9. Commitments and Contingencies

Contingent Consideration Related to Acquisitions

In connection with several business acquisitions, if certain sales targets for the acquired products are achieved, the Company would pay additional cash consideration. The Company has recorded a liability for the fair value of this contingent consideration at March 31, 2013, based on the present value of the expected future cash flows using a market participant's weighted average cost of capital of 15.3 percent.

The following table summarizes the contingent consideration liability as of March 31, 2013 (in thousands):


					Fair Value
		Estimated			of Estimated
		Remaining			Remaining
Acquisition		Payments			Payments
Schwintek products	$	8,774	^(a)	$	7,111
Level-Up^®six-point leveling system		4,140	^(b)		3,254
Other acquired products		596	^(c)		523
Total	$	13,510		$	10,888

(a) The remaining contingent consideration for two of the three products expires in March 2014. Contingent consideration for the remaining product will cease five years after the product is first sold to customers. Two of the three products acquired have a combined remaining maximum contingent consideration of $7.8 million, of which the Company estimates $5.7 million will be paid. Other than expiration of the contingent consideration period, the remaining products have no maximum contingent consideration.

(b) Other than expiration of the contingent consideration period in February 2016, these products have no maximum contingent consideration.

(c) Contingent consideration expires at various dates through October 2025. Certain of these products have a combined remaining maximum of $3.0 million, while the remaining products have no maximum contingent consideration.

As required, the liability for this contingent consideration is measured at fair value quarterly, considering actual sales of the acquired products, updated sales projections, and the updated market participant weighted average cost of capital. Depending upon the weighted average costs of capital and future sales of the products which are subject to contingent consideration, the Company could record adjustments in future periods.

In the first three months of 2013 and 2012, the net impact of the quarterly fair value adjustments and accretion of the liability was an expense of $0.2 million recorded in selling, general, and administrative expenses.

The following table provides a reconciliation of the Company's contingent consideration liability for the three months ended March 31, (in thousands):


		2013			2012
Balance at beginning of period	$	11,519		$	14,561
Payments		(875	)		(354	)

Accretion		392			481
Fair value adjustments		(148	)		(259	)
Balance at end of the period		10,888			14,429
Less current portion in accrued expenses and other current liabilities		(5,412	)		(4,823	)
Total long-term portion in other long-term liabilities	$	5,476		$	9,606

Executive Succession and Severance

On February 12, 2013, the Company announced that Fredric M. Zinn, President and Chief Executive Officer, will retire effective May 10, 2013. Jason D. Lippert, Chairman and Chief Executive Officer of Lippert Components and Kinro, has been appointed to succeed Mr. Zinn as Chief Executive Officer of Drew. Scott T. Mereness, President of Lippert Components and Kinro, has been appointed to succeed Mr. Zinn as President of Drew. Both of these appointments will be effective May 10, 2013. The Company also announced the relocation of its corporate headquarters from White Plains, New York to Elkhart County, Indiana, the location of the corporate headquarters of Lippert Components and Kinro.

In connection with the Company's executive succession and corporate relocation, the Company recorded pre-tax charges of $1.5 million in the fourth quarter of 2012 and $1.1 million in the first quarter of 2013, related to contractual obligations for severance and the acceleration of equity awards held by certain employees whose employment will terminate as a result of the relocation to Indiana. The Company will record an additional pre-tax charge of $0.7 million related to contractual obligations in the second quarter of 2013, with no additional related charges expected thereafter. The liability for executive succession and severance obligations will be paid through 2015. Upon completion of the transition, the Company expects to save an estimated $2 million annually in general and administrative costs.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to product returns, sales rebates, accounts receivable, inventories, goodwill and other intangible assets, income taxes, warranty obligations, self-insurance obligations, lease terminations, asset retirement obligations, long-lived assets, executive succession, post-retirement benefits, stock-based compensation, segment allocations, contingent consideration, environmental liabilities, contingencies and litigation. The Company bases its estimates on historical experience, other available information and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results and events could differ significantly from management estimates.