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Commitments and Contingencies
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Mar. 31, 2014
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies |
Commitments and Contingencies:
Obligations
The Company leases an 185,000 square foot corporate facility in Aurora, Illinois. This location houses the Westell and Kentrox segments product distribution, engineering, sales, marketing and manufacturing as well as corporate administration pursuant to a lease that originated in 1997 and runs through September, 2017. The rental payments are currently $2.0 million a year and increase 2% every other 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 $417,000 and $551,000 presented in other long-term liabilities and a short-term deferred lease liability of $134,000 and $114,000 presented in accrued expenses on the Consolidated Balance Sheets as of March 31, 2014, and 2013, respectively, to account for the straight-line impact on the rental payments. The Westell segment leases two other engineering offices, each approximately 2,500 square feet located in Goleta, California, and Regina, Canada. The Goleta lease is short-term and the Regina lease runs through October, 2017. The Kentrox segment leases a 47,000 square foot manufacturing and office facility in Dublin, Ohio, that ends in October, 2014. A lease for new 9,465 square foot engineering and service center in Dublin, Ohio, will commence in September 2014 which runs through 2019. The CSI segment leases a 16,932 square foot manufacturing and distribution center and a 19,525 square foot office in Manchester, New Hampshire. The CSI 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 $2.8 million, $2.3 million and $2.2 million for fiscal years 2014, 2013 and 2012, respectively. In fiscal years 2014, 2013 and 2012, rent expense was offset by $0.1 million, $0.1 million and $0.4 million of sublease income, respectively.
Purchase obligations consist of inventory that arises in the normal course of business operations. Future obligations and commitments as of March 31, 2014 consisted of the following:
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, 2014, and March 31, 2013, the Company has not recorded any contingent liability attributable to existing litigation.
As of March 31, 2014, and March 31, 2013, the Company had total contingency reserves of $0.7 million and $1.7 million, respectively, related to the discontinued operations of ConferencePlus. The contingency reserves are classified as accrued expenses on the Consolidated Balance Sheets. In fiscal year 2014, the Company paid $1.1 million relating to an indemnification claim. See Note 1, Basis of Presentation.
In fiscal year 2013, the Company resolved, through arbitration, a dispute with NETGEAR regarding an interpretation of the sales agreement covering the CNS asset sale at a cost of $0.9 million. As of March 31, 2012, the Company had a $0.4 million contingency reserve for this claim and recorded an additional expense of $0.5 million during fiscal year 2013. All amounts have been paid as of March 31, 2013.
Additionally, the Company has contingent cash consideration payable related to the ANTONE acquisition. The ANTONE contingent consideration becomes payable based upon the profitability of the acquired products for post-closing periods through June 30, 2016, and is offset by working capital adjustments and certain indemnification claims. The maximum earn-out that could be paid before offsets is $3.5 million. As of March 31, 2014 and March 31, 2013, the fair value of the contingent consideration liability, after an offset for a working capital adjustment and an indemnification claim for warranty obligations, is $2.6 million and $2.3 million, respectively. The first payment will be made in May 2014 (see Note 2, Note 7 and Note 13).
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