Commitments and Contingencies |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies |
Commitments and Contingencies:
Obligations
The Company leases a corporate facility in Aurora, Illinois. This location houses corporate administration, sales, marketing and the CNS segment product distribution, engineering and manufacturing pursuant to a lease that originated in 1997 and runs through September 2017. The rental payments are currently $2.1 million a year. In accordance with FASB Technical Bulletin 88-1, Issues Related to Accounting of Leases, as codified in ASC Topic 840, Leases (ASC 840), the Company recorded a long-term deferred lease liability of $4,000 and $107,000 presented in other long-term liabilities and a short-term deferred lease liability of $103,000 and $182,000 presented in accrued expenses on the Consolidated Balance Sheets as of March 31, 2017 and 2016, respectively, to account for the straight-line impact on the rental payments. During the fourth quarter of fiscal year 2017, the Company executed a new three-year lease beginning in October 2017 for a portion of our current Aurora, Illinois headquarters facility.
The CNS segment leased an engineering office, located in Regina, Canada, which was terminated on March 31, 2016. The ISMS segment leases an engineering and service center in Dublin, Ohio, which runs through 2019. The IBW segment leases a manufacturing and distribution center and an office in Manchester, New Hampshire. The IBW segment leases runs through 2018. The leases require the Company to pay utilities, insurance and real estate taxes on the facilities. Total rent expense for all facilities was $1.2 million and $1.8 million for fiscal years 2017 and 2016, respectively. In fiscal years 2017 and 2016, rent expense was offset by $0.2 million and $0.1 million of sublease income, respectively. In fiscal years 2017 and 2016, $1.5 million and $1.1 million of lease payments reduced accrued reorganization, respectively.
Future minimum lease obligations as of March 31, 2017 consisted of the following:
A reserve for a net loss on firm purchase commitments of $146,000 and $388,000 is recorded on the balance sheet as Accrued expenses as of March 31, 2017 and 2016, respectively.
Litigation and Contingency Reserves
The Company and its subsidiaries are involved in various assertions, claims, proceedings and requests for indemnification concerning intellectual property, including patent infringement suits involving technologies that may be incorporated in the Company’s products, which are being handled and defended in the ordinary course of business. These matters are in various stages of investigation and litigation, and they are being vigorously defended. Although the Company does not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on its financial condition or results of operations, litigation is inherently unpredictable. Therefore, judgments could be rendered, or settlements entered, that could adversely affect the Company’s operating results or cash flows in a particular period. The Company routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and it records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable. As of March 31, 2017 and March 31, 2016, the Company has not recorded any contingent liability attributable to existing litigation.
As of March 31, 2015, the Company had total contingency reserves of $0.4 million related to the discontinued operations of ConferencePlus, which was sold in fiscal year 2012. In fiscal year 2016, the contingency reserve associated with the sale of CPI was removed when the indemnity period expired and resulted in a pre-tax gain of $0.4 million, which is presented in Income from discontinued operations. See Note 1, Basis of Presentation.
As of March 31, 2016, the Company had contingent cash consideration payable related to an acquisition. The fair value of the contingent consideration liability after offsetting a working capital adjustment and an indemnification claim for warranty obligations was $0.3 million. As of March 31, 2017, the contingent liability was paid in full. The contingent consideration was based upon the profitability of the acquired products for post-closing periods through June 30, 2016, and was offset by working capital adjustments and other indemnification claims. The maximum earn-out that could have been paid before offsets was $3.5 million. The final calculation performed during the quarter ended June 30, 2016, determined the actual cash payment for the contingent consideration to be $2.1 million. In fiscal years 2017 and 2016, the Company made contingent consideration payments of $0.2 million and $0.8 million, respectively. See Note 12.
In the ordinary course of operations the Company receives claims where the Company believes an unfavorable outcome is possible and/or for which no estimate of possible losses can currently be made. A significant customer is a defendant in a patent infringement claim and is asserting possible indemnity rights under contracts with the Company. The customer is considering settlement and may seek to recover from the Company a share of the potential settlement and defense costs. The Company has not made an assessment of the merits of the underlying asserted infringement claims or been involved an any settlement discussions and has responded by asking for additional information, which had not been received and therefore management is currently unable to estimate any losses.
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