STEC, INC.

Note 7 — Supplemental Balance Sheet Information

Inventory:

Inventory consisted of the following (in thousands):

 

		June 30, 2013				December 31, 2012
Raw materials		$	30,447			$	28,899
Work-in-progress			78				208
Finished goods			10,967				12,653
Total		$	41,492			$	41,760

Goodwill, Intangible Assets, and Other Long-Lived Assets:

The Company completed its annual goodwill impairment analysis at December 31, 2012 and determined that no adjustment to the carrying value of goodwill was required. The Company’s assessment resulted in a reporting unit fair value that was greater than its carrying value at December 31, 2012 by approximately 13%. The closing sales price per share of the Company’s common stock was $6.72 and $4.93 and as of June 30, 2013 and December 31, 2012, respectively. Future decreases in the Company’s stock price could indicate the impairment of goodwill, which could require the Company to record a material charge to operations.

Intangible assets with finite lives and other long-lived assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” (“ASC 360”). The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its intangibles assets may not be recoverable in accordance with the provisions of ASC 360. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.

 

Long-term intangible assets consisted of the following (in thousands):

 

		As of June 30, 2013												As of December 31, 2012
		Gross				Accumulated Amortization				Net				Gross				Accumulated Amortization				Net
Developed technology (five years)		$	1,345			$	1,194			$	151			$	1,345			$	1,166			$	179
Customer relationships (five years)			792				792				—				792				792				—
Acquisition-related intangible assets			2,137				1,986				151				2,137				1,958				179
Technology licenses (three years)			8,557				4,368				4,189				8,557				3,592				4,965
Total		$	10,694			$	6,354			$	4,340			$	10,694			$	5,550			$	5,144

Amortization expense charged to cost of revenues was as follows (in thousands):

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Amortization expense		$	402			$	242			$	804			$	523

Future estimated amortization expense of existing long-term intangible assets is as follows (in thousands):

 

		Year Ended December 31,
		2013				2014				2015				2016				2017
Amortization expense		$	803			$	1,763			$	1,096			$	585			$	93

The Company’s strategic investment was as follows (in thousands):

 

		June 30, 2013				December 31, 2012
Strategic investment		$	5,000			$	5,000

The Company’s strategic investment is in a privately held company where the Company does not have the ability to exercise significant influence over the investee. This strategic investment is carried at cost and included in other assets, net in the Unaudited Condensed Consolidated Balance Sheets, and is periodically analyzed to determine whether or not there are indicators of impairment.

Accrued and Other Liabilities:

Accrued and other liabilities consisted of the following (in thousands):

 

		June 30, 2013				December 31, 2012
Accrued payroll costs		$	8,514			$	8,714
Accrued legal expenses			5,965				1,058
Accrued legal settlements			—				36,000
Other			5,738				5,814
Total		$	20,217			$	51,586