Commitments and Contingencies

9 Months Ended

Nov. 30, 2017

Note 9 – Commitments and Contingencies

Thermometer Patent Litigation – In January 2016, a jury ruled against the Company in a case that involved claims by Exergen Corporation. The case involved the alleged patent infringement related to two forehead thermometer models sold by our subsidiary, Kaz USA, Inc., in the United States. As a result of the jury verdict, we recorded a charge in fiscal 2016, including legal fees and other related expenses, of $17.8 million (before and after tax). In June 2016, certain post-trial motions were concluded with Exergen Corporation being awarded an additional $1.5 million of pre-judgment compensation. We accrued this additional amount in May 2016. In July 2016, we appealed the judgment to the United States Court of Appeals for the Federal Circuit. The Company continues to vigorously pursue its appellate rights and defend against the underlying judgment.

Other Matters – We are involved in various other legal claims and proceedings in the normal course of operations, including from time to time inquiries and audits from various taxing authorities. We believe the outcome of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity, although the estimation of certain loss contingencies inherently involves some amount of uncertainty.

Product Warranties – Most of our products are under warranty against defects in material and workmanship for periods ranging from two to five years. We estimate our warranty accrual using our historical experience and believe that this is the most reliable method by which we can estimate our warranty liability. The following table summarizes the activity in our warranty accrual for the periods shown:

ACCRUAL FOR WARRANTY RETURNS


	Three Months Ended November 30,				Nine Months Ended November 30,
(in thousands)	2017		2016		2017		2016
Beginning balance	$	22,094	$	19,459	$	21,766	$	20,622
Additions to the accrual		14,473		14,858		40,655		43,052
Reductions of the accrual - payments and credits issued		(12,914)		(12,457)		(38,768)		(41,814)
Ending balance	$	23,653	$	21,860	$	23,653	$	21,860

Notes 3, 10, 11 and 12 to these consolidated condensed financial statements provide additional information regarding certain of our significant commitments and contingencies.