Commitments and Contingencies

9 Months Ended

Nov. 30, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

15. Commitments and Contingencies

Contingent Consideration - BridgeCo Acquisition

The Company recorded a liability for contingent consideration as part of the purchase price for the acquisition of BridgeCo. The maximum amount of contingent consideration that can be earned by the sellers is $27.5 million as set forth in the purchase agreement. The fair value of the contingent consideration at acquisition was $8.8 million. This liability was revalued to $7.2 million as of November 30, 2011 based on the likelihood of achieving the performance goals.

The fair value of the contingent consideration arrangement was estimated by applying the income approach. That measure is based on significant inputs that are unobservable in the market, and are therefore Level 3 inputs. Key assumptions include a discount rate of 19% and a probability-adjusted level of annual revenues. The Company performs a quarterly revaluation of contingent consideration and records the change as a component of operating income.

Contingent Consideration - Symwave Acquisition

The Company recorded a liability for contingent consideration as part of the purchase price for the acquisition of Symwave on November 12, 2010 at the estimated fair value of $3.1 million. The contingent consideration arrangement requires the Company to pay the former owners of Symwave an earnout amount equal to one times revenue (less certain agreed upon adjustments), depending on the achievement of certain revenue and gross profit margin performance goals, for each of the four quarterly periods from January 1, 2011 until December 31, 2011. No earnout payments shall be payable for any period after December 31, 2011. No liability was recorded as of February 28, 2011 and November 30, 2011 based on the likelihood of achieving the performance goals.

Contingent Consideration - STS Acquisition

The Company recorded a liability for contingent consideration as part of the purchase price for the acquisition of STS. The contingent consideration arrangement requires the Company to pay the former owners of STS an earnout amount of $3.0 million for the period from January 1, 2011 until December 31, 2011 provided that revenue meets performance goals set forth in the purchase agreement. No earnout payments shall be payable for any period after December 31, 2011. No liability was recorded as of February 28, 2011 and November 30, 2011 based on the likelihood of achieving the performance goals.

Contingent Consideration - Kleer Acquisition

The Company recorded a liability for contingent consideration as part of the purchase price for the acquisition of Kleer. The maximum amount of contingent consideration that can be earned by the sellers was $2.0 million as set forth in the purchase agreement. No liability was recorded as of February 28, 2011 and November 30, 2011 based on the likelihood of achieving the performance goals.

Contingent Consideration - K2L Acquisition

The Company recorded a liability for contingent consideration as part of the purchase price for the acquisition of K2L GmbH (“K2L”). The maximum amount of contingent consideration that can be earned by the sellers is 2.1 million Euros. Fifty percent of the contingent consideration was earned in calendar year 2010 and fifty percent is available to be earned in calendar year 2011 based on the level of achievement of revenue as set forth in the purchase agreement. On March 31, 2011, 1.1 million Euros in stock and cash was paid to the former owners of K2L for meeting calendar year 2010 performance targets. This liability was revalued from $2.8 million as of February 28, 2011to $1.4 million as of November 30, 2011 as a result of the payout of the 2010 earnout and the likelihood of achieving the 2011 performance goals.

The fair value of the contingent consideration arrangement was estimated by applying the income approach. That measure is based on significant inputs that are unobservable in the market, and are therefore Level 3 inputs. Key assumptions include a discount rate of 16% and a probability-adjusted level of annual revenues. The Company performs a quarterly revaluation of contingent consideration and records the change as a component of operating income.

Litigation

From time to time as a normal incidence of doing business, various claims and litigation may be asserted or commenced against the Company. Due to uncertainties inherent in litigation and other claims, the Company can give no assurance that it will prevail in any such matters, which could subject the Company to significant liability for damages and/or invalidate its proprietary rights. Any lawsuits, regardless of their success, would likely be time-consuming and expensive to resolve and would divert management's time and attention, and an adverse outcome of any significant matter could have a material adverse effect on the Company's consolidated results of operations or cash flows in the quarter or annual period in which one or more of these matters are resolved.