Acquisition

6 Months Ended

Sep. 30, 2011

Acquisition [Abstract]

Acquisition

Note 3 — Acquisition

Punch! Software, LLC

On May 17, 2010, the Company completed the acquisition of substantially all of the assets of Punch! Software, LLC, (“Punch!”) a leading provider of home and landscape architectural design software in the United States. Total consideration included; $8.1 million in cash at closing, a $1.1 million note payable on the first anniversary of the closing with interest at a rate of 0.67% per annum, plus up to two performance payments (contingent consideration) of up to $1.25 million each (undiscounted), based on the Company achieving minimum annual net sales of $8.0 million in connection with the acquired assets. If earned, these payments were and are payable on the first and second anniversary of the closing date. The combined fair value of the contingent consideration of $948,000 was estimated by applying the income approach. That measure is based on significant inputs that are not observable in the market. Key assumptions include (1) a discount rate range of 20%-25% and (2) a probability adjusted level of revenues between $7.7 million and $9.4 million. The Company did not achieve the minimum annual sales target of $8.0 million in the first year and therefore the first anniversary contingent payment of $526,000 was reversed during the first quarter of fiscal 2012.

The acquisition of Punch! expanded the Company’s content ownership. The goodwill of $5.7 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Punch!. All goodwill was assigned to the Company’s publishing business. All of the goodwill recognized is expected to be deductible for income tax purposes over a 15 year tax period. This transaction did not qualify as an acquisition of a significant business pursuant to Regulation S-X and financial statements for the acquired business were not filed. Operating results from the date of acquisition are included within the publishing business.

The purchase price was allocated based on estimates of the fair value of assets acquired and liabilities assumed as follows (in thousands):

Consideration:
Cash	$	8,090
Note payable		1,002
Contingent payment obligation — short-term		422
Contingent payment obligation — unearned and unpaid		526
Fair value of total consideration transferred	$	10,040
The Punch! purchase price was allocated as follows:
Accounts receivable	$	1,114
Inventory		815
Prepaid expenses		94
Property and equipment		18
Purchased intangibles		2,787
Goodwill		5,690
Accounts payable		(469	)
Accrued expenses		(9	)
	$	10,040

Net sales of Punch!, included in the Consolidated Statements of Operations for the three and six months ended September 30, 2011 were $1.4 million and $2.8 million, respectively, compared to $2.4 million and $3.1 million for the three and six months ended September 30, 2010, respectively. Although the Company has made reasonable efforts to calculate the precise impact that the Punch! acquisition had on the Company’s net income (loss) for these periods, the Company has deemed it impracticable to determine such amounts.

Acquisition-related costs (included in selling, general, and administrative expenses in the Consolidated Statements of Operations) for the three and six months ended September 30, 2010 were zero and $185,000, respectively.