reports on Form 10-Q for the quarters ended March 31, 2011, June 30, 2011, September 30, 2011, March 31, 2012, June 30, 2012 and September 30, 2012, should no longer be relied upon. Accordingly, the consolidated financial statements for the first three quarters of the fiscal year ended December 31, 2012, for the fiscal year ended December 31, 2011, and for each of the interim periods within the fiscal year ended December 31, 2011, have been restated in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012. See Note 15, in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012, for the effects of the restatement adjustments on our 2012 and 2011 unaudited quarterly financial information.
As a result of the Audit Committee's investigation, certain employees were terminated and the Company's Sr. Vice President of Sales and Marketing resigned as reported in the Company's current report on Form 8-K dated March 7, 2013.
In connection with the errors identified during the investigation resulting in the restatement of previously reported financial statements, the Company identified control deficiencies in its internal control over financial reporting that constitute material weaknesses. For a discussion of our disclosure controls and procedures and the material weaknesses identified, see Part I, Item 4, Controls and Procedures, of this Quarterly Report on Form 10-Q.
The Company's previously filed annual report on Form 10-K for the fiscal year ended December 31, 2011, and its quarterly reports on Form 10-Q for the periods affected by the restatements, have not been amended. Accordingly, investors should no longer rely upon the Company's previously released financial statements for any quarterly or annual periods after and including March 31, 2011, and any earnings releases or other communications relating to these periods. See Note 2, Restatement of Previously Issued Financial Statements and Financial Information, and Note 15, Unaudited Quarterly Financial Information, of the Notes to the Consolidated Financial Statements, in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012, for the impact of these adjustments for the full fiscal year ended December 31, 2011, and the first three quarters of the fiscal year ended December 31, 2012 and each of the quarterly periods in the fiscal year ended December 31, 2011, respectively.
Restatement Adjustments
Restatement Adjustments Related to Sales Arrangements
Several adjustments were made to the Company's previously filed consolidated financial statements as a result of the restatement in order to reflect revenue recognition in the appropriate periods as discussed above. Accordingly, for the subject sales transactions, revenue and accounts receivable balances were reduced by an equivalent amount in the period that the sale was originally recorded as revenue, and revenue was increased in the subsequent period in which the criteria for revenue recognition were met. Further, for the subject sales transactions, cost of revenue was reduced, and inventory was increased, in the period that the sale was originally recorded as revenue, and cost of revenue was increased, and inventory was reduced, in the period the sale was ultimately recorded as revenue. However, for sales to one distributor in which revenue is being deferred until the Company determines that the distributor is not entitled to any further returns or credits, as discussed above, the increase to revenue, and the related reduction to inventory and increase to cost of revenue, will be recorded in a future period when this determination is made.
The adjustments also reflect the impacts of adjusting the Company's returns reserves for certain stock rotation rights of the distributors, and adjusting the Company's reserves for allowances for doubtful accounts, as well as commissions expense, although these changes were not material.
In addition to the adjustments to revenue, accounts receivable, inventory and cost of revenue, inventory reserves balances and cost of revenue were adjusted in relation to the adjustments to inventory discussed above, in order to reflect inventory ultimately recorded on our balance sheets at its lower of cost or market value.
Other Restatement Adjustments
Since the Company's determination to restate its previously issued financial statements constituted an event of default under the terms of its credit facility, the bank had the right to require immediate payment of the outstanding borrowings. As a result restatement adjustments were recorded to reclassify the amounts outstanding under the credit facility from long-term debt to current liabilities as of each respective balance sheet date. In addition, an insignificant amount of debt issuance costs were reclassified from a long-term asset to a short-term asset, consistent with the classification of the related debt. In June 2013, the Company entered into a forbearance agreement with the bank wherein the bank agreed to forbear from further exercise of its rights and remedies to call our outstanding debt under the credit facility in connection with the events of default for a period terminating on the earlier of September 30, 2013 or the occurrence of any additional events of default.
Further, a restatement adjustment was made to reclassify a legal settlement with a customer from selling, general and administrative expense to contra-revenue in the second quarter of 2011 in the amount of for $2.6 million. Certain other immaterial adjustments were made in connection with the restatement.
The restatement adjustments did not impact the Company's previously reported tax provision or benefit in any of the affected periods, other than a $54,000 decrease in the income tax provision for the quarter ended September 30, 2012, as all of the restatement adjustments were related to our U.S. operations, for which the Company has significant net operating loss carryforwards and has not recorded an income tax expense or benefit in any period to date. However, the restatement adjustments did impact the composition of the Company's deferred tax assets and liabilities as of December 31, 2011 as presented in Note 10, Income Taxes, of the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
The restated quarterly condensed consolidated statement of operations for the first quarter of fiscal year 2012 is presented below (in thousands, except per share data):
 
 
Three Months Ended March 31, 2012
 
 
As previously reported
 
Restatement Adjustments
 
Restated
Revenue
 
$
39,230

 
$
(3,426
)
 
$
35,804

Cost of revenue
 
23,093

 
(2,446
)
 
20,647

Gross profit
 
16,137

 
(980
)
 
15,157

Operating expenses:
 
 
 
 
 
 
Selling, general and administrative
 
9,286

 
502

 
9,788

Research and development
 
5,596

 
(26
)
 
5,570

Total operating expenses
 
14,882

 
476

 
15,358

Income (loss) from operations
 
1,255

 
(1,456
)
 
(201
)
Interest expense, net
 
(26
)
 
—

 
(26
)
Amortization of debt discount and prepaid debt costs
 
(11
)
 
—

 
(11
)
Income (loss) from operations before income taxes
 
1,218

 
(1,456
)
 
(238
)
Income tax provision
 
714

 
—

 
714

Net income (loss)
 
$
504

 
$
(1,456
)
 
$
(952
)
Net income (loss) per share:
 
 
 
 
 
 
Basic
 
$
0.02

 
$
(0.05
)
 
$
(0.03
)
Diluted
 
$
0.02

 
$
(0.05
)
 
$
(0.03
)
Weighted average common shares outstanding:
 
 
 
 
 
 
Basic
 
28,122

 
 
 
28,122

Diluted
 
28,559

 
 
 
28,122

The restated quarterly condensed consolidated statement of cash flows for the first quarter of fiscal year 2012 is presented below (in thousands):
 
 
Three Months Ended March 31, 2012
 
 
As previously reported
 
Restatement Adjustments
 
Restated
OPERATING ACTIVITIES:
 
 
 
 
 
 
Net income (loss)
 
$
504

 
(1,456
)
 
$
(952
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
Depreciation
 
1,768

 
—

 
1,768

Amortization of intangible assets
 
134

 
—

 
134

Amortization of debt discount and prepaid debt costs
 
11

 
—

 
11

Pension cost
 
46

 
—

 
46

Stock-based compensation expense
 
1,286

 
—

 
1,286

Recovery of losses on accounts receivable
 
(103
)
 
(69
)
 
(172
)
Changes in operating assets and liabilities:
 
 
 
—

 
 
Trade and other accounts receivable
 
(6,568
)
 
2,535

 
(4,033
)
Inventories
 
(3,211
)
 
(2,571
)
 
(5,782
)
Prepaid expenses and other assets
 
229

 
(113
)
 
116

Accounts payable and accrued liabilities and deferred revenue
 
(3,217
)
 
1,773

 
(1,444
)
Accrued employee compensation
 
(434
)
 
(99
)
 
(533
)
Deferred income taxes
 
11

 
—

 
11

Other long-term liabilities
 
(2,263
)
 
—

 
(2,263
)
Net cash used in operating activities
 
(11,807
)
 
—

 
(11,807
)
INVESTING ACTIVITIES:
 
 
 
 
 
 
Purchases of property and equipment
 
(4,057
)
 
—

 
(4,057
)
Net cash used in investing activities
 
(4,057
)
 
—

 
(4,057
)
FINANCING ACTIVITIES:
 
 
 
 
 
 
Principal payments on long-term debt and short-term borrowings
 
(3,183
)
 
—

 
(3,183
)
Proceeds from long-term and short-term borrowings
 
8,161

 
—

 
8,161

Proceeds from sale of common stock, net of offering costs
 
10,283

 
—

 
10,283

Repurchase of shares
 
(286
)
 
—

 
(286
)
Proceeds from issuance of common stock under equity compensation plans
 
1,319

 
—

 
1,319

Net cash provided by financing activities
 
16,294

 
—

 
16,294

Increase in cash and cash equivalents from operations
 
430

 
—

 
430

Effect of exchange rate changes on cash and cash equivalents
 
909

 
—

 
909

Increase in cash and cash equivalents
 
1,339

 
—

 
1,339

Cash and cash equivalents, beginning of period
 
29,289

 
—

 
29,289

Cash and cash equivalents, end of period
 
$
30,628

 
—

 
$
30,628

Balance Sheet Details
Balance Sheet Details
Balance Sheet Details (in thousands)
Inventories
 
 
March 31, 2013
 
December 31, 2012
 
 
 
(Restated)
Raw material and purchased parts
 
$
14,525

 
$
13,114

Work-in-process
 
2,864

 
1,753

Finished goods
 
16,085

 
17,511

Consigned finished goods
 
8,862

 
9,242

Total inventories
 
$
42,336

 
$
41,620


Intangible Assets
Intangible assets consisted of the following:
 
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Foreign
Currency
Adjustment
 
Net
Carrying
Value
As of March 31, 2013
 
 
 
 
 
 
 
 
Patents
 
$
2,476

 
$
(1,954
)
 
$
—

 
$
522

Developed core technology
 
1,100

 
(1,100
)
 
—

 
—

Patent license agreement
 
741

 
(640
)
 
(48
)
 
53

Total intangible assets at March 31, 2013
 
$
4,317

 
$
(3,694
)
 
$
(48
)
 
$
575

 
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Foreign
Currency
Adjustment
 
Net
Carrying
Value
As of December 31, 2012
 
 
 
 
 
 
 
 
Patents
 
$
2,476

 
$
(1,903
)
 
$
—

 
$
573

Developed core technology
 
1,100

 
(1,100
)
 
—

 
—

Patent license agreement
 
741

 
(606
)
 
(39
)
 
96

Total intangible assets at December 31, 2012
 
$
4,317

 
$
(3,609
)
 
$
(39
)
 
$
669


Goodwill
The change in the carrying amount of goodwill from December 31, 2012 to March 31, 2013 is as follows:
Balance at December 31, 2012
 
$
25,416

Foreign currency translation adjustments
 
(813
)
Balance at March 31, 2013
 
$
24,603


Accrued Warranty
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Beginning balance
 
$
269

 
$
258

Product warranties issued
 
86

 
63

Settlement of warranties
 
(4
)
 
(13
)
Change related to preexisting warranties
 
(80
)
 
(27
)
Foreign currency translation adjustments
 
(4
)
 
6

Ending balance
 
$
267

 
$
287


Accumulated Other Comprehensive Income
 
 
Foreign
Currency
Translation
Adjustment
 
Defined Benefit
Pension Plan
 
Accumulated
Other
Comprehensive
Income
 
Affected Line Items in the Statement of Operations
Balance as of December 31, 2012
 
$
16,376

 
$
(3,845
)
 
$
12,531

 
 
Other comprehensive loss before reclassifications
 
(2,844
)
 
—

 
(2,844
)
 
 
Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
64

 
64

 
Selling, General and Administrative Expense
Net other comprehensive income (loss) for three months ended March 31, 2013
 
(2,844
)
 
64

 
(2,780
)
 
 
Balance as of March 31, 2013
 
$
13,532

 
$
(3,781
)
 
$
9,751

 
 
Credit Facility
Credit Facility
Credit Facility
In December 2011, the Company obtained a secured credit facility in the form of a revolving line of credit up to a maximum of $15.0 million (the “Revolving Line of Credit”) and an equipment term loan (the “Equipment Term Loan”) (together, the “Credit Facility”). In general, amounts borrowed under the Credit Facility are secured by a lien on all of the Company’s assets other than its intellectual property. In addition, under the credit agreement, the Company is required to pledge 65.0% of its equity interests in its Swiss subsidiary. The Company has also agreed not to encumber any of its intellectual property. The agreement contains certain restrictive covenants that limit the Company’s ability to, amongst other things; (i) incur additional indebtedness or guarantees; (ii) create liens or other encumbrances on its property; (iii) enter into a merger or similar transaction; (iv) invest in another entity; (v) declare or pay dividends; and (vi) invest in fixed assets in excess of a defined dollar amount. Repayment of amounts owed pursuant to the Credit Facility may be accelerated in the event that the Company is in violation of the representations, warranties and covenants made in the credit agreement, including certain financial covenants. The financial covenants that the Company must meet during the term of the credit agreement include quarterly minimum liquidity ratios, minimum quick ratios and EBITDA targets and an annual net income target. Borrowings under the Credit Facility bear interest, payable monthly, at either (i) the bank's prime rate or (ii) LIBOR plus 2.25%, at the Company's option subject to certain limitations. Further, the Company incurs an unused commitment fee, payable quarterly, equal to 0.25% per annum of the average daily unused amount of the Revolving Line of Credit.
As a result of the restatement of prior period financial statements, as such financial information was previously submitted to the bank has since proven to be materially incorrect, the Company was in default with respect to the terms of the credit agreement beginning in the fourth quarter of 2011. In addition, as a result of the restatement of prior period financial statements, the Company was not in compliance with the financial covenant pertaining to the annual minimum net income target for the fiscal year ended December 31, 2011. Although, the Company did meet the financial covenants of the credit agreement in all other periods since the Credit Facility was entered into, including as of December 31, 2012, these violations represent events of default under the terms of the Credit Facility. As a result of this noncompliance, the bank's obligation to extend any further credit has ceased and terminated.
In June 2013, the Company entered into a forbearance agreement with the bank (“the Forbearance Agreement”). Pursuant to the terms of the Forbearance Agreement, the bank agreed to forbear from further exercise of its rights and remedies under the credit agreement to call the Company's outstanding debt obligation in connection with the events of default for a period terminating on the earlier of September 30, 2013 or the occurrence of any additional events of default. In connection with the execution of the Forbearance Agreement, in June 2013, the Company posted a cash deposit of $1.8 million with the bank and granted the bank a security interest therein, which will remain restricted until the bank may determine to waive the existing events of defaults discussed above, or the loan is satisfied.
As borrowings outstanding under the Credit Facility were immediately callable by the bank for each of the quarterly and annual periods since and including the fourth quarter of 2011, borrowings outstanding under the Credit Facility have been classified as a current obligation in the each of the accompanying condensed consolidated balance sheets.
As of March 31, 2013, $3.6 million was outstanding under the Equipment Term Loan and the applicable interest rate was LIBOR plus 2.25% (2.5% as of March 31, 2013). If the bank does not exercise its right to accelerate repayment, under the original terms of the Credit Facility, principal and interest under the Equipment Term Loan are payable in 36 equal monthly installments such that the Equipment Term Loan is fully repaid by the maturity date of April 30, 2015, but may be prepaid in whole or in part at any time. As of March 31, 2013, no amounts were outstanding under the Revolving Line of Credit. Further, as of December 31, 2012, the Company was not eligible to borrow any additional amounts under the Credit Facility, as a result of the events of default discussed above.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements
The Company records certain financial instruments at fair value in accordance with the Fair Value Measurements and Disclosures Topic of the FASB ASC. As of March 31, 2013, the financial instruments to which this topic applied were foreign currency forward contracts. As of March 31, 2013, the fair value of these foreign currency forward contracts was a liability of $568,000 which is recorded in “accounts payable and accrued liabilities” in the consolidated balance sheet. The fair value of these derivative instruments is measured using models following quoted market prices in active markets for identical instruments, which is a Level 2 input under the fair value hierarchy of the Fair Value Measurements and Disclosures Topic of the FASB ASC.
The carrying value of short-term and long-term borrowings approximates fair value because of the relative short maturity of these instruments and the interest rates the Company could currently obtain.
Foreign Currency Derivative Instruments
Foreign Currency Derivative Instruments
Foreign Currency Derivative Instruments
Maxwell uses forward contracts to hedge certain monetary assets and liabilities, primarily receivables and payables, denominated in a foreign currency. The change in fair value of these instruments represents a natural hedge as gains and losses offset the changes in the underlying fair value of the monetary assets and liabilities due to movements in currency exchange rates. These contracts generally expire in one month. These contracts are considered economic hedges and are not designated as hedges under the Derivatives and Hedging Topic of the FASB ASC, therefore, the change in the fair value of the instrument is recognized currently in the consolidated statement of operations.
The net gains and losses on foreign currency forward contracts included in cost of revenue and selling, general and administrative expense are as follows (in thousands):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Cost of revenue
 
$
12

 
$
(2
)
Selling, general and administrative
 
(1,387
)
 
395

Total gain (loss)
 
$
(1,375
)
 
$
393


The net gains and losses on foreign currency forward contracts were partially offset by net gains and losses on the underlying monetary assets and liabilities. Foreign currency gains and losses on those underlying monetary assets and liabilities included in cost of revenue and selling, general and administrative expense are as follows (in thousands):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Cost of revenue
 
$
(8
)
 
$
13

Selling, general and administrative
 
1,246

 
(997
)
Total gain (loss)
 
$
1,238

 
$
(984
)

As of March 31, 2013, the total notional amount of foreign currency forward contracts not designated as hedges was $31.9 million.
The following table presents gross amounts, amounts offset and net amounts presented in the condensed consolidated balance sheets for the Company's derivative instruments measured at fair value (in thousands):
 
 
March 31,
 
 
2013
 
2012
Gross amounts of recognized assets (liabilities)
 
$
(483
)
 
$
(41
)
Gross amounts offset in the condensed consolidated balance sheets
 
85

 
5

Net amount of recognized asset (liability) presented in condensed consolidated balance sheets
 
$
(568
)
 
$
(46
)

The Company has the legal right to offset these recognized assets and liabilities upon settlement of the derivative instruments. For additional information, refer to Note 5 – Fair Value Measurements.
Stock Plans
Stock Plans
Stock Plans
The Company has two active stock-based compensation plans as of March 31, 2013: the 2004 Employee Stock Purchase Plan and the 2005 Omnibus Equity Incentive Plan under which incentive stock options, non-qualified stock options, restricted stock awards and restricted stock units can be granted to employees and non-employee directors.
Stock Options
Compensation expense recognized from employee stock options for the three months ended March 31, 2013 and 2012 was $177,000 and $544,000, respectively. Beginning in 2011, the Company ceased granting stock options and began granting restricted stock awards to employees as part of its annual equity incentive award program. The Company may determine to grant stock options in the future under the Incentive Plan.
Restricted Stock Awards
During the three months ended March 31, 2013 and 2012, the Company issued 305,143 and 249,366 shares, respectively, upon granting of restricted stock awards, which had an average grant date fair value per share of $10.58 and $20.89, respectively. The following table summarizes the amount of compensation expense recognized for restricted stock awards for the three months ended March 31, 2013 and 2012 (in thousands):
 
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Service-based restricted stock
 
$
648

 
$
479

Performance-based restricted stock
 
18

 
63

Total compensation expense recognized for restricted stock awards
 
$
666

 
$
542


Restricted Stock Units
Beginning in 2011, non-employee directors receive an annual restricted stock unit award as part of their annual retainer compensation, which vests one year from the date of grant. During the three months ended March 31, 2013 and 2012, non-employee directors were granted a total of 56,616 and 20,342 restricted stock units, respectively, with an average grant date fair value per share of $10.51 and $20.65, respectively.
Total compensation expense recognized for service-based restricted stock unit awards was $114,000 and $106,000 during the three months ended March 31, 2013 and 2012, respectively.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (“ESPP”) permits substantially all employees to purchase common stock through payroll deductions, at 85% of the lower of the trading price of the stock at the beginning or at the end of each six month offering period commencing on January 1 and July 1. The number of shares purchased is based on participants’ contributions made during the offering period. In 2013, the Company suspended its ESPP Plan because the registration statement on Form S-8 became ineffective as a result of the restatement of the Company's previously issued financial statements (as discussed in Note 2, Restatement of Previously Issued Financial Statements).
Compensation expense recognized for the ESPP for the three months ended March 31, 2013 and 2012 was zero and $94,000, respectively. During the three months ended March 31, 2013, no shares were issued under the Company's ESPP. The fair value of the ESPP shares was estimated using the Black-Scholes valuation model for a call and a put option with the following weighted-average assumptions:
 
 
For the offering period beginning January 1 and ending June 30
 
 
 
 
2012
Expected dividends
 
$
—

Exercise price
 
16.24

Expected volatility
 
63
%
Average risk-free interest rate
 
0.06
%
Expected life/term (in years)
 
0.5

Fair value per share
 
$
5.26


Stock-based Compensation Expense
Compensation cost for restricted stock, restricted stock units, employee stock options and the ESPP included in cost of revenue; selling, general and administrative expense; and research and development expense is as follows (in thousands):
 
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Cost of revenue
 
$
273

 
$
142

Selling, general and administrative
 
497

 
962

Research and development
 
187

 
182

Total stock-based compensation expense
 
$
957

 
$
1,286

Stock Offering
Stock Offering
Stock Offering
In April 2011, the Company filed a shelf registration statement on Form S-3 with the SEC to, from time to time, sell up to an aggregate of $125 million of its common stock, warrants or debt securities. During the quarter ended March 31, 2012, the Company sold a total of 572,510 shares of its common stock for net proceeds of $10.3 million pursuant an At-the-Market Equity Offering Sales Agreement (“Sales Agreement”) with Citadel Securities LLC (“Citadel”) dated February 2012. No shares have been sold subsequent to the quarter ended March 31, 2012.
As a result of the restatement of our previously issued financial statements as discussed in Note 2, the Company is no longer in compliance with the ongoing eligibility requirements of this shelf registration statement on Form S-3, the shelf registration statement is therefore no longer effective.
Defined Benefit Plan
Defined Benefit Plan
Defined Benefit Plan
Maxwell SA, a subsidiary of the Company, has a retirement plan that is classified as a defined benefit pension plan. The employee pension benefit is based on compensation, length of service and credited investment earnings. The plan guarantees both a minimum rate of return as well as minimum annuity purchase rates. The Company’s funding policy with respect to the pension plan is to contribute the amount required by Swiss law, using the required percentage applied to the employee’s compensation. In addition, participating employees are required to contribute to the pension plan. This plan has a measurement date of December 31.
Components of net periodic pension cost are as follows (in thousands):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Service cost
 
$
207

 
$
171

Interest cost
 
125

 
166

Expected return on plan assets
 
(383
)
 
(357
)
Prior service cost amortization
 
11

 
11

Deferred loss amortization
 
45

 
55

Net periodic pension cost
 
$
5

 
$
46


Employer contributions of $183,000 and $189,000 were paid during the three months ended March 31, 2013 and 2012, respectively. Additional employer contributions of approximately $483,000 are expected to be paid during the remainder of fiscal 2013.
Legal Proceedings
Legal Proceedings
Legal Proceedings
Although the Company expects to incur significant legal costs in connection with the below legal proceedings, the Company is unable to estimate the amount of such legal costs and therefore, such costs will be expensed in the period the legal services are performed.
FCPA Matter
As a result of being a publicly traded company in the U.S., we are subject to the U.S. Foreign Corrupt Practices Act (“FCPA”), which prohibits companies from making improper payments to foreign officials for the purpose of obtaining or retaining business. Beginning in 2009, we conducted an internal review into payments made to our former independent sales agent in China with respect to sales of our high voltage capacitor products produced by our Swiss subsidiary. In January 2011, we reached settlements with the SEC and the U.S. Department of Justice (“DOJ”) with respect to charges asserted by the SEC and DOJ relating to the anti-bribery, books and records, internal controls, and disclosure provisions of the FCPA and other securities laws violations. We settled civil charges with the SEC, agreeing to an injunction against further violations of the FCPA. Under the terms of the settlement with the SEC, we agreed to pay a total of approximately $6.4 million in profit disgorgement and prejudgment interest, in two installments, with almost $3.2 million paid in each of the first quarters of 2011 and 2012. Under the terms of the settlement with the DOJ, we agreed to pay a total of $8.0 million in penalties in three installments, with $3.5 million paid in the first quarter of 2011 and $2.3 million paid in each of the first quarters of 2012 and 2013. As part of the settlement, we entered into a three-year deferred prosecution agreement (“DPA”) with the DOJ. If we remain in compliance with the terms of the DPA, at the conclusion of the term, the charges against us asserted by the DOJ will be dismissed with prejudice. Further, under the terms of each agreement, we will periodically report to the SEC and DOJ on our internal compliance program concerning anti-bribery. The final payment of $2.3 million was paid in full as of January 25, 2013.
Customer Bankruptcy Matter
In January 2011, we attended a bankruptcy proceeding for a previous customer in order to bid on certain intellectual property and physical assets that were being auctioned. During this proceeding, an offer for sale was presented for any and all potential claims held by the previous customer against us. While the nature of these potential claims was not specified, the offer was construed as including potential claims related to payments made to us by the customer prior to the previous customer filing bankruptcy, as well as a potential intellectual property dispute between us and the previous customer. At the January 2011 bankruptcy proceeding, we bid $250,000 to purchase from the bankruptcy estate the right to any and all claims against us stemming from rights held by the previous customer. The bankruptcy estate later declined that offer and in the interest of a more expedient resolution, we had recently increased our settlement offer to $750,000. In December 2012, the parties reached a final agreement for total consideration of $525,000 due from us to the bankruptcy estate for full and final release from any claims related only to the potential preference payment claim. The settlement amount was paid in full in February 2013. Concerning the potential intellectual property dispute, we believe this claim is meritless and that the chance of a significant loss with respect to this potential claim is remote. As of the quarter ended September 30, 2012, we had accrued a liability of $750,000 for the anticipated settlement of these potential claims. After consideration of the settlement of the preference claim matter in the amount of $525,000, the remaining balance of the accrual of $225,000 was reversed and credited to the statement of operations during the fourth quarter of 2012.
Securities Matter
In early 2013, we voluntarily provided information to the United States Attorney's Office for the Southern District of California and the U.S. Securities and Exchange Commission related to our announcement that we intend to file restated financial statements for fiscal years 2011 and 2012. We are cooperating with these investigations. At this preliminary stage, we cannot predict the ultimate outcome of this action, nor can we estimate the range of potential loss, and we therefore have not accrued an amount for any potential costs associated with this action, but an adverse result could have a material adverse impact on our financial condition and results of operation.
Securities Class Action Matter
From March 13, 2013 through April 19, 2013, four purported shareholder class actions were filed in the United States District Court for the Southern District of California against us and three of our current and former officers. These actions are entitled Foster v. Maxwell Technologies, Inc., et al., Case No. 13-cv-0580 (S.D. Cal. filed March 13, 2013), Weinstein v. Maxwell Technologies, Inc., et al., No. 13-cv-0686 (S.D. Cal. filed March 21, 2013), Abanades v. Maxwell Technologies, Inc., et al., No. 13-cv-0867 (S.D. Cal. filed April 11, 2013), and Mebarak v. Maxwell Technologies, Inc., et al., No. 13-cv-0942 (S.D. Cal. filed April 19, 2013). The complaints allege that the defendants made false and misleading statements regarding our financial performance and business prospects and overstated our reported revenue. The complaints purport to assert claims for violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 on behalf of all persons who purchased our common stock between April 28, 2011 and March 7, 2013, inclusive. The complaints seek unspecified monetary damages and attorneys' fees and costs. On May 13, 2013, four prospective lead plaintiffs filed motions to consolidate the four actions and to be appointed lead plaintiff. On June 11, 2013, the Court vacated the hearing on those motions and indicated that it would issue a written order in the near future. At this preliminary stage, we cannot determine whether there is a reasonable possibility that a loss has been incurred nor can we estimate the range of potential loss. Accordingly, we have not accrued an amount for any potential loss associated with this action, but an adverse result could have a material adverse impact on our financial condition and results of operation.
State Shareholder Derivative Matter
On April 11, 2013 and April 18, 2013, two shareholder derivative actions were filed in California Superior Court for the County of San Diego, entitled Warsh v. Schramm, et al., Case No. 37-2013-00043884 (San Diego Sup. Ct. filed April 11, 2013) and Neville v. Cortes, et al., Case No. 37-2013-00044911-CU-BT-CTL (San Diego Sup. Ct. filed April 18, 2013). The complaints name as defendants certain of our current and former officers and directors as well as our former auditor McGladrey LLP. We are named as a nominal defendant. The complaints allege that the individual defendants made or caused us to make false and/or misleading statements regarding our financial condition, and failed to disclose material adverse facts about our business, operations and prospects. The complaints assert causes of action for breaches of fiduciary duty for disseminating false and misleading information, failing to maintain internal controls, and failing to properly oversee and manage the company, as well as for unjust enrichment, abuse of control, gross mismanagement, professional negligence and accounting malpractice, and aiding and abetting breaches of fiduciary duty. The lawsuits seek unspecified damages, an order directing us to take all necessary actions to reform and improve its corporate governance and internal procedures, restitution and disgorgement of profits, benefits and other compensation, attorneys' and experts' fees, and costs and expenses. On May 7, 2013, the Court consolidated the two actions. We filed a motion to stay the consolidated action on July 2, 2013. Because this action is derivative in nature, it does not seek monetary damages from us. However, we may be required throughout the term of the action to advance the legal fees and costs incurred by the individual defendants and to incur other financial obligations. At this preliminary stage, we cannot predict the ultimate outcome of this action, nor can we estimate the range of potential loss, and we therefore have not accrued an amount for any potential costs associated with this action, but an adverse result could have a material adverse impact on our financial condition and results of operation.
Federal Shareholder Derivative Matter
On April 23, 2013 and May 7, 2013, two shareholder derivative actions were filed in the United States District Court for the Southern District of California, entitled Kienzle v. Schramm, et al., Case No. 13-cv-0966 (S.D. Cal. filed April 23, 2013) and Agrawal v. Cortes, et al., Case No. 13-cv-1084 (S.D. Cal. filed May 7, 2013). The complaints name as defendants certain of our current and former officers and directors and name us as a nominal defendant. The complaints allege that the individual defendants caused or allowed us to issue false and misleading statements about our financial condition, operations, management, and internal controls and falsely represented that we maintained adequate controls. The complaints assert causes of action for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment. The lawsuits seek unspecified damages, an order directing us to take all necessary actions to reform and improve its corporate governance and internal procedures, restitution and disgorgement of profits, benefits, and other compensation, attorneys' and experts' fees, and costs and expenses. On June 10, 2013, the parties filed a joint motion to consolidate the two actions. The Court has not yet ruled on that motion. Because this action is derivative in nature, it does not seek monetary damages from us. However, we may be required throughout the term of the action to advance the legal fees and costs incurred by the individual defendants and to incur other financial obligations. At this preliminary stage, we cannot predict the ultimate outcome of this action, nor can we estimate the range of potential loss, and we therefore have not accrued an amount for any potential costs associated with this action, but an adverse result could have a material adverse impact on our financial condition and results of operation.
Shareholder Demand Letter Matter
On April 9, 2013, Stephen Neville, a purported shareholder of the Company, sent a demand letter to us to inspect our books and records pursuant to California Corporations Code Section 1601. The demand sought inspection of documents related to our March 7, 2013 announcement that we would be restating our previously-issued financial statements for 2011 and 2012, board minutes and committee materials, and other documents related to our board or management discussions regarding revenue recognition from January 1, 2011 to the present. We responded by letter dated April 19, 2013, explaining why we believed that the demand did not appear to be proper. Following receipt of a second letter from Mr. Neville dated April 23, 2013, we explained by letter dated April 29, 2013 why we continue to believe that the inspection demand appears improper. We have not received a further response from Mr. Neville regarding the inspection demand. At this preliminary stage, we cannot predict the ultimate outcome of this action, nor can we estimate the range of potential loss, and we therefore have not accrued an amount for any potential costs associated with this action, but an adverse result could have a material adverse impact on our financial condition and results of operation.
Description of Business and Basis of Presentation (Policies)
Financial Statement Presentation 
Financial Statement Presentation
The accompanying condensed consolidated financial statements include the accounts of Maxwell Technologies, Inc. and its subsidiaries. All significant intercompany transactions and account balances have been eliminated in consolidation. The Company has prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with the instructions to Form 10-Q and the standards of accounting measurement set forth in the Interim Reporting Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Consequently, the Company has not necessarily included in this Form 10-Q all information and footnotes required for audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements in this Form 10-Q contain all adjustments (consisting only of normal recurring adjustments, except as otherwise indicated) necessary to present fairly the financial position, results of operations, and cash flows of Maxwell Technologies, Inc. for all periods presented. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for any subsequent period or for the entire year. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted in the accompanying interim consolidated financial statements. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.
Use of Estimates 
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures. These estimates include, but are not limited to, assessing the collectability of accounts receivable, applied and unapplied production costs, production capacities, the usage and recoverability of inventories and long-lived assets, including deferred income taxes, the incurrence of warranty obligations, impairment of goodwill and other intangible assets, estimation of the cost to complete certain projects, accruals for estimated losses from legal matters, and estimation of the value of stock-based compensation awards, including the probability that the performance criteria of restricted stock awards will be met.
Warranty Obligation 
Warranty Obligation
The Company provides warranties on all product sales. The majority of the Company’s warranties are for one to two years in the normal course of business. The Company accrues for the estimated warranty costs at the time of sale based on historical warranty experience plus any known or expected changes in warranty exposure.
Net Income (Loss) per Share 
Net Income (Loss) per Share
In accordance with the Earnings Per Share Topic of the FASB ASC, basic net income (loss) per share is calculated using the weighted average number of common shares outstanding during the period. Diluted net income per share includes the impact of additional common shares that would have been outstanding if potentially dilutive common shares were issued. Potentially dilutive securities are not considered in the calculation of diluted net loss per share, as their inclusion would be anti-dilutive.
Derivatives and Hedging 
Maxwell uses forward contracts to hedge certain monetary assets and liabilities, primarily receivables and payables, denominated in a foreign currency. The change in fair value of these instruments represents a natural hedge as gains and losses offset the changes in the underlying fair value of the monetary assets and liabilities due to movements in currency exchange rates. These contracts generally expire in one month. These contracts are considered economic hedges and are not designated as hedges under the Derivatives and Hedging Topic of the FASB ASC, therefore, the change in the fair value of the instrument is recognized currently in the consolidated statement of operations.
Fair Value Measurements and Disclosures 
The Company records certain financial instruments at fair value in accordance with the Fair Value Measurements and Disclosures Topic of the FASB ASC. As of March 31, 2013, the financial instruments to which this topic applied were foreign currency forward contracts. As of March 31, 2013, the fair value of these foreign currency forward contracts was a liability of $568,000 which is recorded in “accounts payable and accrued liabilities” in the consolidated balance sheet. The fair value of these derivative instruments is measured using models following quoted market prices in active markets for identical instruments, which is a Level 2 input under the fair value hierarchy of the Fair Value Measurements and Disclosures Topic of the FASB ASC.
Description of Business and Basis of Presentation (Tables)
Schedule of computation of basic and diluted net income (loss) per share 
The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share data):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Numerator
 
 
 
 
Net loss
 
$
(278
)
 
$
(952
)
Denominator
 
 
 
 
Weighted-average common shares outstanding
 
28,825

 
28,122

Effect of potentially dilutive securities:
 
 
 
 
Options to purchase common stock
 
—

 
—

Restricted stock awards
 
—

 
—

Restricted stock unit awards
 
—

 
—

Employee stock purchase plan
 
—

 
—

Weighted-average common shares outstanding, assuming dilution
 
28,825

 
28,122

Net loss per share
 
 
 
 
Basic
 
$
(0.01
)
 
$
(0.03
)
Diluted
 
$
(0.01
)
 
$
(0.03
)
Schedule of instruments convertible into common shares that are not included in the denominator used in the diluted net income (loss) per share calculation because to do so would be anti-dilutive 
The following table summarizes instruments that may be convertible into common shares that are not included in the denominator used in the diluted net income (loss) per share calculation because to do so would be anti-dilutive (in thousands):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Outstanding options to purchase common stock
 
544

 
178

Restricted stock awards
 
442

 
230

Restricted stock unit awards
 
57

 
—

Employee stock purchase plan awards
 
—

 
—

Restatement of Previously issued Financial Statements (Tables)
Schedule of error corrections and prior period adjustments
The restated quarterly condensed consolidated statement of operations for the first quarter of fiscal year 2012 is presented below (in thousands, except per share data):
 
 
Three Months Ended March 31, 2012
 
 
As previously reported
 
Restatement Adjustments
 
Restated
Revenue
 
$
39,230

 
$
(3,426
)
 
$
35,804

Cost of revenue
 
23,093

 
(2,446
)
 
20,647

Gross profit
 
16,137

 
(980
)
 
15,157

Operating expenses:
 
 
 
 
 
 
Selling, general and administrative
 
9,286

 
502

 
9,788

Research and development
 
5,596

 
(26
)
 
5,570

Total operating expenses
 
14,882

 
476

 
15,358

Income (loss) from operations
 
1,255

 
(1,456
)
 
(201
)
Interest expense, net
 
(26
)
 
—

 
(26
)
Amortization of debt discount and prepaid debt costs
 
(11
)
 
—

 
(11
)
Income (loss) from operations before income taxes
 
1,218

 
(1,456
)
 
(238
)
Income tax provision
 
714

 
—

 
714

Net income (loss)
 
$
504

 
$
(1,456
)
 
$
(952
)
Net income (loss) per share:
 
 
 
 
 
 
Basic
 
$
0.02

 
$
(0.05
)
 
$
(0.03
)
Diluted
 
$
0.02

 
$
(0.05
)
 
$
(0.03
)
Weighted average common shares outstanding:
 
 
 
 
 
 
Basic
 
28,122

 
 
 
28,122

Diluted
 
28,559

 
 
 
28,122

The restated quarterly condensed consolidated statement of cash flows for the first quarter of fiscal year 2012 is presented below (in thousands):
 
 
Three Months Ended March 31, 2012
 
 
As previously reported
 
Restatement Adjustments
 
Restated
OPERATING ACTIVITIES:
 
 
 
 
 
 
Net income (loss)
 
$
504

 
(1,456
)
 
$
(952
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
Depreciation
 
1,768

 
—

 
1,768

Amortization of intangible assets
 
134

 
—

 
134

Amortization of debt discount and prepaid debt costs
 
11

 
—

 
11

Pension cost
 
46

 
—

 
46

Stock-based compensation expense
 
1,286

 
—

 
1,286

Recovery of losses on accounts receivable
 
(103
)
 
(69
)
 
(172
)
Changes in operating assets and liabilities:
 
 
 
—

 
 
Trade and other accounts receivable
 
(6,568
)
 
2,535

 
(4,033
)
Inventories
 
(3,211
)
 
(2,571
)
 
(5,782
)
Prepaid expenses and other assets
 
229

 
(113
)
 
116

Accounts payable and accrued liabilities and deferred revenue
 
(3,217
)
 
1,773

 
(1,444
)
Accrued employee compensation
 
(434
)
 
(99
)
 
(533
)
Deferred income taxes
 
11

 
—

 
11

Other long-term liabilities
 
(2,263
)
 
—

 
(2,263
)
Net cash used in operating activities
 
(11,807
)
 
—

 
(11,807
)
INVESTING ACTIVITIES:
 
 
 
 
 
 
Purchases of property and equipment
 
(4,057
)
 
—

 
(4,057
)
Net cash used in investing activities
 
(4,057
)
 
—

 
(4,057
)
FINANCING ACTIVITIES:
 
 
 
 
 
 
Principal payments on long-term debt and short-term borrowings
 
(3,183
)
 
—

 
(3,183
)
Proceeds from long-term and short-term borrowings
 
8,161

 
—

 
8,161

Proceeds from sale of common stock, net of offering costs
 
10,283

 
—

 
10,283

Repurchase of shares
 
(286
)
 
—

 
(286
)
Proceeds from issuance of common stock under equity compensation plans
 
1,319

 
—

 
1,319

Net cash provided by financing activities
 
16,294

 
—

 
16,294

Increase in cash and cash equivalents from operations
 
430

 
—

 
430

Effect of exchange rate changes on cash and cash equivalents
 
909

 
—

 
909

Increase in cash and cash equivalents
 
1,339

 
—

 
1,339

Cash and cash equivalents, beginning of period
 
29,289

 
—

 
29,289

Cash and cash equivalents, end of period
 
$
30,628

 
—

 
$
30,628

Balance Sheet Details (Tables)
Schedule of inventories 
Inventories
 
 
March 31, 2013
 
December 31, 2012
 
 
 
(Restated)
Raw material and purchased parts
 
$
14,525

 
$
13,114

Work-in-process
 
2,864

 
1,753

Finished goods
 
16,085

 
17,511

Consigned finished goods
 
8,862

 
9,242

Total inventories
 
$
42,336

 
$
41,620

Schedule of intangible assets 
Intangible Assets
Intangible assets consisted of the following:
 
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Foreign
Currency
Adjustment
 
Net
Carrying
Value
As of March 31, 2013
 
 
 
 
 
 
 
 
Patents
 
$
2,476

 
$
(1,954
)
 
$
—

 
$
522

Developed core technology
 
1,100

 
(1,100
)
 
—

 
—

Patent license agreement
 
741

 
(640
)
 
(48
)
 
53

Total intangible assets at March 31, 2013
 
$
4,317

 
$
(3,694
)
 
$
(48
)
 
$
575

 
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Foreign
Currency
Adjustment
 
Net
Carrying
Value
As of December 31, 2012
 
 
 
 
 
 
 
 
Patents
 
$
2,476

 
$
(1,903
)
 
$
—

 
$
573

Developed core technology
 
1,100

 
(1,100
)
 
—

 
—

Patent license agreement
 
741

 
(606
)
 
(39
)
 
96

Total intangible assets at December 31, 2012
 
$
4,317

 
$
(3,609
)
 
$
(39
)
 
$
669

Schedule of change in the carrying amount of goodwill 
Goodwill
The change in the carrying amount of goodwill from December 31, 2012 to March 31, 2013 is as follows:
Balance at December 31, 2012
 
$
25,416

Foreign currency translation adjustments
 
(813
)
Balance at March 31, 2013
 
$
24,603

Schedule of accrued warranty 
Accrued Warranty
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Beginning balance
 
$
269

 
$
258

Product warranties issued
 
86

 
63

Settlement of warranties
 
(4
)
 
(13
)
Change related to preexisting warranties
 
(80
)
 
(27
)
Foreign currency translation adjustments
 
(4
)
 
6

Ending balance
 
$
267

 
$
287

Schedule of accumulated other comprehensive income 
Accumulated Other Comprehensive Income
 
 
Foreign
Currency
Translation
Adjustment
 
Defined Benefit
Pension Plan
 
Accumulated
Other
Comprehensive
Income
 
Affected Line Items in the Statement of Operations
Balance as of December 31, 2012
 
$
16,376

 
$
(3,845
)
 
$
12,531

 
 
Other comprehensive loss before reclassifications
 
(2,844
)
 
—

 
(2,844
)
 
 
Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
64

 
64

 
Selling, General and Administrative Expense
Net other comprehensive income (loss) for three months ended March 31, 2013
 
(2,844
)
 
64

 
(2,780
)
 
 
Balance as of March 31, 2013
 
$
13,532

 
$
(3,781
)
 
$
9,751

 
 
Foreign Currency Derivative Instruments (Tables)
Schedule of gains (losses) on foreign currency forward contracts 
The net gains and losses on foreign currency forward contracts included in cost of revenue and selling, general and administrative expense are as follows (in thousands):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Cost of revenue
 
$
12

 
$
(2
)
Selling, general and administrative
 
(1,387
)
 
395

Total gain (loss)
 
$
(1,375
)
 
$
393

Schedule of foreign currency gains and losses on underlying assets and liabilities 
Foreign currency gains and losses on those underlying monetary assets and liabilities included in cost of revenue and selling, general and administrative expense are as follows (in thousands):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Cost of revenue
 
$
(8
)
 
$
13

Selling, general and administrative
 
1,246

 
(997
)
Total gain (loss)
 
$
1,238

 
$
(984
)
Schedule of derivative instruments in consolidated balance sheets 
The following table presents gross amounts, amounts offset and net amounts presented in the condensed consolidated balance sheets for the Company's derivative instruments measured at fair value (in thousands):
 
 
March 31,
 
 
2013
 
2012
Gross amounts of recognized assets (liabilities)
 
$
(483
)
 
$
(41
)
Gross amounts offset in the condensed consolidated balance sheets
 
85

 
5

Net amount of recognized asset (liability) presented in condensed consolidated balance sheets
 
$
(568
)
 
$
(46
)
Stock Plans (Tables)
Schedule of stock-based compensation expense 
Compensation cost for restricted stock, restricted stock units, employee stock options and the ESPP included in cost of revenue; selling, general and administrative expense; and research and development expense is as follows (in thousands):
 
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Cost of revenue
 
$
273

 
$
142

Selling, general and administrative
 
497

 
962

Research and development
 
187

 
182

Total stock-based compensation expense
 
$
957

 
$
1,286

Schedule of employee stock purchase plan weighted-average assumptions 
The following table summarizes the amount of compensation expense recognized for restricted stock awards for the three months ended March 31, 2013 and 2012 (in thousands):
 
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Service-based restricted stock
 
$
648

 
$
479

Performance-based restricted stock
 
18

 
63

Total compensation expense recognized for restricted stock awards
 
$
666

 
$
542

Schedule of stock-based compensation expense 
The fair value of the ESPP shares was estimated using the Black-Scholes valuation model for a call and a put option with the following weighted-average assumptions:
 
 
For the offering period beginning January 1 and ending June 30
 
 
 
 
2012
Expected dividends
 
$
—

Exercise price
 
16.24

Expected volatility
 
63
%
Average risk-free interest rate
 
0.06
%
Expected life/term (in years)
 
0.5

Fair value per share
 
$
5.26

Defined Benefit Plan (Tables)
Schedule of components of net periodic pension income
Components of net periodic pension cost are as follows (in thousands):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Service cost
 
$
207

 
$
171

Interest cost
 
125

 
166

Expected return on plan assets
 
(383
)
 
(357
)
Prior service cost amortization
 
11

 
11

Deferred loss amortization
 
45

 
55

Net periodic pension cost
 
$
5

 
$
46

Description of Business and Basis of Presentation (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Schedule of computation of basic and diluted net income (loss) per share
 
 
Net loss
$ (278)
$ (952)
Effect of assumed conversion of convertible debentures
 
 
Weighted-average common shares outstanding
28,825 
28,122 
Weighted-average common shares outstanding, assuming dilution
28,825 
28,122 
Net loss per share
 
 
Basic
$ (0.01)
$ (0.03)
Diluted
$ (0.01)
$ (0.03)
Options to purchase common stock
 
 
Effect of assumed conversion of convertible debentures
 
 
Effect of potentially dilutive securities
0 
0 
Restricted stock awards
 
 
Effect of assumed conversion of convertible debentures
 
 
Effect of potentially dilutive securities
0 
0 
Restricted stock unit awards
 
 
Effect of assumed conversion of convertible debentures
 
 
Effect of potentially dilutive securities
0 
0 
Employee stock purchase plan
 
 
Effect of assumed conversion of convertible debentures
 
 
Effect of potentially dilutive securities
0 
0 
Description of Business and Basis of Presentation (Details 1)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Outstanding options to purchase common stock
 
 
Schedule of instruments convertible into common shares that are not included in the denominator used in the diluted net income (loss) per share calculation because to do so would be anti-dilutive
 
 
Anti-dilutive, shares
544 
178 
Restricted stock awards
 
 
Schedule of instruments convertible into common shares that are not included in the denominator used in the diluted net income (loss) per share calculation because to do so would be anti-dilutive
 
 
Anti-dilutive, shares
442 
230 
Restricted stock unit awards
 
 
Schedule of instruments convertible into common shares that are not included in the denominator used in the diluted net income (loss) per share calculation because to do so would be anti-dilutive
 
 
Anti-dilutive, shares
57 
0 
Employee stock purchase plan
 
 
Schedule of instruments convertible into common shares that are not included in the denominator used in the diluted net income (loss) per share calculation because to do so would be anti-dilutive
 
 
Anti-dilutive, shares
0 
0 
Description of Business and Basis of Presentation (Details Textual) (USD $)
3 Months Ended
Mar. 31, 2013
Segment
manufacturing_location
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Manufacturing locations
2 
Operating segments
1 
Warranty period, minimum, in years
1 year 
Warranty period, maximum, in years
2 years 
Additional paid in capital increase
$ 1,200,000 
Amount associated with stock-based compensation plans
1,200,000 
Repurchase of shares
$ 20,000 
Restatement of Previously issued Financial Statements (Quarterly Consolidated Statement of Operations) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Revenue
$ 47,748 
$ 35,804 
Cost of revenue
29,518 
20,647 
Gross Profit
18,230 
15,157 
Operating expenses:
 
 
Selling, general and administrative
11,502 
9,788 
Research and development
6,023 
5,570 
Total operating expenses
17,525 
15,358 
Income (loss) from operations
705 
(201)
Interest expense, net
(44)
(26)
Amortization of debt discount and prepaid debt costs
(15)
(11)
Income (loss) from operations before income taxes
646 
(238)
Income tax provision
924 
714 
Net income (loss)
(278)
(952)
Net income (loss) per share:
 
 
Earnings per share, basic
$ (0.01)
$ (0.03)
Earnings per share, diluted
$ (0.01)
$ (0.03)
Weighted average common shares outstanding:
 
 
Weighted average number of shares outstanding, basic
28,825 
28,122 
Weighted average number of shares outstanding, diluted
28,825 
28,122 
Scenario, Previously Reported [Member]
 
 
Revenue
 
39,230 
Cost of revenue
 
23,093 
Gross Profit
 
16,137 
Operating expenses:
 
 
Selling, general and administrative
 
9,286 
Research and development
 
5,596 
Total operating expenses
 
14,882 
Income (loss) from operations
 
1,255 
Interest expense, net
 
(26)
Amortization of debt discount and prepaid debt costs
 
(11)
Income (loss) from operations before income taxes
 
1,218 
Income tax provision
 
714 
Net income (loss)
 
504 
Net income (loss) per share:
 
 
Earnings per share, basic
 
$ 0.02 
Earnings per share, diluted
 
$ 0.02 
Weighted average common shares outstanding:
 
 
Weighted average number of shares outstanding, basic
 
28,122 
Weighted average number of shares outstanding, diluted
 
28,559 
Restatement Adjustment [Member]
 
 
Revenue
 
(3,426)
Cost of revenue
 
(2,446)
Gross Profit
 
(980)
Operating expenses:
 
 
Selling, general and administrative
 
502 
Research and development
 
(26)
Total operating expenses
 
476 
Income (loss) from operations
 
(1,456)
Interest expense, net
 
0 
Amortization of debt discount and prepaid debt costs
 
0 
Income (loss) from operations before income taxes
 
(1,456)
Income tax provision
 
0 
Net income (loss)
 
$ (1,456)
Net income (loss) per share:
 
 
Earnings per share, basic
 
$ (0.05)
Earnings per share, diluted
 
$ (0.05)
Restatement of Previously issued Financial Statements (Quarterly Consolidated Statement of Cash Flows) (Details) (USD $)
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
OPERATING ACTIVITIES:
 
 
Net income (loss)
$ (278,000)
$ (952,000)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation
2,118,000 
1,768,000 
Amortization of intangible assets
91,000 
134,000 
Amortization of debt discount and prepaid debt costs
15,000 
11,000 
Pension cost
5,000 
46,000 
Stock-based compensation expense
957,000 
1,286,000 
Recovery of losses on accounts receivable
10,000 
(172,000)
Changes in operating assets and liabilities:
 
 
Trade and other accounts receivable
152,000 
(4,033,000)
Inventories
(880,000)
(5,782,000)
Prepaid expenses and other assets
77,000 
116,000 
Accounts payable and accrued liabilities and deferred revenue
5,624,000 
(1,444,000)
Accrued employee compensation
1,116,000 
(533,000)
Deferred income taxes
(8,000)
11,000 
Other long-term liabilities
(33,000)
(2,263,000)
Net cash used in operating activities
8,966,000 
(11,807,000)
INVESTING ACTIVITIES:
 
 
Purchases of property and equipment
(2,026,000)
(4,057,000)
Net cash used in investing activities
(2,026,000)
(4,057,000)
FINANCING ACTIVITIES:
 
 
Principal payments on long-term debt and short-term borrowings
(3,608,000)
(3,183,000)
Proceeds from long-term and short-term borrowings
3,318,000 
8,161,000 
Proceeds from sale of common stock, net of offering costs
0 
10,283,000 
Repurchase of shares
(20,000)
(286,000)
Proceeds from issuance of common stock under equity compensation plans
281,000 
1,319,000 
Net cash provided by financing activities
(29,000)
16,294,000 
Increase in cash and cash equivalents from operations
6,911,000 
430,000 
Effect of exchange rate changes on cash and cash equivalents
(1,526,000)
909,000 
Increase in cash and cash equivalents
5,385,000 
1,339,000 
Cash and cash equivalents, at carrying value
34,124,000 
30,628,000 
Scenario, Previously Reported [Member]
 
 
OPERATING ACTIVITIES:
 
 
Net income (loss)
 
504,000 
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation
 
1,768,000 
Amortization of intangible assets
 
134,000 
Amortization of debt discount and prepaid debt costs
 
11,000 
Pension cost
 
46,000 
Stock-based compensation expense
 
1,286,000 
Recovery of losses on accounts receivable
 
(103,000)
Changes in operating assets and liabilities:
 
 
Trade and other accounts receivable
 
(6,568,000)
Inventories
 
(3,211,000)
Prepaid expenses and other assets
 
229,000 
Accounts payable and accrued liabilities and deferred revenue
 
(3,217,000)
Accrued employee compensation
 
(434,000)
Deferred income taxes
 
11,000 
Other long-term liabilities
 
(2,263,000)
Net cash used in operating activities
 
(11,807,000)
INVESTING ACTIVITIES:
 
 
Purchases of property and equipment
 
(4,057,000)
Net cash used in investing activities
 
(4,057,000)
FINANCING ACTIVITIES:
 
 
Principal payments on long-term debt and short-term borrowings
 
(3,183,000)
Proceeds from long-term and short-term borrowings
 
8,161,000 
Proceeds from sale of common stock, net of offering costs
 
10,283,000 
Repurchase of shares
 
(286,000)
Proceeds from issuance of common stock under equity compensation plans
 
1,319,000 
Net cash provided by financing activities
 
16,294,000 
Increase in cash and cash equivalents from operations
 
430,000 
Effect of exchange rate changes on cash and cash equivalents
 
909,000 
Increase in cash and cash equivalents
 
1,339,000 
Cash and cash equivalents, at carrying value
 
30,628,000 
Restatement Adjustment [Member]
 
 
OPERATING ACTIVITIES:
 
 
Net income (loss)
 
(1,456,000)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation
 
0 
Amortization of intangible assets
 
0 
Amortization of debt discount and prepaid debt costs
 
0 
Pension cost
 
0 
Stock-based compensation expense
 
0 
Recovery of losses on accounts receivable
 
(69,000)
Changes in operating assets and liabilities:
 
 
Trade and other accounts receivable
 
2,535,000 
Inventories
 
(2,571,000)
Prepaid expenses and other assets
 
(113,000)
Accounts payable and accrued liabilities and deferred revenue
 
1,773,000 
Accrued employee compensation
 
(99,000)
Deferred income taxes
 
0 
Other long-term liabilities
 
0 
Net cash used in operating activities
 
0 
INVESTING ACTIVITIES:
 
 
Purchases of property and equipment
 
0 
Net cash used in investing activities
 
0 
FINANCING ACTIVITIES:
 
 
Principal payments on long-term debt and short-term borrowings
 
0 
Proceeds from long-term and short-term borrowings
 
0 
Proceeds from sale of common stock, net of offering costs
 
0 
Repurchase of shares
 
0 
Proceeds from issuance of common stock under equity compensation plans
 
0 
Net cash provided by financing activities
 
0 
Increase in cash and cash equivalents from operations
 
0 
Effect of exchange rate changes on cash and cash equivalents
 
0 
Increase in cash and cash equivalents
 
0 
Cash and cash equivalents, at carrying value
 
$ 0 
Restatement of Previously issued Financial Statements (Details Textual) (USD $)
In Thousands, unless otherwise specified
2 Months Ended 3 Months Ended
Feb. 28, 2013
customer
Distributor
Mar. 31, 2013
Mar. 31, 2012
Sep. 30, 2012
Other Restatement Adjustments [Member]
Jun. 30, 2011
Other Restatement Adjustments [Member]
Number of distributors, arrangements with extended payment terms
3 
 
 
 
 
Number of distributors, arrangements with return rights and profit margin protection
1 
 
 
 
 
Number of non-distributor customer, arrangements with honor transfer of title at a date later than the customer's purchase orders indicated
1 
 
 
 
 
Reclassification to contra-revenue
 
$ 47,748 
$ 35,804 
 
$ (2,600)
Selling, general and administrative
 
11,502 
9,788 
 
(2,600)
Decrease in income tax provision
 
$ (924)
$ (714)
$ 54 
 
Balance Sheet Details (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Schedule of inventories
 
 
Raw material and purchased parts
$ 14,525 
$ 13,114 
Work-in-process
2,864 
1,753 
Finished goods
16,085 
17,511 
Consigned finished goods
8,862 
9,242 
Total inventories
$ 42,336 
$ 41,620 
Balance Sheet Details (Details 1) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Schedule of intangible assets
 
 
Gross Carrying Value
$ 4,317 
$ 4,317 
Accumulated Amortization
(3,694)
(3,609)
Foreign Currency Adjustment
(48)
(39)
Net Carrying Value
575 
669 
Patents
 
 
Schedule of intangible assets
 
 
Gross Carrying Value
2,476 
2,476 
Accumulated Amortization
(1,954)
(1,903)
Foreign Currency Adjustment
0 
0 
Net Carrying Value
522 
573 
Developed core technology
 
 
Schedule of intangible assets
 
 
Gross Carrying Value
1,100 
1,100 
Accumulated Amortization
(1,100)
(1,100)
Foreign Currency Adjustment
0 
0 
Net Carrying Value
0 
0 
Patent license agreement
 
 
Schedule of intangible assets
 
 
Gross Carrying Value
741 
741 
Accumulated Amortization
(640)
(606)
Foreign Currency Adjustment
(48)
(39)
Net Carrying Value
$ 53 
$ 96 
Balance Sheet Details (Details 2) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Schedule of change in the carrying amount of goodwill
 
Balance at December 31, 2012
$ 25,416 
Foreign currency translation adjustments
(813)
Balance at March 31, 2013
$ 24,603 
Balance Sheet Details (Details 3) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Schedule of accrued warranty
 
 
Beginning balance
$ 269 
$ 258 
Product warranties issued
86 
63 
Settlement of warranties
(4)
(13)
Change related to preexisting warranties
(80)
(27)
Foreign currency translation adjustments
(4)
6 
Ending balance
$ 267 
$ 287 
Balance Sheet Details (Details 4) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Schedule of accumulated other comprehensive income
 
Balance as of December 31, 2012
$ 12,531 
Other comprehensive loss before reclassifications
(2,844)
Net other comprehensive income (loss) for three months ended March 31, 2013
(2,780)
Balance as of March 31, 2013
9,751 
Foreign Currency Translation Adjustment
 
Schedule of accumulated other comprehensive income
 
Balance as of December 31, 2012
16,376 
Other comprehensive loss before reclassifications
(2,844)
Net other comprehensive income (loss) for three months ended March 31, 2013
(2,844)
Balance as of March 31, 2013
13,532 
Defined Benefit Pension Plan
 
Schedule of accumulated other comprehensive income
 
Balance as of December 31, 2012
(3,845)
Other comprehensive loss before reclassifications
0 
Net other comprehensive income (loss) for three months ended March 31, 2013
64 
Balance as of March 31, 2013
(3,781)
Selling, General and Administrative Expenses [Member]
 
Schedule of accumulated other comprehensive income
 
Amounts reclassified from accumulated other comprehensive income (loss)
64 
Selling, General and Administrative Expenses [Member] |
Foreign Currency Translation Adjustment
 
Schedule of accumulated other comprehensive income
 
Amounts reclassified from accumulated other comprehensive income (loss)
0 
Selling, General and Administrative Expenses [Member] |
Defined Benefit Pension Plan
 
Schedule of accumulated other comprehensive income
 
Amounts reclassified from accumulated other comprehensive income (loss)
$ 64 
Credit Facility (Details Textual) (USD $)
3 Months Ended 12 Months Ended 3 Months Ended 13 Months Ended
Dec. 31, 2011
Jun. 30, 2013
Collateral for Borrowing [Member]
Mar. 31, 2013
Revolving Credit Facility [Member]
Dec. 31, 2011
Revolving Credit Facility [Member]
Dec. 31, 2011
Revolving Credit Facility [Member]
London Interbank Offered Rate (LIBOR) [Member]
Mar. 31, 2013
Secured Debt [Member]
Apr. 30, 2012
Secured Debt [Member]
Equipment Term Loan [Member]
Installment
Mar. 31, 2013
Secured Debt [Member]
Equipment Term Loan [Member]
Mar. 31, 2013
Secured Debt [Member]
London Interbank Offered Rate (LIBOR) [Member]
Equipment Term Loan [Member]
Dec. 31, 2011
Secured Debt [Member]
London Interbank Offered Rate (LIBOR) [Member]
Equipment Term Loan [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
Revolving line of credit
 
 
$ 15,000,000 
 
 
 
 
 
 
 
Required pledge of percentage of equity interests in subsidiary
65.00% 
 
 
 
 
 
 
 
 
 
Borrowings under credit facility, interest payable description
 
 
at either (i) the bank’s prime rate or (ii) LIBOR plus 2.25% 
 
 
Equipment Term Loan and the applicable interest rate was LIBOR plus 2.25% (2.5% as of March 31, 2013) 
 
 
 
 
Borrowings under credit facility, interest related to Libor rate
 
 
 
 
2.25% 
 
 
 
 
2.25% 
Commitment fee percentage
 
 
 
0.25% 
 
 
 
 
 
 
Equipment term loan number of payments
 
 
 
 
 
 
36 
 
 
 
Equipment term loan, interest rate
 
 
 
 
 
 
 
 
2.50% 
 
Restricted cash
 
1,800,000 
 
 
 
 
 
 
 
 
Long-term Debt
 
 
 
 
 
 
 
3,600,000 
 
 
Amounts outstanding under the Revolving Line of Credit
 
 
$ 0 
 
 
 
 
 
 
 
Fair Value Measurements (Details Textual) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2013
Fair Value Disclosures [Abstract]
 
Fair value of derivatives
$ 568 
Foreign Currency Derivative Instruments (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Schedule of gains (losses) on foreign currency forward contracts
 
 
Net gains (loss) on foreign currency forward contracts
$ (1,375)
$ 393 
Cost of revenue [Member]
 
 
Schedule of gains (losses) on foreign currency forward contracts
 
 
Net gains (loss) on foreign currency forward contracts
12 
(2)
Selling, general and administrative [Member]
 
 
Schedule of gains (losses) on foreign currency forward contracts
 
 
Net gains (loss) on foreign currency forward contracts
$ (1,387)
$ 395 
Foreign Currency Derivative Instruments (Details 1) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Schedule of foreign currency gains and losses on underlying assets and liabilities
 
 
Net gains (loss) on foreign currency forward contracts were partially offset on assets and liabilities
$ 1,238 
$ (984)
Cost of Sales [Member]
 
 
Schedule of foreign currency gains and losses on underlying assets and liabilities
 
 
Net gains (loss) on foreign currency forward contracts were partially offset on assets and liabilities
(8)
13 
Selling, General and Administrative Expenses [Member]
 
 
Schedule of foreign currency gains and losses on underlying assets and liabilities
 
 
Net gains (loss) on foreign currency forward contracts were partially offset on assets and liabilities
$ 1,246 
$ (997)
Foreign Currency Derivative Instruments (Details 2) (USD $)
Mar. 31, 2013
Mar. 31, 2012
Foreign Currency Derivatives [Abstract]
 
 
Total notional amount of foreign currency forward contracts not designated as hedges
$ 31,900,000 
 
Gross amounts of recognized assets (liabilities)
(483,000)
(41,000)
Gross amounts offset in the condensed consolidated balance sheets
85,000 
5,000 
Net amount of recognized asset (liability) presented in condensed consolidated balance sheets
$ 568,000 
$ 46,000 
Stock Plans (Details) (USD $)
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Schedule of stock-based compensation expense
 
 
Allocated Share-based Compensation Expense
$ 957,000 
$ 1,286,000 
Share-based Compensation
957,000 
1,286,000 
Restricted Stock Awards [Member]
 
 
Schedule of stock-based compensation expense
 
 
Share-based Compensation
666,000 
542,000 
Service-based restricted stock [Member] |
Restricted Stock Awards [Member]
 
 
Schedule of stock-based compensation expense
 
 
Share-based Compensation
648,000 
479,000 
Performance-based restricted stock [Member] |
Restricted Stock Awards [Member]
 
 
Schedule of stock-based compensation expense
 
 
Share-based Compensation
18,000 
63,000 
Cost of revenue [Member]
 
 
Schedule of stock-based compensation expense
 
 
Allocated Share-based Compensation Expense
273,000 
142,000 
Selling, General and Administrative Expenses [Member]
 
 
Schedule of stock-based compensation expense
 
 
Allocated Share-based Compensation Expense
497,000 
962,000 
Research and development [Member]
 
 
Schedule of stock-based compensation expense
 
 
Allocated Share-based Compensation Expense
$ 187,000 
$ 182,000 
Stock Plans (Details 1) (Employee Stock Purchase Plan [Member], USD $)
6 Months Ended
Jun. 30, 2012
Employee Stock Purchase Plan [Member]
 
Schedule of stock options and employee stock purchase plan weighted-average assumptions
 
Expected dividends
0.00% 
Exercise price
$ 16.24 
Expected volatility
63.00% 
Average risk-free interest rate
0.06% 
Expected life/term (in years)
6 months 
Fair value per share
$ 5.26 
Stock Plans (Details Textual) (USD $)
3 Months Ended
Mar. 31, 2013
share_based_compensation_plan
Mar. 31, 2012
Stock Plans (Textual) [Abstract]
 
 
Stock-based compensation plans
2 
 
Stock-based compensation expense
$ 957,000 
$ 1,286,000 
Outstanding options to purchase common stock [Member]
 
 
Stock Plans (Textual) [Abstract]
 
 
Stock-based compensation expense
177,000 
544,000 
Restricted Stock Awards [Member]
 
 
Stock Plans (Textual) [Abstract]
 
 
Restricted stock granted
305,143 
249,366 
Restricted stock, average grant date fair value per share
$ 10.58 
$ 20.89 
Restricted Stock Unit [Member]
 
 
Stock Plans (Textual) [Abstract]
 
 
Stock-based compensation expense
114,000 
106,000 
Restricted stock, average grant date fair value per share
$ 10.51 
$ 20.65 
Restricted stock unit vesting period (in years)
1 year 
 
Restricted stock unit, granted
56,616 
20,342 
Employee Stock Purchase Plan [Member]
 
 
Stock Plans (Textual) [Abstract]
 
 
Stock-based compensation expense
$ 0 
$ 94,000 
Discount rate from market value on offering date
85.00% 
 
Stock Offering (Details Textual) (USD $)
1 Months Ended 3 Months Ended
Apr. 30, 2011
Mar. 31, 2012
Stock Offering (Textual) [Abstract]
 
 
Sale of common stock shares
$ 125,000,000 
 
Common stock sold, shares
 
572,510 
Net proceeds on sale of common stock
 
$ 10,300,000 
Defined Benefit Plan (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Schedule of components of net periodic pension income
 
 
Service cost
$ 207 
$ 171 
Interest cost
125 
166 
Expected return on plan assets
(383)
(357)
Prior service cost amortization
11 
11 
Deferred loss amortization
45 
55 
Net periodic pension income
$ 5 
$ 46 
Defined Benefit Plan (Details Textual) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Defined Benefit Plan (Textual) [Abstract]
 
 
Employer contributions
$ 183 
$ 189 
Additional employer contributions, expected to be paid during the remainder of fiscal year
$ 483 
 
Legal Proceedings (Details Textual) (USD $)
3 Months Ended 3 Months Ended 3 Months Ended
Dec. 31, 2012
Customer Bankruptcy [Member]
Sep. 30, 2012
Customer Bankruptcy [Member]
Mar. 31, 2012
Customer Bankruptcy [Member]
Jan. 31, 2011
Customer Bankruptcy [Member]
Mar. 31, 2011
SEC Penalties Settlement [Member]
Jan. 31, 2011
SEC Penalties Settlement [Member]
Mar. 31, 2012
Doj Penalties Settlement [Member]
Mar. 31, 2011
Doj Penalties Settlement [Member]
Mar. 31, 2013
Doj Penalties Settlement [Member]
Jan. 31, 2011
Doj Penalties Settlement [Member]
Loss Contingencies [Line Items]
 
 
 
 
 
 
 
 
 
 
Legal agree upon settle amount
$ 525,000 
 
 
 
 
$ 6,400,000 
 
 
$ 2,300,000 
$ 8,000,000 
Payments for legal settlements
 
 
 
 
3,200,000 
 
2,300,000 
3,500,000 
 
 
Bankruptcy proceedings settlement offer
 
 
750,000 
250,000 
 
 
 
 
 
 
Accrued estimated loss on settlement offer
 
750,000 
 
 
 
 
 
 
 
 
Decrease in settleent accrual under customer bankruptcy claim
$ 225,000