Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v2.4.0.8
Fair Value Measurements
 12 Months Ended
Mar. 31, 2014
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 is 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 March 31, 2014: 
(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
$
117

 
$
117

 
—

 
—

 
Cash and cash equivalents
Liabilities:
 
 
 
 
 
 
 
 
 
Contingent consideration, current
$
2,067

 
—

 
—

 
$
2,067

 
Contingent consideration
Contingent consideration, long-term
$
574

 
—

 
—

 
$
574

 
Contingent consideration non-current
The following table presents financial assets, excluding cash, and non-financial liabilities measured at fair value on a recurring basis and their related valuation inputs as of March 31, 2013: 
(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
$
52,849

 
$
52,849

 
—

 
—

 
Cash and cash equivalents
Liabilities:
 
 
 
 
 
 
 
 
 
Contingent consideration, long-term
$
2,333

 
—

 
—

 
$
2,333

 
Contingent consideration non-current
The fair value of the money market funds 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 certain 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 actual cash payment may range from $0.6 million to $2.7 million.
The fair value measurement of contingent consideration as of March 31, 2014 and March 31, 2013, encompasses the following significant unobservable inputs:
 
Unobservable Inputs for Fiscal Year Ended March 31,
($ in thousands)
2014
 
2013
Estimated earn-out contingent consideration
$
3,500

 
$
3,500

Working capital and other adjustment
$
(444
)
 
$
(444
)
Indemnification related to warranty claims
$
(303
)
 
$
(303
)
Discount rate
7.5
%
 
7.5
%
Approximate timing of cash flows
1.4 years

 
3.0 years


The following table summarizes contingent consideration activity:
 
Fiscal Year Ended March 31,
($ in thousands)
2014
 
2013
Balance beginning of period
$
2,333

 
$
—

Contingent consideration from business acquisition
—

 
3,038

Contingent consideration – payments
—

 
—

Contingent consideration – change in fair value (included in G&A expense)
308

 
42

Working capital and other adjustment
—

 
(444
)
Indemnification related to warranty claims
—

 
(303
)
Balance end of period
$
2,641

 
$
2,333