Warranty Arrangements

6 Months Ended

Jul. 31, 2011

9. Warranty Arrangements

The Company records an accrual for estimated warranty costs as products are sold. Warranty costs are estimated based on periodic analysis of historical experience. These amounts are recorded in accrued liabilities in the unaudited interim condensed consolidated balance sheets. Changes in the estimated warranty accruals are recorded when the change in estimate is identified. During the fourth quarter of fiscal 2010, the Company recorded an accrual of $4.6 million related to the Recall announced on April 30, 2010. Approximately 500,000 Targus branded 90-watt universal AC power adapters for laptops are affected by the Recall. A summary of the warranty accrual activity is shown in the table below (in thousands):


	As of And For the
	Six Months Ended
	July 31,
	2011			2010
Beginning balance	$	310		$	4,759
Accruals for warranties issued during the period		399			203
Utilization		(679	)		(3,513	)

	$	30		$	1,449

The Company believes that the balance remaining as of July 31, 2011 is adequate to cover our standard warranty costs. As discussed in Note 2 (Summary of Significant Accounting Policies — Use of Estimates) and Note 12 (Subsequent Events), Targus and Comarco entered into a Release and Settlement Agreement (the “Settlement Agreement”) with respect to all matters concerning the Recall in August 2011. In the third quarter, as part of the Settlement Agreement, Targus paid Comarco approximately $290,000 which represents a refund of previous amounts withheld from payment in the first quarter of fiscal 2012 and charged to cost of revenue. During the third quarter Comarco will record the payment received from Targus and it will reduce previously recorded accruals for the Recall to the extent the refund represents amounts in excess of Recall warranty costs.