COMMITMENTS AND CONTINGENCIES

12 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Acquisition- and Divestiture-Related

The Company's Level 3 liabilities at March 31, 2020 consisted of contingent purchase consideration related to the two acquisitions that occurred during the fiscal year 2020. The contingent purchase consideration related to the two acquisitions represent amounts deposited into escrow accounts, which were established to cover damages NetScout may suffer related to any liabilities that NetScout did not agree to assume or as a result of the breach of representations and warranties of the sellers as described in the acquisition agreements. The contingent purchase consideration of $0.7 million and $1.0 million related to the

Gigavation and Eastwind acquisitions are included as accrued other in the Company's consolidated balance sheet at March 31, 2020. Except to the extent that valid indemnification claims are made prior to such time, the $0.7 million of purchase consideration related to the Gigavation acquisition will be paid to the seller in February 2021. The contingent purchase consideration related to the Eastwind acquisition was paid to the seller in April 2020.

The Company had a contingent consideration asset related to the divestiture of its HNT tools business in September 2018. The contingent consideration asset represented potential future earnout payments to the Company of up to $4.0 million over two years that were contingent on the HNT tools business achieving certain milestones. The fair value of the contingent consideration of $2.3 million was recognized on the acquisition date and was measured using unobservable (Level 3) inputs. The contingent consideration asset at March 31, 2020 and 2019 was $0 and $0.8 million, respectively.

The Company had a contingent liability at March 31, 2018 for $0.5 million related to the acquisition of Efflux in July 2017 for which an escrow account was established to cover damages NetScout may have suffered related to any liabilities that NetScout did not agree to assume or as a result of the breach of representations and warranties of the seller as described in the acquisition agreement. The $0.5 million was paid to the sellers in July 2018.

The Company had a contingent liability at March 31, 2018 for $4.9 million related to the acquisition of Simena LLC in November 2011, which was based on the ultimate settlement of assets and liabilities acquired as part of the transaction, and the former owners' future period of employment with NetScout. The contingent purchase consideration of $5.0 million was paid to the seller in November 2018.

Legal

From time to time, NetScout is subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, the amount of ultimate expense with respect to any current legal proceedings and claims, if determined adversely, will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

As previously disclosed, in March 2016, Packet Intelligence LLC (Packet Intelligence or Plaintiff) filed a Complaint against NetScout and two subsidiary entities in the United States District Court for the Eastern District of Texas asserting infringement of five United States patents. Plaintiff’s Complaint alleged that legacy Tektronix GeoProbe products, including the G10 and GeoBlade products, infringed these patents. NetScout filed an Answer denying Plaintiff’s allegations and asserting that Plaintiff’s patents were, among other things, invalid, not infringed, and unenforceable due to inequitable conduct. In October 2017, a jury trial was held to address the parties’ claims and counterclaims regarding infringement of three patents by the G10 and GeoBlade products, invalidity of these patents, and damages. On October 13, 2017, the jury rendered a verdict finding in favor of the Plaintiff and that Plaintiff was entitled to $3,500,000 for pre-suit damages and $2,250,000 for post-suit damages. The jury indicated that the awarded damages amounts were intended to reflect a running royalty. The Court also conducted a bench trial on whether these patents were unenforceable due to, among other things, inequitable conduct. In September 2018, the Court entered judgment and "enhanced" the jury verdict in the amount of $2.8 million as a result of a jury finding. The judgment also awards pre- and post judgement interest, and a running royalty on the G10 and GeoBlade products until the expiration of the patents at issue, the last date being June 2022. The Court denied the Plaintiff's motion for fees. Following additional motions for judgment as a matter of law, the court entered final judgment. On June 12, 2019, NetScout filed its Notice of Appeal of the judgment and all other adverse findings. NetScout has concluded that the risk of loss from this matter is currently neither remote nor probable, and therefore, under GAAP definitions, the risk of loss is termed "reasonably possible". Therefore, accounting rules require NetScout to provide an estimate for the range of potential liability. NetScout currently estimates that the estimated range of liability is between $0 and the aggregate amount awarded by the jury and the Court's award of enhanced damages, plus potential additional pre- and post-judgment interest amounts and costs and any royalties owed on post-trial sales of the accused G10 and GeoBlade products.

Unconditional Purchase Obligations

At March 31, 2020, the Company had unconditional purchase obligations of $35.5 million, which represent estimated open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business.

Other Contingent Liabilities