Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v2.4.0.6
Commitments and Contingencies
 12 Months Ended
Mar. 31, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies:
Obligations
The Company leases a 185,000 square foot corporate facility in Aurora, Illinois, to house product distribution, engineering, sales, marketing, manufacturing and 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 $551,000 and $665,000 presented in other long-term liabilities and a short-term deferred lease liability of $114,000 and $94,000 presented in accrued expenses on the Consolidated Balance Sheets as of March 31, 2013, and 2012, respectively, to account for the straight-line impact on the rental payments. The Company leases two other offices, each approximately 2,500 square feet located in Goleta, CA and Regina, Canada. The Goleta lease is short-term and the Regina lease runs through October, 2017. The leases require the Company to pay utilities, insurance and real estate taxes on the facilities. Total rent expense for all facilities was $2.3 million, $2.2 million and $2.0 million for fiscal years 2013, 2012 and 2011, respectively. In fiscal years 2013 and 2012, rent expense was offset by $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, 2013 consisted of the following:
 
Payments due by fiscal year
(in thousands)
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Purchase obligations
$
6,542

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
6,542

Future minimum lease payments for operating leases
2,608

 
2,111

 
2,131

 
2,152

 
1,076

 
—

 
10,078

Future obligations and commitments
$
9,150

 
$
2,111

 
$
2,131

 
$
2,152

 
$
1,076

 
$
—

 
$
16,620


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 are 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 are being vigorously defended.  The Company is also subject to audit by tax authorities in various jurisdictions. 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 and therefore the Company is sometimes unable to make a reasonable estimate or range of estimates of the potential liability.  Therefore, judgments could be rendered or settlements entered, which 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, 2013, and March 31, 2012, the Company has not recorded any contingent liability attributable to existing litigation.
Wi-LAN Inc. v. Westell Technologies, Inc. et al.
In October 2007, Wi-LAN Inc. (“Wi-LAN”), a patent-holding company existing under the laws of Canada, filed two complaints against the Company, amongst other defendants, in the U.S. District Court for the Eastern District of Texas, Marshall Division.  In the complaint, Wi-LAN alleged that certain of the Company’s products infringe U.S. patent numbers 5,282,222 and RE37,802. Wi-LAN sought monetary damages and other relief.  In February 2011, the Company settled the lawsuit with the plaintiff.  The settlement agreement was not material to the Company and concludes the lawsuit.
As of March 31, 2013, and March 31, 2012, the Company had total contingency reserves of $1.7 million and $0.8 million, respectively, related to certain intellectual property and indemnification claims. The contingency reserves are classified as accrued expenses on the Consolidated Balance Sheets.
As of March 31, 2013, and March 31, 2012, the Company had $1.7 million and $0.4 million, respectively, of the contingency reserves related to the discontinued operations of ConferencePlus. The $1.3 million increase in fiscal year 2013 related to impending indemnity claims related to the discontinued operation of ConferencePlus.
In the quarter ended December 31, 2012, the Company resolved, through arbitration, a dispute with NETGEAR regarding an interpretation of the Asset Purchase 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 the three months ended September 30, 2012. All amounts have been paid as of March 31, 2013.
Additionally, as of March 31, 2013, the Company had 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 was $3.5 million. As of 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 $2.3 million (see Notes 1, 5 and 12).