Product Warranties

The Company provides product warranties with varying terms and durations for the majority of its products. The Company estimates its warranty reserve by considering historical and projected warranty claims, historical and projected cost-per-claim, and knowledge of specific product issues that are outside its typical experience. The Company records warranty expense in cost of sales in the consolidated statement of operations. Product warranty claims not expected to occur within one year are recorded in the long-term portion of the warranty reserve in the consolidated balance sheets.

The following table represents changes in the Company’s consolidated warranty reserve:



	Year Ended December 31,
	2016			2015			2014
Beginning balance	$	20,975		$	24,246		$	33,827
Warranty expense	9,962			16,705			14,463
Warranty usage	(12,666		)	(19,976		)	(24,044		)
Ending balance	$	18,271		$	20,975		$	24,246

As a result of the BioMedical segment’s acquisition of AirSep Corporation (“AirSep”) in August 2012, the Company assumed exposure for warranty claims for AirSep’s various product lines. One of these product lines in particular experienced high failure rates with respect to certain of its models as compared to AirSep’s other products. The Company established a warranty reserve on AirSep’s opening balance sheet to account for the cost of satisfying future warranty claims, including a separately calculated warranty reserve for those certain models in the product line that experienced greater warranty return rates (collectively, the “acquired warranty reserve”). The Company has experienced a significant number of warranty claims as AirSep products sold in prior periods run through their respective warranty periods. Usage of the acquired warranty reserve includes claims related to all of AirSep’s product lines, including costs associated with the population of units for which a warranty reserve was separately calculated. Usage of the acquired warranty reserve has exceeded warranty expense since the acquisition. The Company has made various design improvements to this product line, revised the warranty claim process, and reduced the average cost to repair units since the 2012 acquisition, all in an effort to mitigate the costs associated with these warranty issues. The Company does not expect future warranty expense to be as significant as it has been since the acquisition. During the third quarter of 2016, the Company recovered for breaches of representations and warranties primarily related to warranty costs for certain product lines acquired from AirSep under the related representation and warranty insurance. For the year ended December 31, 2016, this reduced our BioMedical segment’s cost of sales by $15,145.

Warranty expense for 2016 does not include the impact of the $15,145 the Company recovered during 2016 for breaches of representations and warranties primarily related to warranty costs for certain product lines acquired in the 2012 acquisition of AirSep under the related representation and warranty insurance. Warranty expense for 2014 does not include the impact of the Company’s recovery of $5,003 during 2014 from an escrow settlement relating to excess warranty costs for certain product lines acquired from AirSep in 2012.