Commitments and Contingencies

9 Months Ended

Nov. 30, 2016

Note 3 – Commitments and Contingencies

On January 22, 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, the Company recorded a charge in the fiscal quarter ended February 29, 2016, including legal fees and other related expenses, of $17.83 million ($17.79 million, after tax). On June 8, 2016, certain post-trial motions were concluded with Exergen Corporation being awarded an additional $1.47 million of pre-judgment compensation. We accrued this additional amount in the fiscal quarter ended May 31, 2016. On July 6, 2016, the Company appealed the judgment to the United States Court of Appeals for the Federal Circuit. The Company intends to vigorously pursue its appellate rights and defend against the underlying judgment.

We are involved in various other legal claims and proceedings in the normal course of operations. We believe the outcome of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

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 historical trends and believe that these trends are 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 covered below:

ACCRUAL FOR WARRANTY RETURNS

(in thousands)


	Three Months Ended November 30,				Nine Months Ended November 30,
	2016		2015		2016		2015
Beginning balance	$	19,459	$	20,797	$	20,622	$	23,553
Additions to the accrual		14,858		17,127		43,052		43,885
Reductions of the accrual - payments and credits issued		(12,457)		(14,386)		(41,814)		(43,900)
Ending balance	$	21,860	$	23,538	$	21,860	$	23,538

Notes 7, 10, 12, 13 and 16 to these consolidated condensed financial statements provide additional information regarding certain of our significant commitments and contingencies.