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COMMITMENTS AND CONTINGENCIES | 3 Months Ended
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Jul. 02, 2016
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES We are presently engaged in various legal actions, and although the total liability cannot be determined at the present time, based on consultation with counsel, we believe that any such liability will not materially affect our consolidated financial position or our results of operations. Italian Employment Litigation Our Italian manufacturing subsidiary is party to several actions initiated by employees of the facility in Ascoli-Piceno, Italy where we have ceased manufacturing operations. These include actions claiming (i) working conditions and minimum salaries should have been established by either a different classification under their national collective bargaining agreement or a different agreement altogether, (ii) certain solidarity agreements, which are arrangements between the Company, employees and the government to continue full pay and benefits for employees who would otherwise be terminated in times of low demand, are void, and (iii) payment of the extra time used for changing into and out of the working clothes at the beginning and end of each shift. In addition, a union represented in the Ascoli plant has filed an action claiming that the Company discriminated against it in favor of three other represented unions by (i) interfering with an employee referendum, (ii) interfering with an employee petition to recall union representatives from office, and (iii) excluding the union from certain meetings. Finally, we have been added as defendants on claims filed against Pall Corporation prior to our acquisition of the plant in August 2012. These claims relate to agreements to "freeze" benefit allowances for a certain period in exchange for Pall's commitments on hiring and plant investment. The total amount of damages claimed by the plaintiffs in these matters is approximately $4.5 million. At this point in the proceedings, we believe the losses are unlikely and therefore no amounts have been accrued. In the future, we may receive other similar claims or adverse rulings from the courts which changes our judgment on these cases. SOLX Arbitration In July 2016, H2 Equity, LLC, formerly known as Hemerus Corporation, filed an arbitration claim for $17 million in milestone and royalty payments allegedly owed as part of our acquisition of the filter and storage solution business from Hemerus Medical, LLC ("Hemerus") in fiscal 2014. The acquired storage solution is referred to as SOLX. At the closing in April 2013, Haemonetics paid Hemerus a total of $24 million and agreed to a $3 million milestone payment due when the U.S. Food and Drug Administration ("FDA") approved a new indication for SOLX (the “24-Hour Approval”), using a filter acquired from Hemerus. We also agreed to make future royalty payments up to a cumulative maximum of $14 million based on the sale of products incorporating SOLX over a ten year period. Due to performance issues with the Hemerus filter, Haemonetics filed for, and received, the 24-Hour Approval using a Haemonetics filter. Accordingly, Haemonetics did not pay Hemerus the $3 million milestone payment because the 24-Hour Approval was obtained using a Haemonetics filter, not a Hemerus filter. In addition, we have not paid any royalties to date as we have not made any commercial sales of products incorporating SOLX. H2 Equity claims, in part, that we owe them $3 million for the receipt of the SOLX 24-Hour Approval despite the use of a Haemonetics filter to obtain the approval and that we have failed to make commercially reasonable efforts to market and sell products incorporating SOLX. We believe that we have meritorious defenses to these claims. It is not possible to accurately evaluate the likelihood or amount of any potential losses related to this claim and therefore no amounts have been accrued. Product Recall In June 2016, we issued a voluntary recall of certain leukoreduction filters within our Blood Center franchise in the United States. The filters, which were yielding higher than expected levels of leukocytes in collected blood, are commonly used by our U.S. blood center customers. As a result of the recall, blood collected using these filters had to be labeled as non-leukoreduced unless tested further for adequate leukocyte counts. We determined that the affected filters were distributed between April and June 2016; credits have been issued to customers who returned affected filters purchased during this period. During the three months ended July 2, 2016, we recorded total charges of $3.4 million associated with the recall, which consisted of $2.3 million of estimated sales returns, $1.0 million of net inventory reserves for the affected filters on-hand that had not yet been shipped to customers and $0.1 million of freight expenses. Our estimate of sales returns was based on preliminary returns data received to date, however, actual customer returns are not expected to conclude until the second quarter of fiscal 2017. Additionally, we have been notified by a blood center group purchasing organization that their members will seek reimbursement for losses sustained as a result of the recall. As a result, we believe we will receive customer claims in future periods. However, at this time we do not yet have sufficient information to develop an estimate or range of estimates of the potential losses associated with future customer claims as we are not able to quantify the maximum exposure and accordingly, we did not record any charges associated with such claims during the three months ended July 2, 2016. We have insurance policies in place which may provide coverage for certain types of potential claims. We will assess the potential for insurance recoveries as we receive more information about customer claims in future reporting periods. We believe we are adequately reserved for the recall based on the known and available data received to date, however, incremental charges may be recorded in future periods as additional customer returns and claims data becomes available.

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