Item 1. FINANCIAL STATEMENTS

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(unaudited)

	September 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	226,091	$	334,944
Short-term investments		515,947		260,169
Accounts receivable, net		79,859		66,843
Inventories		208,062		157,062
Other current assets		34,535		22,980
Total current assets		1,064,494		841,998
Property and equipment, net		340,060		281,528
Goodwill		6,571		6,571
Deferred tax assets, net		17,726		18,556
Other long-term assets		67,050		59,838
Total assets	$	1,495,901	$	1,208,491

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	72,092	$	38,169
Accrued compensation and related benefits		75,815		45,840
Other accrued liabilities		79,756		62,960
Total current liabilities		227,663		146,969
Income tax liabilities		41,019		37,062
Other long-term liabilities		64,506		57,873
Total liabilities		333,188		241,904
Commitments and contingencies
Stockholders’ equity:
Common stock and additional paid-in capital: $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 46,091 and 45,267, respectively		769,858		657,701
Retained earnings		381,193		298,746
Accumulated other comprehensive income		11,662		10,140
Total stockholders’ equity		1,162,713		966,587
Total liabilities and stockholders’ equity	$	1,495,901	$	1,208,491

See accompanying notes to unaudited condensed consolidated financial statements.

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per-share amounts)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue	$	323,522	$	259,422	$	871,294	$	611,409
Cost of revenue		137,211		116,382		379,709		274,329
Gross profit		186,311		143,040		491,585		337,080
Operating expenses:
Research and development		49,468		37,717		136,113		95,346
Selling, general and administrative		56,291		43,503		164,982		116,550
Litigation expense		3,421		1,841		6,645		6,264
Total operating expenses		109,180		83,061		307,740		218,160
Income from operations		77,131		59,979		183,845		118,920
Other income, net		793		2,494		6,411		5,980
Income before income taxes		77,924		62,473		190,256		124,900
Income tax expense		9,154		6,907		20,904		3,412
Net income	$	68,770	$	55,566	$	169,352	$	121,488

Net income per share:
Basic	$	1.50	$	1.24	$	3.70	$	2.72
Diluted	$	1.44	$	1.18	$	3.55	$	2.59
Weighted-average shares outstanding:
Basic		45,970		44,970		45,754		44,737
Diluted		47,852		46,955		47,772		46,819

See accompanying notes to unaudited condensed consolidated financial statements.

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income	$	68,770		$	55,566		$	169,352		$	121,488
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(371	)		6,936			2,592			5,072
Change in unrealized gain (loss) on available-for-sale securities, net of tax of $32, $30, $177 and $(321), respectively		(268	)		(368	)		(1,070	)		2,888
Other comprehensive income (loss), net of tax		(639	)		6,568			1,522			7,960
Comprehensive income	$	68,131		$	62,134		$	170,874		$	129,448

See accompanying notes to unaudited condensed consolidated financial statements.

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per-share amounts)

(unaudited)

								Accumulated
	Common Stock and							*Other*			*Total*
	Additional Paid-in Capital				*Retained*			*Comprehensive*			****Stockholders’
Three Months Ended September 30, 2021	*Shares*		*Amount*		*Earnings*			*Income*			*Equity*
Balance as of July 1, 2021		45,917	$	733,672	$	341,382		$	12,301		$	1,087,355
Net income		-		-		68,770			-			68,770
Other comprehensive loss		-		-		-			(639	)		(639	)
Dividends and dividend equivalents declared ($0.60 per share)		-		-		(28,959	)		-			(28,959	)
Common stock issued under the employee equity incentive plan		167		2,227		-			-			2,227
Common stock issued under the employee stock purchase plan		7		2,377		-			-			2,377
Stock-based compensation expense		-		31,582		-			-			31,582
Balance as of September 30, 2021		46,091	$	769,858	$	381,193		$	11,662		$	1,162,713

								Accumulated
	Common Stock and							*Other*			*Total*
	Additional Paid-in Capital				*Retained*			*Comprehensive*			****Stockholders’
Three Months Ended September 30, 2020	*Shares*		*Amount*		*Earnings*			*Income (Loss)*			*Equity*
Balance as of July 1, 2020		44,911	$	605,165	$	247,864		$	(4,084	)	$	848,945
Net income		-		-		55,566			-			55,566
Other comprehensive income		-		-		-			6,568			6,568
Dividends and dividend equivalents declared ($0.50 per share)		-		-		(23,777	)		-			(23,777	)
Common stock issued under the employee equity incentive plan		173		2,347		-			-			2,347
Common stock issued under the employee stock purchase plan		12		1,927		-			-			1,927
Stock-based compensation expense		-		22,993		-			-			22,993
Balance as of September 30, 2020		45,096	$	632,432	$	279,653		$	2,484		$	914,569

								Accumulated
	Common Stock and							*Other*		*Total*
	Additional Paid-in Capital				*Retained*			*Comprehensive*		****Stockholders’
Nine Months Ended September 30, 2021	*Shares*		*Amount*		*Earnings*			*Income*		*Equity*
Balance as of January 1, 2021		45,267	$	657,701	$	298,746		$	10,140	$	966,587
Net income		-		-		169,352			-		169,352
Other comprehensive income		-		-		-			1,522		1,522
Dividends and dividend equivalents declared ($1.80 per share)		-		-		(86,905	)		-		(86,905	)
Common stock issued under the employee equity incentive plan		807		15,147		-			-		15,147
Common stock issued under the employee stock purchase plan		17		4,670		-			-		4,670
Stock-based compensation expense		-		92,340		-			-		92,340
Balance as of September 30, 2021		46,091	$	769,858	$	381,193		$	11,662	$	1,162,713

								Accumulated
	Common Stock and							*Other*			*Total*
	Additional Paid-in Capital				*Retained*			*Comprehensive*			****Stockholders’
Nine Months Ended September 30, 2020	*Shares*		*Amount*		*Earnings*			*Income (Loss)*			*Equity*
Balance as of January 1, 2020		43,616	$	549,517	$	229,450		$	(5,476	)	$	773,491
Net income		-		-		121,488			-			121,488
Other comprehensive income		-		-		-			7,960			7,960
Dividends and dividend equivalents declared ($1.50 per share)		-		-		(71,285	)		-			(71,285	)
Common stock issued under the employee equity incentive plan		1,452		16,457		-			-			16,457
Common stock issued under the employee stock purchase plan		28		3,819		-			-			3,819
Stock-based compensation expense		-		62,639		-			-			62,639
Balance as of September 30, 2020		45,096	$	632,432	$	279,653		$	2,484		$	914,569

See accompanying notes to unaudited condensed consolidated financial statements.

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net income	$	169,352		$	121,488
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		20,376			13,785
Amortization of premium on available-for-sale securities		3,231			1,984
Gain on deferred compensation plan investments		(2,640	)		(1,420	)
Deferred taxes, net		1,004			3,400
Stock-based compensation expense		92,282			62,581
Other		(8	)		15
Changes in operating assets and liabilities:
Accounts receivable		(13,033	)		(40,826	)
Inventories		(50,968	)		(20,533	)
Other assets		(14,051	)		(6,376	)
Accounts payable		30,032			19,811
Accrued compensation and related benefits		30,030			21,780
Income tax liabilities		4,088			(1,805	)
Other accrued liabilities		22,109			14,271
Net cash provided by operating activities		291,804			188,155
Cash flows from investing activities:
Purchases of property and equipment		(76,849	)		(44,129	)
Purchases of short-term investments		(354,171	)		(270,797	)
Proceeds from maturities and sales of short-term investments		94,192			182,355
Proceeds from sales of long-term investments		400			250
Contributions to deferred compensation plan, net		(1,917	)		(1,116	)
Purchases of intangible assets		(793	)		-
Net cash used in investing activities		(339,138	)		(133,437	)
Cash flows from financing activities:
Property and equipment purchased on extended payment terms		(2,049	)		(4,437	)
Proceeds from common stock issued under the employee equity incentive plan		15,147			16,457
Proceeds from common stock issued under the employee stock purchase plan		4,670			3,819
Dividends and dividend equivalents paid		(80,725	)		(65,477	)
Net cash used in financing activities		(62,957	)		(49,638	)
Effect of change in exchange rates		1,431			1,432
Net increase (decrease) in cash, cash equivalents and restricted cash		(108,860	)		6,512
Cash, cash equivalents and restricted cash, beginning of period		335,071			173,076
Cash, cash equivalents and restricted cash, end of period	$	226,211		$	179,588
Supplemental disclosures for cash flow information:
Cash paid for taxes	$	16,217		$	1,036
Non-cash investing and financing activities:
Liability accrued for property and equipment purchases	$	7,144		$	9,355
Liability accrued for dividends and dividend equivalents	$	31,911		$	26,429

See accompanying notes to unaudited condensed consolidated financial statements.

MONOLITHIC POWER SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by Monolithic Power Systems, Inc. (the “Company” or “MPS”) in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted in accordance with these accounting principles, rules and regulations. The information in this report should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The financial statements contained in this Quarterly Report on Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other future periods.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions used in these condensed consolidated financial statements primarily include those related to revenue recognition, inventory valuation, valuation of share-based awards, contingencies and income tax valuation allowances. Actual results could differ from these estimates and assumptions, and any such differences may be material to the Company’s condensed consolidated financial statements.

The COVID-19 pandemic did not materially and adversely impact the Company's overall operating results or business operations during the three and nine months ended September 30, 2021. As of the date of issuance of these condensed consolidated financial statements, the Company is not aware of any specific event or circumstance related to the COVID-19 pandemic that would require management to update the significant estimates and assumptions used in the preparation of the condensed consolidated financial statements, as compared to those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020_._ As new events continue to evolve and additional information becomes available, any changes to these estimates and assumptions will be recognized in the condensed consolidated financial statements as soon as they become known.

Recently Adopted Accounting Pronouncement

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies and simplifies other aspects of the accounting for income taxes. The standard became effective for annual reporting periods beginning after December 15, 2020. The standard is generally applied prospectively, with certain exceptions. The Company adopted the standard in the first quarter of 2021 and the adoption did not have a material impact on its condensed consolidated financial statements.

2. REVENUE RECOGNITION

Revenue from Product Sales

The Company generates revenue primarily from product sales, which include assembled and tested integrated circuits (“ICs”), as well as dies in wafer form. These product sales accounted for 96% and 97% of the Company’s total revenue for the three months ended September 30, 2021 and 2020_,_ respectively, and 96% and 98% of the Company’s total revenue for the nine months ended September 30, 2021 and 2020, respectively. The remaining revenue primarily includes royalty revenue from licensing arrangements and revenue from wafer testing services performed for third parties, which have not been significant in all periods presented. See Note 7 for the disaggregation of the Company’s revenue by geographic regions and by product families.

The Company sells its products primarily through third-party distributors, value-added resellers, original equipment manufacturers (“OEMs”), original design manufacturers (“ODMs”) and electronic manufacturing service (“EMS”) providers. For the three months ended September 30, 2021 and 2020, 89% and 75%, respectively, of the Company’s product sales were made through distribution arrangements. For the nine months ended September 30, 2021 and 2020, 89% and 79%, respectively, of the Company’s product sales were made through distribution arrangements. These distribution arrangements contain enforceable rights and obligations specific to those distributors and not the end customers. Purchase orders, which are generally governed by sales agreements or the Company's standard terms of sale, set the final terms for unit price, quantity, shipping and payment agreed by both parties. The Company considers purchase orders to be the contracts with customers. The unit price as stated on the purchase orders is considered the observable, stand-alone selling price for the arrangements.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company excludes taxes assessed by government authorities, such as sales taxes, from revenue.

Product sales consist of a single performance obligation that the Company satisfies at a point in time. The Company recognizes product revenue from distributors and direct end customers when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products. In accordance with the shipping terms specified in the contracts, these criteria are generally met when the products are shipped from the Company’s facilities (such as the “Ex Works” shipping term) or delivered to the customers’ locations (such as the “Delivered Duty Paid” shipping term).

Under certain consignment agreements, revenue is not recognized when the products are shipped and delivered to be held at customers’ designated locations because the Company continues to control the products and retain ownership, and the customers do not have an unconditional obligation to pay. The Company recognizes revenue when the customers consume the products from the consigned inventory locations or, in some cases, after a 60-day period from the delivery date has passed, at which time control transfers to the customers and the Company invoices them for payment.

Variable Consideration

The Company accounts for price adjustment and stock rotation rights as variable consideration that reduces the transaction price and recognizes that reduction in the same period the associated revenue is recognized. Four U.S.-based distributors have price adjustment rights when they sell the Company’s products to their end customers at a price that is lower than the distribution price invoiced by the Company. When the Company receives claims from the distributors that products have been sold to the end customers at the lower price, the Company issues the distributors credit memos for the price adjustments. The Company estimates the price adjustments using the expected value method based on an analysis of historical claims, at both the distributor and product level, as well as an assessment of any known trends of product sales mix. Other U.S. distributors and non-U.S. distributors, which make up the majority of the Company’s total sales to distributors, do not have price adjustment rights. The Company records a credit against accounts receivable for the estimated price adjustments, with a corresponding reduction to revenue.

Certain distributors have limited stock rotation rights that permit the return of a small percentage of the previous six months’ purchases in accordance with the contract terms. The Company estimates the stock rotation returns using the expected value method based on an analysis of historical returns, and the current level of inventory in the distribution channel. The Company records a liability for the stock rotation reserve, with a corresponding reduction to revenue. In addition, the Company recognizes an asset for product returns which represents the right to recover products from the customers related to stock rotations, with a corresponding reduction to cost of revenue.

Contract Balances

Accounts Receivable:

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied. As of September 30, 2021 and December 31, 2020_,_ accounts receivable totaled $79.9 million and $66.8 million, respectively. The Company's accounts receivable are short-term, with standard payment terms generally ranging from 30 to 90 days. The Company does not require its customers to provide collateral to support accounts receivable. The Company assesses the collectability by reviewing accounts receivable on a customer-by-customer basis. To manage credit risk, management performs ongoing credit evaluations of the customers’ financial condition, monitors payment performance, and assesses current economic conditions, as well as reasonable and supportable forecasts of future economic conditions, that may affect collectability of the outstanding receivables. For certain high-risk customers, the Company requires standby letters of credit or advance payment prior to shipments of goods. The Company did not recognize any write-offs of accounts receivable in any of the periods presented. As of September 30, 2021 and December 31, 2020_,_ the Company did not record any allowance for credit losses.

Contract Liabilities:

For certain customers located in Asia, the Company requires cash payments two weeks before the products are scheduled to be shipped to the customers. The Company records these payments received in advance of performance as customer prepayments within current accrued liabilities. As of September 30, 2021 and December 31, 2020_,_ customer prepayments totaled $6.7 million and $7.2 million, respectively. The decrease in the customer prepayment balance for the nine months ended September 30, 2021 resulted from a decrease in unfulfilled customer orders for which the Company has received payments. For the nine months ended September 30, 2021_,_ the Company recognized $7.1 million of revenue that was included in the customer prepayment balance as of December 31, 2020_._

Practical Expedients

The Company has elected the practical expedient to expense sales commissions as incurred because the amortization period would have been one year or less.

The Company’s standard payment terms generally require customers to pay 30 to 90 days after the Company satisfies the performance obligations. For those customers who are required to pay in advance, the Company satisfies the performance obligations generally within a quarter. The Company has elected not to determine whether contracts with customers contain significant financing components.

The Company’s unsatisfied performance obligations primarily include products held in consignment arrangements and customer purchase orders for products that the Company has not yet shipped. Because the Company expects to fulfill these performance obligations within one year, the Company has elected not to disclose the amount of these remaining performance obligations.

3. STOCK-BASED COMPENSATION

2014 Equity Incentive Plan

In April 2013_,_ the Board of Directors adopted the 2014 Equity Incentive Plan (the “2014 Plan”), which the Company's stockholders approved in June 2013_._ In October 2014_,_ the Board of Directors approved certain amendments to the 2014 Plan. The amended 2014 Plan became effective on November 13, 2014 and provided for the issuance of up to 5.5 million shares. In April 2020_,_ the Board of Directors further amended and restated the amended 2014 Plan (the “Amended and Restated 2014 Plan”), which the Company's stockholders approved in June 2020_._ The Amended and Restated 2014 Plan became effective on June 11, 2020 and provides for the issuance of up to 10.5 million shares. The Amended and Restated 2014 Plan will expire on June 11, 2030_._ As of September 30, 2021_,_ 5.6 million shares remained available for future issuance under the Amended and Restated 2014 Plan.

Stock-Based Compensation Expense

The Company recognized stock-based compensation expenses as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cost of revenue	$	922	$	707	$	2,622	$	1,906
Research and development		6,646		5,334		19,564		14,666
Selling, general and administrative		24,004		16,934		70,096		46,009
Total stock-based compensation expense	$	31,572	$	22,975	$	92,282	$	62,581
Tax benefit related to stock-based compensation (1)	$	488	$	512	$	1,299	$	1,450

(1)	Amount reflects the tax benefit related to stock-based compensation recorded for equity awards that are expected to generate tax deductions when they vest in future periods.

Restricted Stock Units (“RSUs”)

The Company’s RSUs include time-based RSUs, RSUs with performance conditions (“PSUs”), RSUs with market conditions (“MSUs”), and RSUs with both market and performance conditions (“MPSUs”). Vesting of awards with performance conditions or market conditions is subject to the achievement of pre-determined performance goals and the approval of such achievement by the Compensation Committee of the Board of Directors (the “Compensation Committee”). All awards include service conditions which require continued employment with the Company. A summary of RSU activity is presented in the table below (in thousands, except per-share amounts):

	Time-Based RSUs					PSUs and MPSUs					MSUs					Total
	Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share
Outstanding at January 1, 2021		161		$	151.62		1,390		$	132.60		1,554		$	40.40		3,105		$	87.42
Granted		43		$	375.33		365	(1)	$	352.37		-		$	-		408		$	354.79
Vested		(60	)	$	142.13		(504	)	$	91.73		(243	)	$	23.57		(807	)	$	74.95
Forfeited		(9	)	$	199.05		(12	)	$	100.25		(9	)	$	68.48		(30	)	$	118.31
Outstanding at September 30, 2021		135		$	223.71		1,239		$	214.52		1,302		$	43.33		2,676		$	131.68

(1)	Amount reflects the number of awards that may ultimately be earned based on management’s probability assessment of the achievement of performance conditions at each reporting period.

The intrinsic value related to vested RSUs was $76.8 million and $45.9 million for the three months ended September 30, 2021 and 2020, respectively. The intrinsic value related to vested RSUs was $297.7 million and $267.8 million for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, the total intrinsic value of all outstanding RSUs was $1.3 billion, based on the closing stock price of $484.68. As of September 30, 2021, unamortized compensation expense related to all outstanding RSUs was $186.7 million with a weighted-average remaining recognition period of approximately two years.

Cash proceeds from vested PSUs with a purchase price requirement totaled $15.1 million and $16.5 million for the nine months ended September 30, 2021 and 2020, respectively.

Time-Based RSUs:

For the nine months ended September 30, 2021, the Compensation Committee granted 43,000 RSUs with service conditions to non-executive employees and non-employee directors. The RSUs generally vest over four years for employees and one year for directors, subject to continued service with the Company.

2021 PSUs:

In February 2021_,_ the Compensation Committee granted 80,000 PSUs to the executive officers, which represent a target number of shares that can be earned subject to the achievement of two sets of performance goals (“2021 Executive PSUs”). For the first goal, the executive officers can earn up to 300% of the target number of the 2021 Executive PSUs based on the achievement of the Company’s average two-year (2021 and 2022) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the Semiconductor Industry Association. 50% of the 2021 Executive PSUs will vest in the first quarter of 2023 if the pre-determined revenue goal is met during the performance period. The remaining 2021 Executive PSUs will vest over the following two years on a quarterly basis. For the second goal, the executive officers can earn an additional 100% of the target number of the 2021 Executive PSUs based on the achievement of certain environmental objectives under the environmental, social and governance (“ESG”) initiatives with a performance period through December 31, 2023. The 2021 Executive PSUs related to the ESG goal will fully vest upon achievement of the goal, but no earlier than December 31, 2022. All vested shares related to the ESG goal will be subject to a post-vesting sales restriction period of one year. Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the 2021 Executive PSUs is $114.4 million.

In February 2021_,_ the Compensation Committee granted 14,000 PSUs to certain non-executive employees, which represent a target number of shares that can be earned subject to the achievement of the Company’s 2022 revenue goals for certain regions or product line divisions, or based on the achievement of the Company’s average two-year (2021 and 2022) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the Semiconductor Industry Association (“2021 Non-Executive PSUs”). The maximum number of shares that an employee can earn is either 200% or 300% of the target number of the 2021 Non-Executive PSUs, depending on the job classification of the employee. 50% of the 2021 Non-Executive PSUs will vest in the first quarter of 2023 if the pre-determined performance goals are met during the performance period. The remaining 2021 Non-Executive PSUs will vest over the following two years on an annual or quarterly basis. Assuming the achievement of the highest level of performance goals, the total stock-based compensation cost for the 2021 Non-Executive PSUs is $12.2 million.

The 2021 Executive PSUs and the 2021 Non-Executive PSUs contain a purchase price feature, which requires the employees to pay the Company $30 per share upon vesting of the shares. The $30 purchase price requirement is deemed satisfied and waived if the average stock price for 20 consecutive trading days at any time between the grant date and December 31, 2022 is $30 higher than the grant date stock price of $374.57. This market condition was achieved in the third quarter of 2021. The Company determined the grant date fair value of the 2021 Executive PSUs and the 2021 Non-Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $374.57, simulation term of 4.0 years, expected volatility of 41.4%, risk-free interest rate of 0.3%, and expected dividend yield of 0.6%. In addition, the grant date fair value for the 2021 Executive PSUs subject to the ESG goal included an illiquidity discount of 9.8% to account for the post-vesting sales restrictions.

2004 Employee Stock Purchase Plan (“ESPP”)

For the three months ended September 30, 2021 and 2020, 7,000 and 12,000 shares, respectively, were issued under the ESPP. For the nine months ended September 30, 2021 and 2020, 17,000 and 28,000 shares, respectively, were issued under the ESPP. As of September 30, 2021, 4.5 million shares were available for future issuance under the ESPP.

The intrinsic value of the shares issued was $1.0 million and $1.5 million for the three months ended September 30, 2021 and 2020, respectively. The intrinsic value of the shares issued was $2.4 million and $2.5 million for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, the unamortized expense was $0.6 million, which will be recognized through the first quarter of 2022. The Black-Scholes model was used to value the employee stock purchase rights with the following weighted-average assumptions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Expected term (in years)		0.5			0.5			0.5			0.5
Expected volatility		43.0	%		66.4	%		43.2	%		48.9	%
Risk-free interest rate		0.1	%		0.1	%		0.1	%		0.8	%
Dividend yield		0.5	%		0.7	%		0.6	%		0.9	%

Cash proceeds from the shares issued under the ESPP were $4.7 million and $3.8 million for the nine months ended September 30, 2021 and 2020, respectively.

4. BALANCE SHEET COMPONENTS

Inventories

Inventories consist of the following (in thousands):

	September 30,		December 31,
	2021		2020
Raw materials	$	17,254	$	25,503
Work in process		112,922		77,100
Finished goods		77,886		54,459
Total	$	208,062	$	157,062

Other Current Assets

Other current assets consist of the following (in thousands):

	September 30,		December 31,
	2021		2020
RSU tax withholding proceeds receivable	$	16,075	$	12,504
Prepaid expense		10,638		5,032
Accrued interest receivable		4,094		1,914
Assets for product returns		2,059		1,684
Other		1,669		1,846
Total	$	34,535	$	22,980

Other Long-Term Assets

Other long-term assets consist of the following (in thousands):

	September 30,		December 31,
	2021		2020
Deferred compensation plan assets	$	50,641	$	46,146
Operating lease right-of-use (“ROU”) assets		6,292		3,719
Prepaid expense		2,256		2,340
Debt investment		2,501		2,861
Equity investment in a privately held company		3,215		3,400
Other		2,145		1,372
Total	$	67,050	$	59,838

Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

	September 30,		December 31,
	2021		2020
Dividends and dividend equivalents	$	32,044	$	26,435
Stock rotation and sales returns		7,695		6,005
Accrued purchases of property and equipment		1,033		5,841
Income tax payable		3,884		3,755
Customer prepayments		6,690		7,238
Commissions		1,347		1,107
Operating lease liabilities		2,425		1,406
Warranty		17,776		6,895
Other		6,862		4,278
Total	$	79,756	$	62,960

Other Long-Term Liabilities

Other long-term liabilities consist of the following (in thousands):

	September 30,		December 31,
	2021		2020
Deferred compensation plan liabilities	$	52,707	$	48,280
Dividend equivalents		8,444		7,871
Operating lease liabilities		3,355		1,693
Other		-		29
Total	$	64,506	$	57,873

5. LEASES

Lessee

The Company has operating leases primarily for administrative and sales and marketing offices, manufacturing operations and research and development facilities, employee housing units and certain equipment. These leases have remaining lease terms from less than a year to five years. Some of these leases include options to renew the lease term for up to two years or on a month-to-month basis. The Company does not have finance lease arrangements.

As of September 30, 2021 and December 31, 2020_,_ operating lease ROU assets totaled $6.3 million and $3.7 million, respectively. As of September 30, 2021 and December 31, 2020_,_ operating lease liabilities totaled $5.8 million and $3.1 million, respectively. The following tables summarize certain information related to the leases (in thousands, except percentages):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Lease costs:
Operating lease costs	$	623	$	364	$	1,694	$	1,093
Other		140		87		387		235
Total lease costs	$	763	$	451	$	2,081	$	1,328

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	612	$	394	$	1,622	$	1,097
ROU assets obtained in exchange for new operating lease liabilities	$	793	$	-	$	4,477	$	1,796

	September 30,			December 31,
	2021			2020
Weighted-average remaining lease term (in years)		3.0			2.7
Weighted-average discount rate		2.1	%		2.7	%

As of September 30, 2021, the maturities of the lease liabilities were as follows (in thousands):

2021 (remaining three months)	$	664
2022		2,342
2023		1,505
2024		834
2025		645
Thereafter		8
Total remaining lease payments		5,998
Less: imputed interest		(218	)
Total lease liabilities	$	5,780
Reported as:
Current liabilities	$	2,425
Long-term liabilities	$	3,355

As of September 30, 2021_,_ the Company had operating leases that have not yet commenced with future lease obligations of $4.2 million. The leases are expected to commence in the fourth quarter of 2021 with contractual lease terms ranging from two to five years.

Lessor

The Company owns certain office buildings and leases a portion of these properties to third parties under arrangements that are classified as operating leases. These leases have remaining lease terms ranging from less than one year to five years. Some of these leases include options to renew the lease term for up to five years.

For the three months ended September 30, 2021 and 2020, income related to lease payments was $0.7 million and $0.5 million, respectively. For the nine months ended September 30, 2021 and 2020, income related to lease payments was $1.7 million and $1.3 million, respectively. As of September 30, 2021, future income related to lease payments was as follows (in thousands):

2021 (remaining three months)	$	594
2022		2,293
2023		1,621
2024		631
2025		110
Thereafter		21
Total	$	5,270

6. NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that would occur if outstanding securities or other contracts to issue common stock were exercised or converted into common shares, and calculated using the treasury stock method. Contingently issuable shares, including equity awards with performance conditions or market conditions, are considered outstanding common shares and included in the basic net income per share as of the date that all necessary conditions to earn the awards have been satisfied. Prior to the end of the contingency period, the number of contingently issuable shares included in the diluted net income per share is based on the number of shares, if any, that would be issuable under the terms of the arrangement at the end of the reporting period.

The Company’s RSUs contain forfeitable rights to receive cash dividend equivalents, which are accumulated and paid to the employees when the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the employees do not fulfill the requisite service requirement and, as a result, the awards do not vest. Accordingly, these awards are not treated as participating securities in the net income per share calculation.

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per-share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
Net income	$	68,770	$	55,566	$	169,352	$	121,488

Denominator:
Weighted-average outstanding shares - basic		45,970		44,970		45,754		44,737
Effect of dilutive securities		1,882		1,985		2,018		2,082
Weighted-average outstanding shares - diluted		47,852		46,955		47,772		46,819

Net income per share:
Basic	$	1.50	$	1.24	$	3.70	$	2.72
Diluted	$	1.44	$	1.18	$	3.55	$	2.59

Anti-dilutive common stock equivalents were not material in any of the periods presented.

7. SEGMENT, SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION

The Company operates in one reportable segment that includes the design, development, marketing and sale of high-performance, semiconductor-based power electronics solutions for the computing and storage, automotive, industrial, communications and consumer markets. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company derives a majority of its revenue from sales to customers located outside North America, with geographic revenue based on the customers’ ship-to locations.

The Company sells its products primarily through third-party distributors and value-added resellers, and directly to OEMs, ODMs and EMS providers. The following table summarizes those customers with sales equal to 10% or more of the Company's total revenue:

	Three Months Ended September 30,						Nine Months Ended September 30,
Customer	2021			2020			2021			2020
Distributor A		24	%		22	%		26	%		23	%
Distributor B		15	%		11	%		16	%		*
Distributor C		12	%		*			*			*
Direct customer A		*			14	%		*			11	%

Represents less than 10%.

The Company’s agreements with these third-party customers were made in the ordinary course of business and may be terminated with or without cause by these customers with advance notice. Although the Company may experience a short-term disruption in the distribution of its products and a short-term decline in revenue if its agreement with any of the distributors was terminated, the Company believes that such termination would not have a material adverse effect on its financial statements because it would be able to engage alternative distributors, resellers and other distribution channels to deliver its products to end customers within a short period following the termination of the agreement with the distributor.

The following table summarizes those customers with accounts receivable equal to 10% or more of the Company’s total accounts receivable:

	September 30,			December 31,
Customer	2021			2020
Distributor A		17	%		24	%
Distributor B		18	%		21	%
Value-added reseller A		15	%		13	%
Direct customer A		*			10	%

Represents less than 10%.

The following is a summary of revenue by geographic regions (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Country or Region	2021		2020		2021		2020
China	$	184,796	$	157,215	$	509,072	$	375,708
Taiwan		47,048		40,782		125,756		79,644
Europe		21,328		14,255		62,498		40,770
South Korea		24,442		20,935		62,721		44,452
Southeast Asia		14,820		11,854		38,506		32,256
Japan		20,944		9,433		47,546		25,079
United States		10,091		4,880		24,935		13,298
Other		53		68		260		202
Total	$	323,522	$	259,422	$	871,294	$	611,409

The following is a summary of revenue by product family (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Product Family	2021		2020		2021		2020
DC to DC	$	307,368	$	247,561	$	827,605	$	580,549
Lighting Control		16,154		11,861		43,689		30,860
Total	$	323,522	$	259,422	$	871,294	$	611,409

The following is a summary of long-lived assets by geographic regions (in thousands):

	September 30,		December 31,
Country	2021		2020
China	$	192,485	$	151,752
United States		113,310		101,768
Taiwan		19,187		18,797
Other		15,078		9,211
Total	$	340,060	$	281,528

8. COMMITMENTS AND CONTINGENCIES

Product Warranties

The Company generally provides one to two-year warranties against defects in materials and workmanship and will repair the products, provide replacements at no charge to customers or issue a refund. As they are considered assurance-type warranties, the Company does not account for them as separate performance obligations. Warranty reserve requirements are generally based on a specific assessment of the products sold with warranties when a customer asserts a claim for warranty or a product defect.

The changes in warranty reserves are as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Balance at beginning of period	$	10,873		$	1,174		$	6,895		$	1,139
Warranty provision for product sales		7,757			3,324			12,954			4,364
Settlements made		(770	)		(254	)		(1,739	)		(760	)
Unused warranty provision		(84	)		(345	)		(334	)		(844	)
Balance at end of period	$	17,776		$	3,899		$	17,776		$	3,899

Purchase Commitments

The Company has outstanding purchase commitments with its suppliers and other parties that require the future purchases of goods or services, which primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction or purchases of property and equipment, and license arrangements. As of September 30, 2021_,_ the Company’s outstanding purchase obligations totaled approximately $197.8 million.

Litigation

The Company is a party to actions and proceedings in the ordinary course of business, including potential litigation initiated by its stockholders, challenges to the enforceability or validity of its intellectual property, claims that the Company’s products infringe on the intellectual property rights of others, and employment matters. These proceedings often involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to prosecute and defend. The Company defends itself vigorously against any such claims. As of September 30, 2021_,_ there were no material pending legal proceedings to which the Company was a party.

9. CASH, CASH EQUIVALENTS, INVESTMENTS AND RESTRICTED CASH

The following is a summary of the Company’s cash, cash equivalents and debt investments (in thousands):

	September 30,		December 31,
	2021		2020
Cash	$	212,622	$	300,609
Money market funds		13,469		34,335
Certificates of deposit		139,361		-
Corporate debt securities		369,094		249,671
Commercial paper		-		2,999
U.S. treasuries and government agency bonds		7,492		7,499
Auction-rate securities backed by student-loan notes		2,501		2,861
Total	$	744,539	$	597,974

	September 30,		December 31,
	2021		2020
Reported as:
Cash and cash equivalents	$	226,091	$	334,944
Short-term investments		515,947		260,169
Debt investment within other long-term assets		2,501		2,861
Total	$	744,539	$	597,974

The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of _September 30, 2021 (_in thousands):

	Amortized Cost		Fair Value
Due in less than 1 year	$	113,987	$	114,265
Due in 1 - 5 years		401,166		401,682
Due in greater than 5 years		2,620		2,501
Total	$	517,773	$	518,448

Gross realized gains and losses recognized on the sales of available-for-sale investments were not material for any of the periods presented.

The following tables summarize the unrealized gain and loss positions related to the available-for sale investments (in thousands):

	September 30, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	13,469	$	-	$	-		$	13,469
Certificates of deposit		139,361		-		-			139,361
Corporate debt securities		368,298		1,122		(326	)		369,094
U.S. treasuries and government agency bonds		7,494		1		(3	)		7,492
Auction-rate securities backed by student-loan notes		2,620		-		(119	)		2,501
Total	$	531,242	$	1,123	$	(448	)	$	531,917

	December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	34,335	$	-	$	-		$	34,335
Corporate debt securities		247,591		2,177		(97	)		249,671
Commercial paper		2,999		-		-			2,999
U.S. treasuries and government agency bonds		7,499		2		(2	)		7,499
Auction-rate securities backed by student-loan notes		3,020		-		(159	)		2,861
Total	$	295,444	$	2,179	$	(258	)	$	297,365

The following tables present information about the available-for-sale investments that had been in a continuous unrealized loss position for less than 12 months and for greater than 12 months (in thousands):

	September 30, 2021
	Less than 12 Months					Greater than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	190,629	$	(326	)	$	-	$	-		$	190,629	$	(326	)
U.S. treasuries and government agency bonds		5,992		(3	)		-		-			5,992		(3	)
Auction-rate securities backed by student-loan notes		-		-			2,501		(119	)		2,501		(119	)
Total	$	196,621	$	(329	)	$	2,501	$	(119	)	$	199,122	$	(448	)

	December 31, 2020
	Less than 12 Months					Greater than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	59,144	$	(97	)	$	-	$	-		$	59,144	$	(97	)
U.S. treasuries and government agency bonds		5,998		(2	)		-		-			5,998		(2	)
Auction-rate securities backed by student-loan notes		-		-			2,861		(159	)		2,861		(159	)
Total	$	65,142	$	(99	)	$	2,861	$	(159	)	$	68,003	$	(258	)

An impairment exists when the fair value of an investment is less than its amortized cost basis. As of September 30, 2021 and December 31, 2020, the Company did not consider the impairment of its investments to be a result of credit losses. The Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. When evaluating a debt security for impairment, management reviews factors such as the Company’s intent to sell, or whether it will more likely than not be required to sell, the security before recovery of its amortized cost basis, the extent to which the fair value of the security is less than its cost, the financial condition of the issuer and the credit quality of the investment.

The Company’s auction-rate securities are backed by pools of student loans supported by guarantees by the U.S. Department of Education. The underlying maturities of these securities are up to 25 years. The Company has received all scheduled interest payments on a timely basis pursuant to the terms and conditions of the securities. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities, before recovery of its amortized cost basis. To date, the Company has redeemed $40.7 million, or 94% of the original portfolio in these auction-rate securities, at par without any realized losses.

Non-Marketable Equity Investment

In November 2020_,_ the Company made an equity investment in a privately held Swiss company (the “Investee”) that is accounted for under the measurement alternative. One member of the Company’s Board of Directors is an executive officer of a company that has a commercial relationship with the Investee. In addition, the Company’s Chief Executive Officer has a personal investment in the Investee. As of September 30, 2021 and December 31, 2020_,_ the Company’s investment in the Investee, which is denominated in CHF, had a carrying value of $3.2 million and $3.4 million, respectively. The Company did not record any impairment or adjustments resulting from observable price changes for the three and nine months ended September 30, 2021_._

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Condensed Consolidated Balance Sheets to the amounts reported on the Condensed Consolidated Statements of Cash Flows (in thousands):

	September 30,		December 31,
	2021		2020
Cash and cash equivalents	$	226,091	$	334,944
Restricted cash included in other long-term assets		120		127
Total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Statements of Cash Flows	$	226,211	$	335,071

As of September 30, 2021 and December 31, 2020_,_ restricted cash included a security deposit that is set aside in a bank account and cannot be withdrawn by the Company under the terms of a lease agreement. The restriction will end upon the expiration of the lease.

10. FAIR VALUE MEASUREMENTS

The following tables summarize the fair value of the financial assets measured on a recurring basis (in thousands):

	September 30, 2021
	Total		Level 1		Level 2		Level 3
Money market funds	$	13,469	$	13,469	$	-	$	-
Certificates of deposit		139,361		-		139,361		-
Corporate debt securities		369,094		-		369,094		-
U.S. treasuries and government agency bonds		7,492		-		7,492		-
Auction-rate securities backed by student-loan notes		2,501		-		-		2,501
Mutual funds and money market funds under deferred compensation plan		29,919		29,919		-		-
Total	$	561,836	$	43,388	$	515,947	$	2,501

	December 31, 2020
	Total		Level 1		Level 2		Level 3
Money market funds	$	34,335	$	34,335	$	-	$	-
Corporate debt securities		249,671		-		249,671		-
Commercial paper		2,999		-		2,999		-
U.S. treasuries and government agency bonds		7,499		-		7,499		-
Auction-rate securities backed by student-loan notes		2,861		-		-		2,861
Mutual funds and money market funds under deferred compensation plan		26,924		26,924		-		-
Total	$	324,289	$	61,259	$	260,169	$	2,861

●	Level 1 —includes instruments with quoted prices in active markets for identical assets.

●

Level 2 —includes instruments for which the valuations are based upon quoted market prices in active markets involving similar assets or inputs other than quoted prices that are observable for the assets. The market inputs used to value these instruments generally consist of market yields, recently executed transactions, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Pricing sources may include industry standard data providers, security master files from large financial institutions, and other third-party sources used to determine a daily market value.

●	Level 3 —includes instruments for which the valuations are based on inputs that are unobservable and significant to the overall fair value measurement.

Redemptions and changes in the fair value of the auction-rate securities classified as Level 3 assets were not material for the three and nine months ended September 30, 2021.

11. DEFERRED COMPENSATION PLAN

The following table summarizes the deferred compensation plan balances on the Condensed Consolidated Balance Sheets (in thousands):

	September 30,		December 31,
	2021		2020
Deferred compensation plan asset components:
Cash surrender value of corporate-owned life insurance policies	$	20,722	$	19,222
Fair value of mutual funds and money market funds		29,919		26,924
Total	$	50,641	$	46,146

Deferred compensation plan assets reported in:
Other long-term assets	$	50,641	$	46,146

Deferred compensation plan liabilities reported in:
Accrued compensation and related benefits (short-term)	$	282	$	155
Other long-term liabilities		52,707		48,280
Total	$	52,989	$	48,435

12. OTHER INCOME, NET

The components of other income, net, are as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Interest income	$	3,050		$	2,311		$	8,102		$	7,073
Amortization of premium on available-for-sale securities		(1,305	)		(863	)		(3,231	)		(1,984	)
Gain (loss) on deferred compensation plan investments		(399	)		1,598			2,640			1,420
Foreign currency exchange loss		(171	)		(759	)		(544	)		(889	)
Other		(382	)		207			(556	)		360
Total	$	793		$	2,494		$	6,411		$	5,980

13. INCOME TAXES

The income tax provision or benefit for interim periods is generally determined using an estimate of the Company’s annual effective tax rate and adjusted for discrete items, if any, in the relevant period. Each quarter the estimate of the annual effective tax rate is updated, and if the Company’s estimated tax rate changes, a cumulative adjustment is made.

The income tax expense for the three months ended September 30, 2021 was $9.2 million, or 11.7% of pre-tax income. The income tax expense for the nine months ended September 30, 2021 was $20.9 million, or 11.0% of pre-tax income. The effective tax rates differed from the federal statutory rate primarily due to foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates, the impact of federal tax credits from research and development activities, and excess tax benefits from stock-based compensation. The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the global intangible low-taxed income (“GILTI”) tax.

The income tax expense for the three months ended September 30, 2020 was $6.9 million, or 11.1% of pre-tax income. The income tax expense for the nine months ended September 30, 2020 was $3.4 million, or 2.7% of pre-tax income. The effective tax rates differed from the federal statutory rate primarily due to excess tax benefits from stock-based compensation, and foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates. The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.

The Company’s uncertain tax positions relate to the allocation of income and deductions among its global entities and to the determination of the research and development tax credit. Various events, some of which cannot be predicted, such as clarification of tax law by administrative or judicial means, may occur and would require the Company to increase or decrease its reserves and effective income tax rate over the next twelve months. However, it is not possible to determine either the magnitude or the range of increases or decreases at this time.

14. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes in accumulated other comprehensive income (in thousands):

	Unrealized Gains (Loss) on Available- for-Sale Securities			Foreign Currency Translation Adjustments			Total
Balance as of January 1, 2021	$	1,601		$	8,539		$	10,140
Other comprehensive loss before reclassifications		(754	)		(2,474	)		(3,228	)
Amounts reclassified from accumulated other comprehensive income		(24	)		-			(24	)
Tax effect		124			-			124
Net current period other comprehensive loss		(654	)		(2,474	)		(3,128	)
Balance as of March 31, 2021		947			6,065			7,012
Other comprehensive income (loss) before reclassifications		(169	)		5,437			5,268
Tax effect		21			-			21
Net current period other comprehensive income (loss)		(148	)		5,437			5,289
Balance as of June 30, 2021		799			11,502			12,301
Other comprehensive loss before reclassifications		(287	)		(371	)		(658	)
Amounts reclassified from accumulated other comprehensive income		(13	)		-			(13	)
Tax effect		32			-			32
Net current period other comprehensive loss		(268	)		(371	)		(639	)
Balance as of September 30, 2021	$	531		$	11,131		$	11,662

The amounts reclassified from accumulated other comprehensive income were recorded in other income, net, on the Condensed Consolidated Statements of Operations.

15. DIVIDENDS AND DIVIDEND EQUIVALENTS

Cash Dividend Program

The Company has a dividend program approved by the Board of Directors, pursuant to which the Company intends to pay quarterly cash dividends on its common stock. Based on the Company’s historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month. The Board of Directors declared the following cash dividends (in thousands, except per-share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Dividend declared per share	$	0.60	$	0.50	$	1.80	$	1.50
Total amount	$	27,606	$	22,508	$	82,501	$	67,239

As of September 30, 2021 and December 31, 2020, accrued dividends totaled $27.6 million and $22.6 million, respectively.

The declaration of any future cash dividends is at the discretion of the Board of Directors and will depend on, among other things, the Company’s financial condition, results of operations, capital requirements, business conditions, and other factors that the Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of the stockholders.

The Company anticipates that cash used for future dividend payments will come from its domestic cash, cash generated from ongoing U.S. operations, and cash repatriated from its Bermuda subsidiary. The Company also anticipates that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

Cash Dividend Equivalent Rights

The Company's RSUs contain rights to receive cash dividend equivalents, which entitle employees who hold RSUs to the same dividend value per share as holders of common stock. The dividend equivalents are accumulated and paid to the employees when the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the employees do not fulfill the requisite service requirement and, as a result, the awards do not vest. As of September 30, 2021 and December 31, 2020_,_ accrued dividend equivalents totaled $12.9 million and $11.7 million, respectively.

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