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Commitments and Contingencies | 12 Months Ended
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Mar. 31, 2020
Commitments and Contingencies [Abstract] |
Commitments and Contingencies |
15. | Commitments and Contingencies
Warranty Returns The Company allows its customers to return goods that their consumers have returned to them, whether or not the returned item is defective (“warranty returns”). The Company accrues an estimate of its exposure to warranty returns based on a historical analysis of the level of this type of return as a percentage of total unit sales. Amounts charged to expense for these warranty returns are considered in arriving at the Company’s net sales. The following summarizes the changes in the warranty return accrual:
|  | Years Ended March 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Balance at beginning of year |  | $ | 19,475,000 |  |  | $ | 16,646,000 |  |  | $ | 14,286,000 |
Acquisition (1) |  |  | - |  |  |  | 221,000 |  |  |  | - |
Charged to expense |  |  | 112,590,000 |  |  |  | 111,321,000 |  |  |  | 105,156,000 |
Amounts processed |  |  | (113,765,000 | ) |  |  | (108,713,000 | ) |  |  | (102,796,000 | )
Balance at end of year |  | $ | 18,300,000 |  |  | $ | 19,475,000 |  |  | $ | 16,646,000 |
(1) | Warranty reserve established in the opening balance sheet in connection with the Company’s Dixie acquisition.
Commitments to Provide Marketing Allowances under Long-Term Customer Contracts The Company has or is renegotiating long-term agreements with many of its major customers. Under these agreements, which in most cases have initial terms of at least four years, the Company is designated as the exclusive or primary supplier for specified categories of the Company’s products. Because of the very competitive nature of the market and the limited number of customers for these products, the Company’s customers have sought and obtained price concessions, significant marketing allowances, and more favorable delivery and payment terms in consideration for the Company’s designation as a customer’s exclusive or primary supplier. These incentives differ from contract to contract and can include (i) the issuance of a specified amount of credits against receivables in accordance with a schedule set forth in the relevant contract, (ii) support for a particular customer’s research or marketing efforts provided on a scheduled basis, (iii) discounts granted in connection with each individual shipment of product, and (iv) other marketing, research, store expansion or product development support. These contracts typically require that the Company meet ongoing performance standards. The Company’s contracts with its customers expire at various dates through December 2024. While these longer-term agreements strengthen the Company’s customer relationships, the increased demand for the Company’s products often requires that the Company increase its inventories and personnel. Customer demands that the Company purchase their Remanufactured Core inventory also require the use of the Company’s working capital. The marketing and other allowances the Company typically grants its customers in connection with its new or expanded customer relationships adversely impact the near-term revenues, profitability, and associated cash flows from these arrangements. Such allowances include sales incentives and concessions and typically consist of: (i) allowances which may only be applied against future purchases and are recorded as a reduction to revenues in accordance with a schedule set forth in the long-term contract, (ii) allowances related to a single exchange of product that are recorded as a reduction of revenues at the time the related revenues are recorded or when such incentives are offered, and (iii) amortization of core premiums paid to customers generally in connection with new business. The following summarizes the breakout of allowances discussed above, recorded as a reduction to revenues:
|  | Years Ended March 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Allowances incurred under long-term customer contracts |  | $ | 26,733,000 |  |  | $ | 29,612,000 |  |  | $ | 24,829,000 |
Allowances related to a single exchange of product |  |  | 97,408,000 |  |  |  | 92,588,000 |  |  |  | 79,851,000 |
Amortization of core premiums paid to customers |  |  | 4,501,000 |  |  |  | 4,127,000 |  |  |  | 3,588,000 |
Total customer allowances recorded as a reduction of revenues |  | $ | 128,642,000 |  |  | $ | 126,327,000 |  |  | $ | 108,268,000 |
The following presents the Company’s commitments to incur allowances, excluding allowances related to a single exchange of product, which will be recognized as a reduction to revenue when the related revenue is recognized:
Year Ending March 31, |  |  |
2021 |  | $ | 25,896,000 |
2022 |  |  | 5,838,000 |
2023 |  |  | 4,701,000 |
2024 |  |  | 2,859,000 |
2025 |  |  | 2,052,000 |
Thereafter |  |  | 2,667,000 |
Total marketing allowances |  | $ | 44,013,000 |
Contingencies The Company is subject to various lawsuits and claims. In addition, government agencies and self-regulatory organizations have the ability to conduct periodic examinations of and administrative proceedings regarding the Company’s business. Following an audit in fiscal 2019, the U.S. Customs and Border Protection stated that it believed that the Company owed additional duties of approximately $17 million from 2011 through mid-2018 relating to products that it imported from Mexico. The Company does not believe that this amount is correct and believes that it has numerous defenses and intends to dispute this amount vigorously. The Company cannot assure that the U.S. Customs and Border Protection will agree or that it will not need to accrue or pay additional amounts in the future.

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