Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.4.0.6
Fair Value Measurements
 9 Months Ended
Dec. 31, 2012
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
Fair value is defined by ASC 820 as the price that would be received upon selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•
Level 1 – Quoted prices in active markets for identical assets and liabilities.
•
Level 2 – Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The Company’s money market funds are measured using Level 1 inputs. The ANTONE contingent consideration described in Note 1 and the note payable guarantee described in Note 8 are measured using Level 3 inputs.
The following table presents financial assets and non-financial liabilities measured at fair value on a recurring basis and their related valuation inputs as of December 31, 2012:
(in thousands)
Total Fair Value of Asset or Liability
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
Balance Sheet Classification
Assets:
 
 
 
 
 
 
 
 
 
Money market funds
$
85,466

 
$
85,466

 
—

 
—

 
Cash and cash equivalents
Liabilities:
 
 
 
 
 
 
 
 
 
Contingent consideration, current
$
181

 
—

 
—

 
$
181

 
Accrued expenses
Contingent consideration, long-term
$
2,221

 
—

 
—

 
$
2,221

 
Contingent consideration long-term
Note payable guarantee
$
14

 
—

 
—

 
$
14

 
Accrued expenses
The following table presents financial assets and liabilities measured at fair value on a recurring basis and their related valuation inputs as of March 31, 2012:
(in thousands)
Total Fair Value of Asset or Liability
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
 
Balance Sheet Classification
Assets:
 
 
 
 
 
 
 
 
 
Money market funds
$
82,931

 
$
82,931

 
—

 
—

 
Cash and cash equivalents
Liabilities:
 
 
 
 
 
 
 
 
 
Note payable guarantee
$
25

 
—

 
—

 
$
25

 
Accrued expenses

The fair value of investments approximates their carrying amounts due to the short-term nature of these financial assets.
In connection with the ANTONE acquisition in the quarter ended June 30, 2012, payment of a portion of the purchase price is contingent upon the profitability of the acquired products for post-closing periods through June 30, 2016 and may be offset by working capital adjustments and other indemnification claims. The Company estimates the fair value of contingent consideration as the present value of the expected payments over the term of the arrangement based on financial forecasts of future profitability of the acquired products, and reaching the forecast. This estimate is subject to ongoing evaluation.
The fair value measurement of contingent consideration as of December 31, 2012 encompasses the following significant unobservable inputs:
($ in thousands)
Unobservable Inputs
Estimated earn-out contingent consideration
$
3,500

Working capital and other adjustment
(469
)
Indemnification related to warranty claims
(303
)
Discount rate
7.5
%
Approximate timing of cash flows
3 years


The following table summarizes contingent consideration activity:
(in thousands)
 
Balance as of March 31, 2012
$
—

Contingent consideration from business acquisition
3,038

Contingent consideration – payments
—

Contingent consideration – change in fair value in G&A expense
136

Working capital and other adjustment
(469
)
Indemnification related to warranty claims
(303
)
Balance as of December 31, 2012
$
2,402