UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
X	THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended May 31, 2015
	For the fiscal year ended May 31, 2016
	OR
	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-14820

IMMUCOR, INC.

(Exact name of registrant as specified in its charter)

Georgia	22-2408354
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3130 GATEWAY DRIVE, P.O. BOX 5625	30091-5625
Norcross, Georgia	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code, is (770) 441-2051

Securities registered pursuant to Section 12(b) and 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes___ No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes X __X__ No ____

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ____No X __X___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ~~Yes~~ Yes_ X __ No _____

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ X]	Small reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes____ No X __ X___

As of November 30, 2012, there was no established public trading market for the Company’s common stock; therefore, the aggregate market value of the common stock is not determinable.

As of August 2122, ~~2015~~2016, there were 100 shares of common stock outstanding.

Table Of Contents


Part I


Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
Item 4.	[Reserved]	17

Part II


Item 5.	Market For The Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	20
Item 7A.	Quantitative And Qualitative Disclosures About Market Risk	30
Item 8.	Financial Statements And Supplementary Data	31
Item 9.	Changes In And Disagreements With Accountants On Accounting And Financial Disclosure	77
Item 9A.	Controls And Procedures	78
Item 9B.	Other Information	78

Part III


Item 10.	Directors, Executive Officers and Corporate Governance	79
Item 11.	Executive Compensation	81
Item 12.	Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters	91
Item 13.	Certain Relationships And Related Transactions, And Director Independence	92
Item 14.	Principal Accountant Fees And Services	93

Part IV


Item 15.	Exhibits And Financial Statement Schedules	94

Signatures		97

Ex-21	Subsidiaries Of The Registrant
Ex-31.1	Certificate Of Principal Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
Ex-31.2	Certificate Of Principal Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
Ex-32.1	Certificate of Principal Executive Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002
Ex-32.2	Certificate of Principal Financial Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 202

Table Of Contents
Part I
Item 1.	Business
Item 1A.	Risk Factors
Item 1B.	Unresolved Staff Comments
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	[Reserved]
Part II
Item 5.	Market For The Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
Item 7A.	Quantitative And Qualitative Disclosures About Market Risk
Item 8.	Financial Statements And Supplementary Data
Item 9.	Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
Item 9A.	Controls And Procedures
Item 9B.	Other Information
Part III
Item 10.	Directors, Executive Officers and Corporate Governance
Item 11.	Executive Compensation
Item 12.	Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters
Item 13.	Certain Relationships And Related Transactions, And Director Independence
Item 14.	Principal Accountant Fees And Services
Part IV
Item 15.	Exhibits And Financial Statement Schedules
Signatures
Ex-21	Subsidiaries Of The Registrant
Ex-31.1	Certificate Of Principal Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
Ex-31.2	Certificate Of Principal Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
Ex-32	Certifications Required Under Section 906 Of The Sarbanes-Oxley Act Of 2002

FORWARD – LOOKING STATEMENTS

This annual report on Form 10-K contains forward-looking statements which include information concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs and other statements that are not related to present facts or current conditions or that are not purely historical. Many of these statements appear, in particular, under the headings “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” When used in this report, the words “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, ~~without limitation,~~ our examination of operating trends, are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but there can be no assurance that we will realize our expectations or that our beliefs will prove correct.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this report. Important factors that could cause our actual results to differ include but are not limited to:

• our substantial indebtedness; ~~• lower industry blood demand;~~

•

lower industry blood demand;

•

lower than expected demand for our instruments;

•

the decision of customers to defer capital spending;

• the failure of customers to efficiently integrate our products into their operations; ~~• increased competition; • product development, manufacturing and regulatory obstacles; • the failure to successfully integrate and capitalize on past or future acquisitions;~~

• ~~general~~the ~~economic~~rate ~~conditions;~~of ~~and~~adoption •by ~~other~~customers ~~risks and uncertainties discussed in this report, particularly in “Risk Factors” and “Management’s Discussion and Analysis~~ of ~~Financial~~new ~~Condition~~technologies and ~~Results of Operations.”~~products;

~~There~~• ~~may~~increased ~~be other factors of which we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements.~~competition;

•

product development, manufacturing and regulatory obstacles;

•

the failure to successfully integrate and capitalize on past or future acquisitions;

•

general economic conditions; and

•

other risks and uncertainties discussed in this report, particularly in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

There may be other factors of which we are currently unaware or that we deem immaterial that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us apply only as of the date they are made and are expressly made subject to the cautionary statements included in this report. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances occurring after the date they were made or to reflect the occurrence of unanticipated events.

Item 1. — Business.

Founded in 1982, Immucor, Inc., a Georgia corporation (“Immucor” or the “Company”), is a worldwide leader in the transfusion and transplantation in vitro diagnostics markets. Our products perform typing and screening of blood and organs to ensure donor-recipient compatibility. Our offerings are targeted at hospitals, donor centers and reference laboratories around the world.

Our Company

On August 19, 2011, Immucor was acquired (the “Immucor Acquisition”) by investment funds from TPG Capital, L.P. (the “Sponsor”) and certain co-investors, for a purchase price of approximately $1.9 billion, including the assumption of approximately $1.1 billion of acquisition-related debt. As a result of the Immucor Acquisition, our stock is no longer publicly traded. Currently, the issued and outstanding shares of Immucor are indirectly owned by the Sponsor and certain co-investors.

Acquisitions

LIFECODES

On March 22, 2013, we acquired the LIFECODES business (“LIFECODES”), one of the market leaders in transplantation diagnostics. LIFECODES manufactures and markets diagnostics products used primarily by hospitals and reference laboratories in a number of tests performed to detect and identify certain properties of human tissue to ensure the most compatible match between patient and donor. These tests are performed for pre-transplant human leukocyte antigen (“HLA”) typing and screening processes as well as for post-transplant patient monitoring to aid in the identification of graft rejection. LIFECODES also offers other immune-monitoring products, which are used to identify certain properties commonly found in patients with severe illnesses, and with an immune response to certain drug therapies.

Acquiring LIFECODES strengthened our position in the global in vitro diagnostics market by creating a single source for transfusion and transplantation-related testing products, and signaled our initial steps in implementing our strategy to become a global leader in transfusion and transplantation medicine. Our goal is to diversify our business into the new and growing market of transplant diagnostics. Such diversification enhances our ability to grow our business, expand our customer reach and better insulate us against market and economic downturns. LIFECODES had approximately 170 employees at the date of acquisition.

We paid $86.2 million in cash to acquire LIFECODES financed with a combination of debt and equity. In conjunction with the LIFECODES acquisition, the Term Loan Facility was amended and an additional $50.0 million was issued with the same terms and maturity as the then-existing facility. An equity investment of $42.5 million was contributed by our parent company, IVD Intermediate Holdings B Inc. (the “Parent”), to fund the acquisition, including transaction costs and provide additional working capital.

LIFECODES ~~Distribution~~distribution ~~Businesses~~businesses

We have completed the acquisition of three LIFECODES distribution businesses, one in the United Kingdom and one in Italy, both of which were completed on January 31, 2014, and one in India which was completed on August 1, 2014. These acquisitions enable us to streamline the distribution of our LIFECODES products in Europe and in India. We paid $6.8 million in cash to acquire these distribution businesses which was funded from cash flows from operating activities.

Organ-i

On May 30, 2014, we completed the acquisition of Organ-i, Inc. (“Organ-i”) a privately-held company focused on developing non-invasive tests to monitor and predict organ health for transplant recipients. This acquisition expands our product ~~offering~~offerings for post-transplant testing and directly complements our existing LIFECODES business. The total cash purchase price to acquire this business was $12.0 million which was funded from cash flows from operating activities.

Sentilus

On October 1, 2014, we completed the acquisition of Sentilus, Inc. (“Sentilus”). Sentilus was a privately-held company focused on developing a novel, inkjet-printed antibody microarray-based technology, FemtoarraysTM. Among other uses, Sentilus has been developing FemtoarraysTM and the underlying technology for use in a variety of in vitro diagnostics areas, including transfusion diagnostics, and could potentially serve as a next generation technology platform for our transfusion diagnostics business. The total purchase price ~~for~~ of the Sentilus business was $6.0 million which was paid in cash.

~~Other~~In ~~Investments~~February 2016, we contributed the assets acquired in the Sentilus acquisition to a newly formed company, Sentilus Holdco LLC (“Sentilus LLC”). We then distributed our interest in Sentilus LLC via a dividend, indirectly, to IVD Intermediate Holdings A Inc., which is the owner of Immucor’s Parent company, IVD Intermediate Holdings B Inc. Sentilus LLC is considered to be a variable interest entity. Accordingly, the financial results of Sentilus LLC are included in the consolidated financial results of the Company.

Sirona ~~Collaboration~~

On ~~October~~March 34, ~~2014~~2016, we ~~entered~~completed ~~into~~the aacquisition ~~collaborative~~of ~~arrangement with~~ Sirona Genomics, Inc. (“Sirona”). ~~for~~Sirona ~~the~~was ~~commercialization~~a ofprivately-held ~~Sirona’s~~company focused on developing human leukocyte antigen (“HLA”) typing sample preparation and bioinformatics ~~offering~~offerings ~~for~~using next generation sequencing. As part of this collaborative arrangement, the Company paid $0.7 million for a warrant with an exclusive option to acquire 100% of the common stock of Sirona and loaned $4.6 million bearing interest to Sirona for development funding. The ~~collaborative~~total ~~arrangement~~purchase ~~includes~~price ~~the potential for future interest bearing loans from the Company~~ of ~~up to $6.7 million over a two year period from~~ the ~~date of the arrangement, subject to the achievement of certain development milestones and other terms of the arrangements, of which, $3.1 million was paid to~~ Sirona asbusiness ~~an additional loan on June 1, 2015. As of May 31, 2015, the total cash investment in the collaborative arrangement with Sirona~~ was $514.34 million which was ~~paid~~funded infrom cash ~~and~~flows ~~financed with a combination of debt (borrowings~~ from ~~our~~operating ~~Term~~activities ~~Loan Facility)~~ and ~~cash~~our ~~flows~~revolving ~~from~~debt ~~operating activities~~facility.

Prior to March 2016, Sirona was a variable interest entity that was not consolidated with our financial results. We entered into a collaborative arrangement with Sirona for the commercialization of its HLA product offerings on October 3, 2014.

Reference lab (“Immucor DX”)

On August 3, 2015, we completed the asset purchase of a U.S. reference lab for a total cash purchase price of $0.8 million. Immucor DX is an independent clinical laboratory providing diagnostic testing services. The Immucor DX service leverages Immucor’s expertise and allows us to offer our products as a service to our laboratory customers as well as clinicians. The total cash purchase price to acquire this business was $0.8 million which was funded from cash flows from operating activities.

Financial Information about Segments

We determine our operating segments in accordance with our internal operating structure, which is organized based upon product groups. Each segment is separately managed and is evaluated primarily upon operating results. The Company has two operating segments, the Transfusion segment and the Transplant & Molecular segment, which have been aggregated into one reportable segment. We aggregate our operating segments because they have a similar class of consumer, economic characteristics, nature of products, and nature of production and distribution methods.

Competitive Strengths

Automation – Since 1998, our strategy in transfusion diagnostics (or “immunohematology”) has been to drive automation in the blood bank with the goal of improving operations as well as patient safety. Due to the critical importance of matching patient and donor blood, manual testing is performed by highly educated and skilled technologists. In the U.S. market, we estimate that approximately 55% of customers perform testing on a manual basis without the use of an automated instrument. These customers are primarily in the small- to medium-hospital segment of the market. A significant number of customers in the high volume segment of the U.S. market (large hospitals, donor centers and reference laboratories) are automated. Outside the U.S., a significant portion of customers are automated in the developed international markets while there continues to be need for automation in the developing markets.

We believe our customers, whether a hospital, a donor center or a reference laboratory, are able to realize significant economic benefits while improving patient safety from adopting our automation. ~~Automation~~When moving from manual testing to automation, our instrumentation can allow customers to reduce headcount and/or overtime in the blood bank, which can be especially beneficial in the U.S. given the current shortage of qualified blood bank technologists ~~in the U~~.S. Given the reduction in both human and economic capital, we estimate that our instruments have an average payback period of one year or less, depending on the size of the lab. We also believe ~~our~~the ~~automated~~features ~~products~~and ~~represent~~functionality anof ~~attractive~~our ~~value~~instrumentation ~~proposition~~provide ~~for~~compelling ~~manual~~benefits to customers worldwide to ~~switch~~move tofrom competitor automation to Immucor.

Leadership position in niche markets – We estimate the global market for our transfusion and transplantation products is approximately $1.8 billion and we believe we have leadership positions in our focused markets. We believe our transfusion products, ranging from our automated instruments to our proprietary Capture® technology, are widely used and recognized by the immunohematology industry worldwide. In transplantation, our LIFECODES® products leverage the significant installed base of Luminex Corporation (“Luminex”) instruments to enable adoption of our products in HLA labs around the world. We look to maintain our leadership position in these markets by continuing to innovate and introduce high value products for our customers.

Product ~~Innovations~~innovations –We continually seek to improve existing products and develop new products to increase our market share and to improve the operations of our customers. In support of our immunohematology customers, we continue to develop innovative products. For example, we expect to launch our new low volume instrument, the Echo Lumena™, in the coming year, making us the only company to have launched ~~four~~five generations of automated serology instruments. ~~and~~Additionally, we ~~continue~~are toleading ~~develop~~the ~~innovative~~way ~~products,~~with ~~including~~offering ~~our~~molecular ~~offering~~methods to support ~~molecular~~transfusion ~~methods~~medicine, ~~which~~including weour ~~believe~~PreciseType® ~~will~~HEA betest, which is the ~~future~~first ofand only molecular immunohematology product approved by the U.S. Food and Drug Administration (“FDA”).In support of our transplant customers, we continue to launch new assays that support both pre- and post-transplant testing, including ~~monitoring~~our ofnew ~~patients~~high toresolution ~~reduce~~typing ~~the~~product, ~~probability~~MIA ofFORA™ NGS, and our new post-transplant ~~rejection~~monitoring test for kidney recipients, kSORT™.

Donor-patient compatibility – Our product offering, whether in transfusion or transplant medicine, is focused on achieving compatibility between donors and patients, which is explained in more detail in “Products” below.

Products

Our products are used to determine compatibility between a patient and a donor for the purposes of a blood transfusion, or an organ or stem cells (bone marrow) transplant. Compatibility is determined by performing a “type and screen” for both the patient and the donor.

Typing for both transfusions and transplants involves identifying antigens. For transfusion, antigens in the Human Erythrocyte Antigen (“HEA”) system, which are on the surface of red blood cells are identified. For transplant, antigens in the HLA system, which are on the surface white blood cells are identified. Screening for both a transfusion and a transplant determines whether there are any antibodies present that could cause a negative immune response.

We sell reagents as well as instruments to allow laboratories – whether in a hospital, a donor center or a reference lab – to perform compatibility testing. Our automated instrument-reagent systems operate on a “razor/razor blade” model, with our instruments serving as the “razors” and our reagents serving as the “razor blades.” For transfusion diagnostics, our instruments are “closed systems,” meaning our proprietary reagents can only be used on our instruments. For transplant diagnostics, our HLA reagents run on Luminex instruments, which are open systems. The “razor/ razor blade” business model generates a recurring revenue stream for us.

Transfusion Diagnostics

REAGENTS

We offer both traditional and proprietary serology reagents. Our serology instruments use both our traditional reagents, as well as our proprietary solid phase technology, marketed under the name Capture, to perform tests.

Traditional reagents are used in a manual setting with testing performed via traditional agglutination blood testing techniques in a test tube. Certain traditional reagents are also used on our automated instruments.

Capture reagents are used with our instruments to perform antibody screening and identification. Delivered in a microtitration plate, the technology delivers clearly defined, machine-readable test results that are often easier to interpret than the subjective results sometimes obtained from existing agglutination technology (manual method). Also, in batch test mode the solid phase test results can generally be obtained in substantially less time than by traditional agglutination techniques.

INSTRUMENTS

NEO – Targeted at donor centers, large volume hospitals and reference laboratories, NEO® provides a fully-automated solution to perform all routine blood bank tests, including blood grouping, antibody screening, cross match, direct antiglobulin test (“DAT”) and antibody identification. NEO is our fourth generation automated instrument. NEO’s added functionality includes STAT functionality, a faster turnaround time and improved reliability. NEO can process up to 224 different samples at once, and can perform approximately 60 type-and-screen tests an hour. We believe that NEO has the highest type and screen throughput available in the global market.

ECHO – The Echo® is targeted at small- to medium-sized hospitals as well as at integrated delivery networks (both hospital and lab systems) in combination with NEO. Echo has a broad test menu and the capacity to load 20 samples at a time, performing approximately 14 type-and-screen tests an hour. Echo features STAT functionality, exceptional mean time between failures and what we believe is the fastest turnaround time in the industry.

CAPTURE WORKSTATION (Semi-Automated Processor) – The Capture Workstation has semi-automated components for performing our proprietary Capture assays manually. It is marketed as a back-up system for our fully automated NEO and Echo instruments, or as a standalone test system for small laboratories looking to standardize testing.

Transplant and Molecular Diagnostics

Our molecular products perform typing for both transfusion and transplantation, including the HEA and HLA systems.

~~For~~TRANSFUSION ~~transfusion,~~- ~~our~~Our molecular typing assays use our multiplex, polymerase chain reaction (“PCR”) technology. Our current offering includes HEA and Human Platelet Antigen (“HPA”) assays as well as our current semi-automated molecular immunohematology instrument, the Array Imaging System and BASIS database.

In May 2014, the ~~U.S. Food and Drug Administration (“~~FDA”) approved our ~~PreciseTypeTM~~PreciseType HEA test, which is the first FDA-approved molecular immunohematology product on the market. ~~Formerly~~PreciseType ~~marketed as the~~ HEA ~~BeadChip™ Test, PreciseType~~ provides clinicians with detailed genetic matching information that can reduce the risk of alloimmunization (antibody production) and serious hemolytic reactions associated with transfusions, which can be especially problematic for patients receiving frequent blood transfusions. With its FDA in- vitro diagnostic, or IVD, approval, PreciseType is ~~now~~the only molecular immunohematology product that can be the “test of record” in the U.S. for both patient and donor typing of red blood cells. The test has been CE-marked in Europe for ~~in vitro diagnostics, or~~ IVD, use since 2010.

InWe ~~July~~have ofbeen ~~2015,~~working ~~Medicare~~on ~~approved~~expanding ~~coverage~~reimbursement ofin the U.S. for our PreciseType ~~product~~HEA ~~for~~test. ~~pretransfusion~~The ~~molecular~~first ~~testing~~Medicare Administrative Contractor (“MAC”) approved reimbursement of the test in July of 2015 for four designated types of use. inSince ~~the~~then, ~~Medicare~~we ~~Administrative~~have ~~Contractor~~positive ~~jurisdiction~~payment ~~which~~coverages ~~includes~~for ~~North~~approximately ~~Carolina,~~77% ~~South~~of ~~Carolina~~potential Medicare-covered lives. Additionally, ~~West~~we ~~Virginia~~have coverage in a number of states for Medicaid and ~~most~~are ~~counties~~expanding ~~within~~coverage ~~Virginia.~~among private payers. In order to receive reimbursement for the service, healthcare providers are required to demonstrate that it is a medically necessary test for that particular patient.

For transplant diagnostics, we deliver our reagents for both typing and screening on Luminex’s xMAP multiplex technology. In addition to other HLA-related testing products, such as serological typing trays, we also sell assays that monitor organ health post-transplant.6

TRANSPLANT – Marketed under the LIFECODES brand, our reagents for both our molecular typing products and our antibody screening products are delivered on Luminex’s xMAP multiplex technology. We also resell Luminex instruments. Additionally, we sell other HLA-related testing products, such as serological typing trays.

In December 2015, we launched our new MIA FORA NGS product, which supports high resolution typing for transplants using next generation sequencing (“NGS”) and is compatible with the Illumina platform. MIA FORA NGS is a sample preparation and bioinformatics offering that fills a gap in our product portfolio. With MIA FORA NGS, we can now access the entire HLA market to sell not only MIA FORA but also our full LIFECODES offering. We expect to deliver a portfolio of HLA NGS typing products under the MIA FORA name.

In May 2016, we launched kSORT, our new kidney Solid Organ Response Test. kSORT is a molecular gene expression assay that measures a kidney recipient’s immune response to predict organ rejection and graft injury. kSORT calculates a patient’s immune risk with a simple blood draw – akin to a liquid biopsy. kSORT is available exclusively through Immucor DX, our CLIA certified and CAP accredited independent clinical laboratory as a Laboratory Developed Test (“LDT”). We are actively working on reimbursement for this novel diagnostic tool.

We also offer platelet-focused products for both transfusion medicine and specialty coagulation.

Marketing, Distribution and Seasonality

Our target customers are donor centers, hospitals and reference laboratories. Our products are distributed globally through both direct affiliate offices and third-party distribution arrangements. No single customer represents 10% or more of our annual consolidated revenue. We ~~believe~~do ~~there~~not isbelieve athat ~~slight amount of seasonality in~~ our business asis ~~fewer~~impacted ~~blood~~by ~~donations and elective surgical procedures are generally performed in our first fiscal quarter (June-August)~~seasonality.

Backlog

For the majority of our products, the nature and shelf-life prohibits us from maintaining a material backlog. For the orders in backlog, it is expected that the majority will be shipped or completed within the following 12 months. At May 31, ~~2015~~2016, our backlog was not material.

Suppliers

We obtain raw materials from numerous suppliers and believe our business relationships with them are good. Some of our products are derived from blood having particular or rare combinations of antibodies or antigens, which are found in a limited number of individuals. To date, we have been able to obtain sufficient quantities of such blood for use in manufacturing our products, but there can be no assurance that a sufficient supply of such blood will always be available to us.

We source our ~~transfusion~~Transfusion ~~diagnostic~~Diagnostic instruments from single-source suppliers. Although we currently do not have a written contract with our Echo instrument supplier, we generally operate under the terms of past contractual arrangements ~~with that supplier~~. We believe that our business relationships with these instrument suppliers are good. While these relationships are significant, we believe that other manufacturers could supply these instruments to us after a reasonable transition period. In the event one or more of these suppliers experience financial problems that prevent it from continuing to produce our instruments, we believe it would take in the range of 18 months to 24 months to begin production with a new supplier. While a change in suppliers would disrupt our business during the transition period, we do not believe it would have a material financial impact on our business as a whole.

We source our ~~transplant~~instruments ~~diagnostic instrument~~ as well as certain raw materials for the majority of our transplant products from Luminex. Our long-term contractual relationship with Luminex is significant and our business relationship is good.

Regulation

The manufacture and sale of transfusion in vitro diagnostics products is a highly regulated business and is subject to continuing compliance with country-specific statutes, regulations and standards that generally include licensing, product testing, facilities compliance, product labeling, post-market vigilance and consumer disclosure. In the U.S., the FDA regulates the transfusion of human blood as a drug and as a biological product. The FDA regulates all phases of the transfusion process, including donor selection and the collection, classification, storage, handling and transfusion of blood and blood components.

In the U.S., an FDA biologics license is issued for an indefinite period of time, subject to the FDA’s right to revoke the license. As part of its overview responsibility, the FDA makes facility inspections on an unannounced basis. In addition, each product manufactured by us is subject to formal product submissions and review processes by the FDA and other regulatory bodies, such as Health Canada, a European Union recognized Notified Body and the Japanese Ministry of Health prior to authorization to market. Significant changes to our products or facilities can require additional submission and review prior to implementation. For example, we hold several FDA biologic licenses to manufacture blood grouping reagents, anti-human globulin reagents and reagent red blood cells. We must submit biologic license applications, pre-market approval applications or 510(k) pre-market notifications to the FDA to obtain product licenses, market approval or market clearance for new products or instruments. To accomplish this, we must submit detailed product information to the FDA, perform a clinical trial of the product, and demonstrate to the satisfaction of the FDA that the product meets certain efficacy and safety standards. There can be no assurance that any future product licenses, product clearances or instrument clearances will be obtained by us.

Our ~~manufacturing~~North ~~and~~American ~~distribution~~manufacturing facilities ~~in the U.S., Germany~~ and ~~Canada~~European offices are certified to ISO 13485:2003. In addition, ~~our manufacturing facility in Germany is also certified~~ to ISO 9001:2008. This is an internationally recognized standard and certification is required in order to continue product distribution in key markets such as the European Union and Canada. In addition, to allow continued marketing of our products in the European Union, we are required to maintain certification under the EC Full Quality Assurance System Assessment in accordance with the requirements of Annex IV of the IVD Medical Devices Directive 98/79/EC. This certification authorizes the use of the CE Mark on our products that allows products free access to all countries within the European Union. ~~We have successfully completed certifications for CE marking of all products manufactured for the European market.~~

There are multiple countries worldwide that also impose regulatory barriers to market entry. We maintain product registrations and approvals necessary to maintain access to certain foreign markets.

Environmental

Some of our processes generate hazardous waste and we have a U.S. Environmental Protection Agency identification number. We believe we are in compliance with applicable portions of the federal and state hazardous waste regulations.

Research, Development and Intellectual Property

We rely on a combination of patent and trade secret laws, know-how and licensing opportunities to establish and protect our proprietary technologies and products. We enforce our intellectual property rights consistent with our strategic business objectives. We do not believe that we own any single patent or hold any single license (or series of patents or licenses) that is material to the operation of our business, but we consider them in the aggregate to be of material importance to our business.

We continually seek to improve our existing products and to develop new ones in order to increase our market share. ~~Prior~~and toenter ~~sale, any~~ new ~~product requires regulatory approvals, including licensing or pre-market clearance from the FDA in the U~~markets.S. ~~and CE marking in Western Europe.~~ For fiscal years ~~2015~~2016, ~~2014~~2015, and ~~2013~~2014, we spent approximately $2830.83 million, $2928.18 million, and $2129.31 million, respectively, for research and development.

We use trademarks on most of the products we sell. These trademarks are protected by registration in the U.S. and other countries where such products are marketed using the trademarks. We consider these trademarks in the aggregate to be of material importance in the operation of our business.

Competition

Competition in the transfusion and transplantation in vitro diagnostics markets is based on quality of products, pricing, the results of research and development efforts, talent of the sales forces, ability to furnish a range of products, reliable technology, skilled and trained technicians, customer service and continuity of product supply. We believe we are well positioned to compete favorably in our markets because of the completeness, reliability and quality of our product lines, our competitive pricing structure and our introduction of innovative products that enhances our competitive position. We also believe that new product introductions and the experience and expertise of our sales technical support personnel will enable us to remain competitive in the market.

Our principal competitors worldwide in transfusion diagnostics are Ortho-Clinical Diagnostics and Bio-Rad Laboratories, Inc. In transplantation diagnostics, our primary competitor is Thermo Fisher Scientific.

Employees

At May 31, ~~2015~~2016, we had approximately 1,~~090~~125 full-time employees worldwide. We ~~have a low staff turnover rate and~~ consider our employee relations to be good. In addition to our full-time work force, we employ temporary and contract employees. None of our employees are represented by a labor union.

Available Information

We file periodic reports under the Securities Exchange Act of 1934 with the SEC. Electronic versions of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports filed or furnished with the SEC may be accessed free of charge through our website at www.immucor.com. The information may also be accessed at the SEC’s web site at www.sec.gov. The reference to our website address does not constitute incorporation by reference of the information contained on the website, and the information contain on the website is not part of this document.

8Item 1A. — Risk Factors

Item 1A. — Risk Factors.

We are subject to various risks and uncertainties relating to or arising out of the nature of our business and general business, economic, financing, legal and other factors or conditions that may affect us. We provide the following cautionary discussion of risks and uncertainties relevant to our business, which we believe are factors that, individually or in the aggregate, could have a material and adverse impact on our business, results of operations and financial condition, or could cause our actual results to differ materially from expected or historical results. You should understand that it is not possible to predict or identify all such factors. Consequently, our operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations.

Risks Relating to Our Company

Lower blood demand could negatively impact our financial results.

Our transfusion diagnostics products are used to test blood prior to transfusion. Lower demand for blood in the markets in which we operate could result in lower testing volumes. For example, we believe the U.S. market has been experiencing lower demand for blood in our last ~~four~~six fiscal years. Lower blood demand could result from a variety of factors, such as fewer elective surgeries and more efficient blood utilization by hospitals. Blood is a large expense for hospital laboratories and pressure on hospital budgets due to macroeconomic factors and healthcare reform could force changes in the ways in which blood is used. Lower blood demand could negatively impact our revenue, profitability and cash flows.

A catastrophic event at any of our manufacturing facilities would prevent us from producing many of our reagent products.

Substantially all of our diagnostic products are produced at single -sites. While we have reliable supplies of most raw materials, our reagent production is highly dependent on the uninterrupted and efficient operation of each facility, and we currently have no plans to develop a third-party reagent manufacturing capability as an alternative source of supply. Therefore, if a catastrophic event occurred at any of our facilities, such as a fire or tornado, many of those products could not be produced until the manufacturing portion of the facility was restored and cleared by the FDA. We maintain a disaster recovery plan to minimize the effects of such a catastrophe, and we have obtained insurance to protect against certain business interruption losses. However, there can be no assurance that such coverage will be adequate or that such coverage will continue to remain available on acceptable terms, if at all.

We may not be successful in capitalizing on our acquisitions.

Acquisitions could cause diversion of management’s time as well as a shift of focus from operating the businesses to issues related to integration and administration or inadequate management resources available for oversight as well as integration activities. We may face difficulties and inefficiencies in managing and operating businesses in multiple locations or operating businesses in which we have either limited or no direct experience today.

The long-term success of our acquisitions and any additional acquisitions we may complete in the future will depend upon our ability to successfully grow the acquired businesses as well as realize the anticipated benefits from combining the acquired businesses with our business. We may fail to grow these businesses or realize the expected synergies or anticipated growth targets from acquisitions. In addition, it may take longer than expected to achieve those synergies and growth targets. Acquisitions may cause other unexpected costs or liabilities and our failure to realize the anticipated benefits from acquisitions could harm our business and prospects.

Our business may be harmed by the contingent earn-out obligations in connection with acquisitions.

In connection with some of our acquisitions, we incur obligations to make contingent earn-out payments if certain financial and product development targets of certain acquired businesses are met over specified periods. Contractual provisions relating to the contingent earn-out obligation include covenants to operate the acquired businesses in a manner that may not otherwise be most advantageous to us. These provisions may also result in the risk of litigation relating to the calculation of the earn-out obligation amount due as well as the operation of the acquired businesses. Such litigation could be expensive and divert management attention and resources. We can give no assurance that our contingent obligations, including the associated covenants relating to the operation of the acquired businesses, will not otherwise adversely affect our business, liquidity, capital resources or results of operations.

Unforeseen product performance problems could prevent us from selling or result in a recall of the affected products.

In the event that we experience a product performance problem with either our instruments or our reagents, we may be required to, or may voluntarily, recall or suspend selling the products until the problem is resolved. We have from time to time initiated voluntary recalls of our products. Depending on the product, as well as the availability of acceptable substitutes, such a product recall or suspension could significantly impact our operating results.

Product performance could increase operating costs and result in the loss of current or future customers.

Product performance and reliability is a key factor in satisfying current customers and attracting new customers. Poor performance or unreliability of our products would not only increase maintenance costs, in the case of our instruments, but also could result in losing important current customers and an inability to gain new customers which could adversely affect our financial results.

Because we sell our U.S. manufactured products internationally, we could be adversely affected by fluctuations in foreign currency exchange rates.

In the fiscal year ended May 31, ~~2015~~2016, revenue outside the U.S. was approximately 3937% of total revenue. As a result, fluctuations in foreign currency exchange rates against the U.S. Dollar could make our products less competitive and affect our revenue and earnings levels for our international affiliates. An increase in our revenue outside the U.S. would increase this exposure. We have not historically hedged against currency exchange rate fluctuations.

Gross margin volatility may negatively impact our profitability.

Our gross margin may be volatile from period to period due to various factors, including instrument sales, product mix, geographic mix, and manufacturing costs. As we continue to drive automation in the blood bank marketplace, we may experience increased instrument sales. The probable sales mix (in terms of instrument/reagent sales) could make it difficult for us to sustain the overall gross margins we have generated in the past. The higher margins on the reagents used on our instruments may not be enough to offset the lower margins on the instruments themselves. For our products, margins vary depending upon the type of product. Additionally, market pricing for our products varies by geographic region. Depending upon the product and geographic sales mix, margins could vary significantly from period to period. Our reagent products are manufactured in-house. Margins for these products could be impacted based upon costs of raw materials and labor as well as overhead and the efficiency of our manufacturing operations from period to period. Margins may also be negatively impacted by increased competition. New market entrants or existing market participants seeking to gain market share may foster a competitive environment of pricing pressures and/or increased marketing and other expenditures that could negatively impact profitability.

If customers delay integrating our instruments into their operations, the growth of our business could be negatively impacted.

From time to time in the past, some of our customers have experienced significant delays between the purchase of an instrument and the time at which it has been successfully integrated into the customer’s existing operations and is generating reagent revenue at its expected annualized run rate. These delays may be due to a number of factors, including staffing and training issues and difficulties interfacing our instruments with the customer’s computer systems. Because our business operates on a “razor/razor blade” model, such integration delays result in delayed purchases of the reagents used with the instrument. Delays of customers successfully integrating instruments into their operations could adversely impact our future revenues, earnings and cash flow.

We may not be successful in capitalizing on acquisitions of former distributors or newly established distribution networks outside the U.S.

An integral part of our strategy is to sell our products in additional markets outside North America. To further this strategy, in the past we have either acquired third party distribution businesses or have established our own direct distribution organizations. Our ability to grow successfully in overseas markets depends in part on our ability to achieve product acceptance and customer loyalty in these markets. Additionally, our operations in foreign countries present certain challenges and are subject to certain risks not necessarily present in our domestic operations, such as fluctuations in foreign currency exchange rates, shipping delays, changes in applicable laws and regulations and various restrictions on trade. These factors could impact our ability to compete successfully in these markets, which could in turn negatively affect our international expansion goals, and could have a material adverse effect on our operating results.

Our financial performance is dependent on the timely and successful introduction of new products and services.

Our financial performance depends in part upon our ability to successfully develop and market next generation automated instruments and other products in a rapidly changing technological and economic environment. Our market share and operating results would be adversely affected if we fail to successfully identify new product opportunities and timely develop and introduce new products that achieve market acceptance, or if new products or technology are introduced in the market by competitors that could render our products uncompetitive or obsolete. In addition, delays in the introduction of new products due to regulatory, developmental, or other obstacles could negatively impact our revenue, earnings and market share.

Industry adoption of alternative technology could negatively impact our ability to compete successfully.

Our products are used to test antibodies and DNA to determine a match prior to a transfusion or a transplant as well as for post-transplant monitoring to aid in the determination of graft rejection. Various advances in the treatment and monitoring of patients could cause lower demand for testing with our products. Additionally, customers could adopt alternative technologies for testing, instead of our technology, which could result in lower demand for our products.

We may need to develop new technologies for our products to remain competitive. We may have problems in the process of developing and delivering new products to the market, which could cause our financial performance to be negatively impacted.

Global economic conditions may have a material adverse impact on our results.

We are a global company with customers around the world. General economic conditions impact our customers, particularly hospitals. For our instruments, reduced capital budgets that result from negative economic conditions, such as a global recession, could result in lower instrument sales, which would negatively impact our future revenue, profitability and cash flow. Additionally, global economic conditions may adversely affect the ability of our customers to access funds to enable them to fund their operating and capital budgets. Budget constraints could slow our progress in driving automation in both our customer base and the blood banking industry as a whole, as well as the adoption of new products, which could negatively impact our future revenues, profitability and cash flow.

We are highly dependent on our senior management team and other key employees, and the loss of one or more of these employees could adversely affect our operations.

Our success is dependent upon the efforts of our senior management and staff, including sales, technical and management personnel, many of whom have very specialized industry and technical expertise that is not easily replaced. If key individuals leave us, we could be adversely affected if suitable replacement personnel are not quickly recruited. Our future success depends on our ability to continue to attract, retain and motivate qualified personnel. For example, there is intense competition for medical technologists, and in some markets there is a shortage of qualified personnel in our industry. If we are unable to continue to attract or retain highly qualified personnel, the development, growth and future success of our business could be adversely affected.

Supply chain interruptions could negatively impact our operations and financial performance.

Supply chain interruptions could negatively impact our operations and financial performance. The supply of any of our manufacturing materials may be interrupted because of poor vendor performance or other events outside our control, which may require us, among other things, to identify alternate vendors and could result in lost sales and increased expenses. While such interruption could impact any of our third-party sourced materials, three particular areas of note are our transfusion diagnostic instrument suppliers, our supply sources for rare antibodies or antigen combinations and our supply of raw materials from Luminex, which are described below.

We purchase our transfusion diagnostic instruments from single-source suppliers. If the supply of any of our instruments were interrupted, due to the supplier’s financial problems or otherwise, we believe an alternative supplier could be found but that it would take in the range of 18 months to 24 months to transfer the technology and begin production with a new instrument supplier. The disruption of one of these supply relationships could cause us to incur costs associated with the development of an alternative source. Also, we may be required to obtain FDA clearance of the instrument if it is not built to the same specifications as with the previous supplier. The process of changing an instrument supplier could have an adverse impact on future growth opportunities during the transition period if supplies of instruments on hand were insufficient to satisfy demand.

Some of our reagent products are derived from blood having particular or rare combinations of antibodies or antigens, which are found in a limited number of individuals. If we had difficulty in obtaining sufficient quantities of such blood and the supply was interrupted, we would need to establish a viable alternative, which may take both time and expense to either identify and/or develop and could have an adverse impact on our operations and financial position.

Luminex is our technology partner for our HLA products and we secure certain raw materials from Luminex to manufacture our HLA reagents. A disruption in supply of these raw materials could cause us to not be able to supply products to our customers. Additionally, a long-term disruption of supply from Luminex could result in us having to develop an alternate technology platform on which to deliver our HLA products, which could be both costly and result in a loss of revenue until a new product was brought to market.

Interruptions in our production capabilities could increase our production costs or reduce sales.

Our manufacturing processes are dependent upon critical pieces of equipment for which there may be only limited or no production alternatives and this equipment may, on occasion, be out of service as a result of unanticipated failures. We may experience periods of reduced production as a result of these types of equipment failures, which could cause us to lose or prevent us from taking advantage of various business opportunities or prevent us from responding to competitive pressures.

Closure of our facility in Stamford, CT could negatively impact our production capabilities of its products at another location.

We may face unexpected risks related to the closure of our facility in Stamford, Connecticut. We may not be able to transfer the manufacture of certain products to other facilities without interruptions in supply or difficulties in maintaining the quality of our products. We may have difficulty hiring or retaining the appropriate personnel for the manufacture of Stamford products at another location. We are following a plan for the facility closure to mitigate these risks, but we will not be able to eliminate all the risks related to moving the manufacturing location of some of our products.

Distribution chain interruptions could negatively impact our operations and financial performance.

Distribution chain interruptions could negatively impact our operations and financial performance. Our international affiliates get almost all of their reagent products from our U.S. manufacturing facilities. If circumstances arose that disrupted our distribution of U.S.-sourced products internationally, we would need to establish an alternate distribution channel, which may take both time and expense to establish and could have an adverse impact on our operations and financial position.

Our molecular diagnostics products may not gain wide commercial acceptance.

BioArray’s molecular diagnostics products ~~have~~continue ~~slowly~~to ~~gained~~gain commercial traction. In May 2014, the FDA approved our PreciseTypeTM HEA test, and in July 2015, Medicare approved coverage for our product for pretransfusion molecular testing for four designated types of use in the Medicare Administrative Contractor jurisdiction which includes North Carolina, South Carolina, West Virginia and most counties within Virginia. Since then, we have positive payment coverages for approximately 77% of potential Medicare-covered lives. Additionally, we have coverage in a number of states for Medicaid and are expanding coverage among private payers. However, even with regulatory approval, these products are new to the marketplace and we will have to develop the nascent market for these products over time. Our molecular transfusion diagnostic business is also subject to risks associated with reimbursement, cannibalization of a portion of our existing serology business and the same macroeconomic factors, such as lower blood demand, that our serology business faces.

We may be unable to adequately protect our proprietary technology.

We have a substantial patent portfolio of issued patents or pending patent applications supporting our molecular immunohematology offering. We also have patents supporting our transfusion and coagulation products. Our competitiveness depends in part on our ability to maintain the proprietary nature of our owned and licensed intellectual property. Because the law is constantly changing, and unforeseen facts may arise, there is always a risk that patents may be found to be invalid or unenforceable. Therefore, there is no absolute certainty as to the exact scope of protection associated with any intellectual property. We believe our patents, together with our trade secrets and know-how, will prevent any current or future competitors from successfully copying and distributing our products. However, there can be no assurance that competitors will not develop around the patented aspects of any of our current or proposed products or independently develop technology or know-how that is equivalent to or competitive with our technology and know-how. Any damage to our intellectual property portfolio could result in an adverse effect on our current or proposed products, our revenues and our operations.

Protecting our intellectual property rights is costly and time consuming. We may need to initiate lawsuits to protect or enforce our patents, or litigate against third-party claims, which would be expensive and, if we lose, may cause us to lose some of our intellectual property rights and reduce our ability to compete in the marketplace. Furthermore, these lawsuits may divert the attention of our management and technical personnel.

We may be subject to intellectual property rights infringement claims in the future, which are costly to defend, could require us to pay substantial damages and could limit our ability to use certain technologies in the future.

Our commercial success depends, in part, not only on protecting our own intellectual property but on not infringing the patents or proprietary rights of third parties. Were third parties to claim that we infringe on their intellectual property rights, responding to such claims, regardless of their merit, could be time consuming, result in costly litigation, divert management’s attention and resources and cause us to incur significant expenses. Our practices, products and technologies, particularly with respect to the field of molecular immunohematology, may not be able to withstand third-party claims, regardless of the merits of such claims.

As a result of such potential intellectual property infringement claims, we could be required or otherwise decide it is appropriate to discontinue manufacturing, using, or selling particular products subject to infringement claims or develop other technology not subject to infringement claims, which could be time-consuming and costly or may not be possible. In addition, to the extent potential claims against us are successful, we may have to pay substantial monetary damages or discontinue certain of our practices, products or technologies that are found to be in violation of another party’s rights. We also may have to seek third-party licenses to continue certain of our existing or planned product lines, thereby incurring substantial costs related to royalty payments for such licenses, which could negatively affect our gross margins. Also, license agreements can be terminated under appropriate circumstances. No assurance can be given that efforts to remediate any infringement would be successful or that licenses could be obtained on acceptable terms or that litigation will not occur.

In the event there is a temporary or permanent injunction entered prohibiting us from marketing or selling certain of our products, or a successful claim of infringement against us requiring us to pay royalties to a third party and we fail to license such technology on acceptable terms and conditions or to develop or license a substitute technology, our business, results of operations or financial condition could be materially adversely affected.

The upgrade of our business information system could pose a risk to our ability to effectively operate and manage our business.

In an effort to streamline our processes and gain efficiencies, the Company made the decision to reduce the number of business information systems we operate. We are currently in the process of migrating our existing businesses to a single business information system. The business information system is also being upgraded to the next generation application. The introduction of a new business information system or upgrading existing systems poses multiple risks. Our information systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and to keep pace with continuing changes in information processing technology, evolving industry, and regulatory standards. If the information we rely upon to run our businesses was found to be inaccurate or unreliable or if we fail to maintain our information systems and data integrity effectively, we could have operational disruptions which could result in inaccurate or untimely reporting of financial and operational results, an inability to effectively manage the ongoing operations of the business, adversely affect our ability to adequately service the needs of our existing customer’s or attract new customers, or suffer other damaging consequences. We depend on independent third parties for significant portions of our systems-related support. This dependence makes our operations vulnerable to such third parties' failure to perform adequately under the contract, due to internal or external factors.

Increased IT security threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, solutions and services.

Increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. Depending on their nature and scope, such threats could potentially lead to the compromising of confidential information, improper use of our systems and networks, manipulation and destruction of data and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.

Risks relating to our industry

Government regulation may delay or prevent new product introduction and affect our ability to continue manufacturing and marketing existing products.

Our instruments, reagents and other products are subject to regulation by governmental and private agencies in the U.S. and abroad, which regulate the testing, manufacturing, packaging, labeling, distribution, and marketing of medical supplies and devices. Certain international regulatory bodies also impose import and tax restrictions, tariff regulations, and duties on imported products. Delays in agency review can significantly delay new product introduction and may result in a product becoming “outdated” or losing its market opportunity before it can be introduced. Also, the FDA and international agencies have the authority to require a recall or modification of products in the event of a defect.

FDA clearance or approval may be required before we can market new instruments or reagents in the U.S. or make significant changes to existing products. The process of obtaining marketing clearances and approvals from regulatory agencies for new products can be time consuming and expensive. There is no assurance that clearances or approvals will be granted or that agency review will not involve delays that would adversely affect our ability to commercialize our products.

Other governmental regulations may require the redesign and clearance of our products before they can be available in the marketplace. For example, our instruments are subject to “The Restriction on the Use of Certain Hazardous Substances and Electronic Equipment” (RoHS), which implements European Union Directive 2002/95, and restricts the level of certain hazardous substances, including lead and mercury, in the sale of new electrical and electronic equipment in the EU.

If any of our products failed to perform in the manner represented during this clearance or approval process, particularly concerning safety issues, one or more of these agencies could require us to cease manufacturing and selling that product, or even recall previously-placed products, and to resubmit the product for clearance or approval before we could sell it again. Depending on the product, and the availability of acceptable substitutes, such an agency action could result in significantly reduced revenues and earnings for an indefinite period.

Federal, state and foreign regulations regarding the manufacture and sale of our products are subject to change. We cannot predict what impact, if any, such changes might have on our business. In addition, there can be no assurance that regulation of our products will not become more restrictive in the future and that any such development would not have a material adverse effect on our business.

We are subject to a number of existing laws and regulations, non-compliance with which could adversely affect our business, financial condition and results of operations, and we are susceptible to a changing regulatory environment.

The sales, marketing and pricing of products and relationships that medical device companies have with healthcare providers are under increased scrutiny by federal, state and foreign government agencies. Compliance with the Anti-Kickback Statute, False Claims Act, Physician Payments Sunshine Act and other healthcare related laws, as well as competition, data and patient privacy and export and import laws is under increased focus by the agencies charged with overseeing such activities. Our new Immucor DX business introduces new compliance obligations for our business that may not be familiar to our employees. The Immucor DX lab causes us to have greater exposure to risks related to federal reimbursement compliance, the Anti-Kickback Statute, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Stark law and other federal state and local regulations.

U.S. and foreign governments have also increased their focus on the enforcement of the US Foreign Corrupt Practices Act (FCPA), and similar anti-bribery laws. We are expanding internationally into countries that have higher risk profiles for anti-bribery compliance. We have compliance programs in place, including policies, training and various forms of monitoring, designed to address these risks. However, these programs and policies may not always protect us from conduct by individual employees that violate these laws. Violations, or allegations of violations, of these laws may result in large civil and criminal penalties, debarment from participating in government programs, diversion of management time, attention and resources and may otherwise have an adverse effect on our business, financial condition and results of operations.

The industry and market segments in which we operate are highly competitive, and we may not be able to compete effectively with larger companies with greater financial resources than we have.

Our industry and the markets we operate in are highly competitive. Some of our competitors have greater financial resources than we do, making them better equipped to fund research and development, manufacturing and marketing efforts, or license technologies and intellectual property from third parties. We also face risks related to customers finding alternative methods of testing, which could result in lower demand for our products. Our competitors can be expected to continue to improve the design and performance of their products and to introduce new products with competitive price and performance characteristics. Although we believe that we have certain technological and other advantages over our competitors, maintaining these advantages will require us to continue to invest in research and development, sales and marketing and customer service and support. Sufficient resources to continue to make such investments may not be available, or at such levels that would allow us to be successful in maintaining such advantages.

Increased competition in the U.S. could negatively impact our revenues and profitability.

We could face increased competition in the U.S. market, which historically has had a limited number of market participants. For fiscal ~~2015~~year 2016, approximately 6163% of our revenues were generated in the U.S., and our U.S. operations have higher gross margins than our operations outside the U.S. Additional competition in the U.S. could negatively impact our revenues and/or our profitability.

Changes in government policy may have a material adverse effect on our business.

Changes in government policy could have a significant impact on our business by increasing the cost of doing business, affecting our ability to sell our products and negatively impacting our profitability. Such changes could include modifications to existing legislation, such as U.S. tax policy, or entirely new legislation.

We may be exposed to product liability claims resulting from the use of products we sell and distribute.

Although product liability claims in our industry are infrequent, the expansion of our business in an increasingly litigious business environment may expose us to product liability claims related to the products we sell. We maintain insurance that includes product liability coverage, and we believe our insurance coverage is adequate for our business. However, there can be no assurance that insurance coverage for these risks will continue to be available or, if available, that it will be sufficient to cover potential claims or that the present level of coverage will continue to be available at a reasonable cost. A partially or completely uninsured successful claim against us could have a material adverse effect on us.

Risks related to our indebtedness

Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt obligations.

We have a significant amount of indebtedness outstanding. The major components of our debt consist of senior credit facilities (“Senior Credit Facilities”) and unsecured notes (“Notes”). Our Senior Credit Facilities, as amended, are comprised of: (a) asenior secured revolving loan facilities (the “Revolving Facilities”) for $~~100~~80.0 million ~~senior~~which ~~secured~~mature ~~revolving~~on ~~loan~~the ~~facility~~earlier of (i) February 2020, (ii) May 2018, if the ~~“Revolving~~maturity of the Term Loan Facility” has not been extended by such date, and (iii) 90 days prior to any maturity date of certain funded material indebtedness (which ~~matures~~maturity indate ~~August~~shall ~~2017~~be no earlier than October 19, 2019) and (b) a $~~663~~641.38 million senior secured term loan facility (the “Term Loan Facility”) which matures in August 2018. We have $400.0 million in aggregate principal of unsecured 11.125% Notes due in August 2019. As of May 31, ~~2015~~2016, total principal indebtedness outstanding was $1,~~048~~041.48 million and we had unused commitments of $~~100~~80.0 million under our Revolving ~~Facility~~Facilities. The ~~terms~~Revolving ~~of the Senior Credit~~ Facilities, as amended, also provide that we can borrow up to an additional $100.0 million (or a greater amount if we meet specified financial ratios) of which the availability is subject to certain conditions including bank approval. In addition, the Revolving Facility includes borrowing capacity in the form of letters of credit and borrowings on same-day notice, referred to as swing line loans, in each case, up to $25.0 million, and is available in U.S. dollars, GBP, Euros, Yen, Canadian dollars and in such other currencies as the Company and the Administrative Agent under the Revolving ~~Facility~~Facilities may agree (subject to a sublimit for such non-U.S. currencies).

Subject to the limits contained in the credit agreement governing our Senior Credit Facilities and the indenture that governs the Notes, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify. Specifically, our high level of debt could have important consequences, including:

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making it more difficult for us to satisfy our obligations with respect to our debt;

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requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

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increasing our vulnerability to general adverse economic and industry conditions;

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exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our Senior Credit Facilities, are at variable rates of interest;

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limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

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placing us at a disadvantage compared to other, less leveraged competitors;

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increasing our cost of borrowing; and

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preventing us from raising the funds necessary to repurchase all the Notes tendered to us upon the occurrence of certain changes of control, which would constitute a default under the indenture governing the Notes and cause a cross-default under the Senior Credit Facilities.

In addition, the indenture that governs the Notes and the credit agreement governing our Senior Credit Facilities contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all our debt.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to affect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The credit agreement governing our Senior Credit Facilities and the indenture governing the Notes restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due.

In addition, we conduct a substantial portion of our operations through our subsidiaries, many of which are foreign legal entities and are not guarantors of our debt. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Our non-guarantor subsidiaries do not have any obligation to pay amounts due on our debt or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the indenture governing the Notes and the credit agreement governing our Senior Credit Facilities limit the ability of our subsidiaries to incur contractual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under our indebtedness. If we cannot make scheduled payments on our debt, we will be in default and holders of the Notes could declare all outstanding principal and interest to be due and payable, the lenders under our Senior Credit Facilities could terminate their commitments to loan money, the lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.

Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks to our financial condition described above.

We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the indenture governing the Notes and the credit agreement governing our Senior Credit Facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. In addition, as of May 31, ~~2015~~2016, our Senior Credit Facilities had unused revolving debt commitments of $~~100~~80.0 million~~, which amount could increase up to an additional $100~~.0 ~~million (or a greater amount if we meet specified financial ratios), the availability of which is subject to certain conditions, including bank approval.~~ All of those borrowings would be secured indebtedness. If new debt is added to our current debt levels, the risks that we face could intensify.

The terms of the credit agreement governing our Senior Credit Facilities and the indenture governing the Notes restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

The indenture governing the Notes and the credit agreement governing our Senior Credit Facilities contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to:

•

incur additional indebtedness;

•

pay dividends or make other distributions or repurchase or redeem our capital stock;

•

prepay, redeem or repurchase certain debt;

•

make loans and investments;

•

sell assets;

•

incur liens;

•

enter into transactions with affiliates;

•

alter the businesses we conduct;

•

enter into agreements restricting our subsidiaries’ ability to pay dividends; and

•

consolidate, merge or sell all or substantially all of our assets.

In addition, the restrictive covenants in the credit agreement governing the Revolving Facility portion of our Senior Credit Facilities require us to maintain a senior secured net leverage ratio of less than 5.25 to 1.00 to be tested on the last day of each fiscal quarter. Our ability to meet this financial covenant can be affected by events beyond our control. 16

In addition, the restrictive covenants in the credit agreement governing the Revolving Facilities portion of our Senior Credit Facilities require us to maintain a senior secured net leverage ratio of less than 5.25 to 1.00 to be tested on the last day of each fiscal quarter. Our ability to meet this financial covenant can be affected by events beyond our control.

A breach of the covenants under the indenture governing the Notes or under the credit agreement governing our Senior Credit Facilities could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the credit agreement governing our Senior Credit Facilities would permit the lenders under our Senior Credit Facilities to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under our Senior Credit Facilities, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or note holders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. As a result of these restrictions, we may be:

•

limited in how we conduct our business;

•

unable to raise additional debt or equity financing to operate during general economic or business downturns; or

•

unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our strategy.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under our Senior Credit Facilities are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed will remain the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Assuming that the entire Revolving ~~Facility~~Facilities ~~was~~were fully drawn, each one-eighth point change in the LIBOR interest rate above the Term Loan Facility’s LIBOR floor of 1.25% would result in a $0.89 million change in annual interest expense on our indebtedness under our Senior Credit Facilities. We have entered into, and may continue to enter into, interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.

Item 1B. — Unresolved Staff Comments.

Not applicable.

Item 2. — Properties.

We own our Canadian manufacturing facility and ~~one~~lease the remainder of our ~~Belgium~~other ~~sales offices~~facilities. WeIn ~~lease~~fiscal ~~the~~year ~~remainder~~2016, ofwe sold our ~~facilities.~~Belgium sales office.

Our owned ~~properties~~property ~~are~~is not encumbered as security for any loan. We believe that our ~~current~~ facilities are adequate for our current and anticipated needs and do not foresee any difficulty in renewing leases that expire in the near term.

Item 3. — Legal Proceedings.

We (Immucor, Inc. and BioArray Solutions Limited (“BioArray”), a wholly owned subsidiary of Immucor, Inc.) are defendants in an action brought in August 2014 by Rutgers, the State University of New Jersey (“Rutgers”), in the Superior Court of New Jersey for Middlesex County, alleging breach of contract and fraud claims under a patent license between Rutgers and BioArray. We believe the claims are without merit and that we have meritorious defenses. We believe that liability is unlikely and that the amount of any liability is not ~~now~~currently reasonably estimable,. ~~but~~We also believe that any potential liability would not be material to our operations or to our financial condition.

From time to time, we are a party to certain legal proceedings in the ordinary course of business. However, we are not currently subject to any legal proceedings expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 4. — [Reserved]

PART II

Item 5. — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Prior to the Immucor Acquisition, our common stock was traded on The NASDAQ Stock Market under the symbol BLUD. Following the Immucor Acquisition, our common stock ishas been privately held. Therefore there is currently no established trading market for our common stock.

IVD Intermediate Holdings B Inc. (the “Parent”) is the only owner of record of our common stock. The Parent is a wholly owned indirect subsidiary of IVD Holdings Inc. (“Holdings”), which was formed by investment funds affiliated with TPG Capital, L.P.

Dividend Policy

With the exception of certain limited circumstances, payment of dividends is restricted under our Senior Credit Facilities and the indenture governing our Notes. WeExcept ~~have~~for ~~never~~a ~~declared~~$6.0 ~~cash~~million ~~dividends~~dividend ~~with~~related ~~respect~~to the Sentilus LLC spin-off, and a $0.4 million dividend related to ~~our~~a stock redemption and tax payments to be made by Holdings in fiscal year 2016, the Company has not paid dividends on its common stock. Other than potential periodic dividends to fund Sentilus LLC activities and dotax payments, the Company does not expect to dopay sodividends on its common stock in the near future. We presently intend to continue to reinvest our earnings in the business.

Item 6. – Selected Financial Data.

The following financial tables present selected consolidated financial data for Immucor. The data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and notes, included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.

As a result of the Immucor Acquisition on August 19, 2011, our stock is no longer publicly traded. Currently, the issued and outstanding shares of Immucor are indirectly owned by TPG Capital, L.P. and certain co-investors. Our financial data is labeled as “Predecessor” for financial periods prior to the Immucor Acquisition, and “Successor” for financial periods after the Immucor Acquisition. In the following financial tables, we have presented the results of operations for the twelve month periods ended May 31, ~~2015~~2016 (the fiscal year 2016), May 31, 2015 ~~period~~(the fiscal year 2015), May 31, 2014 (the fiscal ~~2014~~year ~~period~~2014), and May 31, 2013 (the fiscal ~~2013~~year ~~period~~2013), and have presented separately the results of operations for the period from August 20, 2011 to May 31, 2012 (the Successor fiscal year 2012 period) and the period from June 1, 2011 to August 19, 2011 (the Predecessor fiscal year 2012 period)~~, as well as May 31, 2011 (the fiscal 2011 period)~~. This data has been derived from our audited consolidated financial statements and is in thousands ~~of dollars~~.

										~~Successor~~			~~Predecessor~~Successor			Predecessor
										August 20,			June 1,
													August 20, 2011			June 1, 2011
										2011			2011
	Year Ended May 31												through			through
										through			through
	2016			2015			2014			2013			May 31, 2012			August 19, 2011
	Year Ended May 31									May 31,			August 19,			Year Ended
Net sales	$	379,972			389,300			388,056			347,788			261,814			74,910
	2015			2014			2013			2012			2011			May 31, 2011
Cost of sales (exclusive of amortization shown separately below)		143,969			143,659			139,634			120,027			105,698			22,955
Net sales	$	389,300			388,056			347,788			261,814			74,910			333,091
Gross profit		236,003			245,641			248,422			227,761			156,116			51,955
Cost of sales (exclusive of amortization shown separately below)		143,659			139,634			120,027			105,698			22,955			96,175
Gross margin		245,641			248,422			227,761			156,116			51,955			236,916
Operating expenses:
Research and development		2830,~~791~~255			2928,~~070~~791			2129,~~313~~070			1321,~~929~~313			413,~~895~~929			154,~~900~~895
Selling and marketing		5756,~~833~~655			5957,~~057~~833			5059,~~129~~057			3250,~~913~~129			1032,~~510~~913			3510,~~931~~510
Distribution		2017,~~022~~462			20,~~165~~022			1820,~~718~~165			1418,~~333~~718			314,~~952~~333			163,~~508~~952
General and administrative		4144,~~191~~462			41,~~603~~191			4241,~~801~~603			3642,~~954~~801			1936,~~312~~954			3719,~~747~~312
Amortization expense		54,~~531~~937			5254,~~965~~531			5052,~~765~~965			3950,~~224~~765			~~931~~39,224			~~4,333~~931
Acquisition-related items		-			~~(4,638~~-	)		2(4,~~616~~638	)		12,~~362~~616			181,~~863~~362			~~500~~18,863
Impairment loss		-3,318			~~160,150~~-			3160,~~500~~150			-3,500			-			-
Certain litigation expenses	-	-			-			-			~~22,000~~-			-22,000			-
Loss on disposition of fixed assets		-			-			~~1,175~~-			-1,175			-			-
Total operating expenses	~~202,368~~	207,089			~~358~~202,~~372~~368			~~191~~358,~~017~~372			~~160~~191,~~715~~017			58160,~~463~~715			~~110~~58,~~919~~463
Income (loss) from operations	~~43,273~~	28,914			~~(109~~43,~~950~~273	)		36(109,~~744~~950	)		(436,~~599~~744	)		(64,~~508~~599	)		~~125~~(6,~~997~~508	)
Non-operating (expense) income:
Interest income		~~145~~135			36145			2836			728			~~142~~7			~~706~~142
Interest expense		(8990,~~421~~535	)		(8889,~~304~~421	)		(9088,~~830~~304	)		(7790,~~048~~830	)		-(77,048	)		~~(70~~-	)
Loss on extinguishment of debt		-			-			~~(9,111~~-	)		-(9,111	)		-			-
Other, net		~~878~~(244	)		45878			~~(539~~45	)		~~447~~(539	)		~~2,673~~447			32,~~997~~673
Total non-operating net (expense) income		(8890,~~398~~644	)		(88,~~223~~398	)		(~~100~~88,~~452~~223	)		(76100,~~594~~452	)		2(76,~~815~~594	)		42,~~633~~815
(Loss) income before income taxes		(45,125	)		(198,173	)		(63,708	)		(81,193	)		(3,693	)		130,630
Loss before income taxes		(61,730	)		(45,125	)		(198,173	)		(63,708	)		(81,193	)		(3,693	)
Provision (benefit) for income taxes		15,600			(15,916	)		(24,566	)		(31,546	)		2,681			41,303
(Benefit) provision for income taxes		(17,963	)		15,600			(15,916	)		(24,566	)		(31,546	)		2,681
Net (loss) income	$	(60,725	)		(182,257	)		(39,142	)		(49,647	)		(6,374	)		89,327
Net loss		(43,767	)		(60,725	)		(182,257	)		(39,142	)		(49,647	)		(6,374	)
Net loss attributable to noncontrolling interest		(1,677	)		-			-			-			-			-
Net loss attributable to Immucor, Inc.	$	(42,090	)		(60,725	)		(182,257	)		(39,142	)		(49,647	)		(6,374	)

	The following data is as of the dates indicated below:
							Successor		Predecessor
	May 31						May 31		August 19		May 31
	2015		2014		2013		2012		2011		2011
Working capital	$	74,946		91,917		87,069		71,295		381,259		378,979
Total assets		1,752,686		1,824,414		2,000,970		1,949,153		652,395		633,127
Long-term debt, net of debt discounts		1,033,276		1,037,183		1,039,278		986,361		-		-
Shareholders’ equity		383,681		468,616		644,706		637,378		576,646		568,872

Certain reclassifications have been made to the previous year's information to conform to the 2016 presentation. See Note 1 of our consolidated financial statements for additional information.

	The following data is as of the dates indicated below:
									Successor		Predecessor
	May 31								May 31		August 19
	2016		2015		2014		2013		2012		2011

Working capital	$	52,317		66,920		81,613		80,008		63,578		365,922
Total assets		1,707,633		1,720,338		1,783,030		1,956,231		1,888,305		636,706
Long-term debt		1,007,948		1,004,706		1,002,014		997,880		945,364		-
Shareholders’ equity		344,546		383,681		468,616		644,706		637,378		576,646

Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Our Business

We operate in the transfusion and transplantation in vitro diagnostics markets. Our products perform typing and screening of blood, organs or stem cells to ensure donor-recipient compatibility. Our offerings are targeted at hospitals, donor centers and reference laboratories around the globe.

We have manufacturing facilities in the United States (“U.S.”) and Canada and sell our products through both direct affiliate offices and third-party distribution arrangements.

We operate in a highly regulated industry and are subject to continuing compliance with multiple country-specific statutes, regulations and standards. For example, in the U.S. the Food and Drug Administration (“FDA”) regulates all aspects of the transfusion process, including the marketing of reagents and instruments used to determine compatibility. Additionally, we are subject to government legislation that governs the delivery of healthcare. products and services.

Our automated instrument-reagent systems operate on a “razor/razor blade” model, with our instruments serving as the “razors” and our reagents serving as the “razor blades.” For transfusion diagnostics, our instruments are “closed systems,” meaning our proprietary reagents can only be used on our instruments. For transplant diagnostics, our reagents run on Luminex instruments, which are open systems. The “razor/razor blade” business model generates a recurring revenue stream for us.

Business Highlights of ~~2015~~2016

The following is a summary of significant factors affecting our business in fiscal ~~2015~~year 2016:

● Acquisitions ~~and Investments~~ –

o ~~Sentilus Acquisition –~~ On ~~October~~March 14, ~~2014~~2016, ~~the~~we ~~Company~~exercised ~~paid~~our ~~$6.0~~warrant ~~million~~to inacquire ~~cash~~100% toof ~~acquire~~the ~~Sentilus,~~common ~~Inc.~~stock of Sirona Genomics (“~~Sentilus~~Sirona”). ~~Sentilus~~for ~~was~~ a ~~privately-held~~total ~~company~~of ~~focused~~$14.4 onmillion ~~developing~~paid ain ~~novel,~~cash. ~~inkjet-printed~~In ~~antibody~~October ~~microarray-based technology~~2014, ~~FemtoarraysTM.~~entered ~~Sentilus~~into ~~has~~a ~~been~~collaboration ~~developing~~with ~~FemtoarraysTM~~Sirona ~~and~~on the ~~underlying~~development ~~technology~~and ~~for~~commercialization ~~use in a variety~~ of inour ~~vitro~~MIA ~~diagnostics~~FORA ~~areas,~~NGS ~~including~~next ~~transfusion~~generation ~~diagnostics,~~sequencing ~~and~~(“NGS”) ~~could~~product ~~potentially~~offerings ~~serve~~for astransplant acompatibility ~~next-generation~~testing ~~technology~~(see ~~platform~~below for ~~our~~more ~~molecular transfusion diagnostics business~~information.)

o● ~~Sirona~~New ~~Collaboration~~product –launches On October 3, 2014, the Company entered into a collaborative arrangement with Sirona Genomics, Inc. (“Sirona”) for the commercialization of Sirona’s human leukocyte antigens (“HLA”) typing sample preparation and bioinformatics offering for next-generation sequencing. As part of the collaboration, the Company paid $0.7 million for a warrant with an exclusive option to acquire 100% of the common stock of Sirona at a future date, and loaned $4.6 million to Sirona for development funding. The collaborative arrangement also includes the potential to provide additional future funding in ~~the~~transplant ~~form~~business of a loan of up to $6.7 million over a two year period from the date of the arrangement, subject to the achievement of certain development milestones and other terms of the arrangement, of which $3.1 million was paid to Sirona as an additional loan on June 1, 2015.–

●o ~~Income~~In ~~Tax~~the ~~Expense~~third ~~Item~~quarter –of fiscal year 2016, we expanded our product offerings to include MIA FORA NGS , a product for high resolution human leukocyte antigen (“HLA”) typing that provides accurate, comprehensive coverage of 11 HLA genes. MIA FORA, which was developed in collaboration with Sirona, is comprised of sample preparation reagents and bioinformatics software that, together, deliver high resolution DNA typing results for transplant patients. We believe MIA FORA will expand our presence in transplant diagnostics, particularly in bone marrow typing, where our market share has historically been small. We believe the transplant business provides a significant growth opportunity for our business.

o● ~~During~~Operations fiscal 2015, the Company decided to change its election with regard to the treatment of its foreign tax credits (“FTCs”). This decision is expected to generate a significant reduction in cash income tax payments related to the fiscal 2014, fiscal 2015 and fiscal 2016 years as a result of the Company changing from the credit method to the deduction method for its FTCs in various tax periods. As a result of this change in election, the Company recognized a discrete charge of additional income tax expense of $23.7 million during fiscal 2015. In addition, the Company recorded a valuation allowance of $7.6 million during fiscal 2015 related to uncertainties in the Company’s ability to utilize its FTC carryovers prior to their expiration.–

On April 5, 2016, we announced a plan to consolidate our LIFECODES facilities to simplify our operations, improve processes and reduce expenses of our transplant business. The plan includes closing our Stamford, CT facility and moving most of the activity to our Waukesha, WI site with a target completion date of April 30, 2017. We anticipate that the costs involved in closing this facility will be recovered within approximately 12 months.

● Fluctuations in Foreign Currency Exchange Rates –

o Certain of the foreign markets in which we operate have experienced significant fluctuations in foreign currency exchange rates in fiscal 2015 which caused an unfavorable impact on our consolidated operating results, balance sheet and cash flows in that period. Our foreign markets could continue to see significant fluctuations in foreign currency exchange rates in future periods which could cause a decline in expected future consolidated operating results, statement of position and cash flows.

Results of Operations

The operating results presented in the table below ~~are~~ (in thousands ~~of dollars~~, except percentages).

										Change
	Year Ended May 31									~~2015~~2016 vs ~~2014~~2015						~~2014~~2015 vs ~~2013~~2014
	2015			2014			2013			Amount			%			Amount			%
	2016			2015			2014			Amount			%			Amount			%
Net sales	$	~~389~~379,~~300~~972			~~388~~389,~~056~~300			~~347~~388,~~788~~056			1(9,~~244~~328	)		0(2.34	)		401,~~268~~244			110.63
Cost of sales (*)		143,~~659~~969			~~139~~143,~~634~~659			~~120~~139,~~027~~634			~~4,025~~310			20.92			194,~~607~~025			162.39
Gross margin		245,641			248,422			227,761			(2,781	)		(1.1	)		20,661			9.1
Gross profit		236,003			245,641			248,422			(9,638	)		(3.9	)		(2,781	)		(1.1	)
Operating expenses:
Research and development		2830,~~791~~255			2928,~~070~~791			2129,~~313~~070			~~(279~~1,464	)		(15.01	)		~~7,757~~(279	)		36(1.40	)
Selling and marketing		5756,~~833~~655			5957,~~057~~833			5059,~~129~~057			(1,~~224~~178	)		(2.10	)		8(1,~~928~~224	)		17(2.81	)
Distribution		2017,~~022~~462			20,~~165~~022			1820,~~718~~165			(~~143~~2,560	)		(012.78	)		~~1,447~~(143	)		7(0.7	)
General and administrative		4144,~~191~~462			41,~~603~~191			4241,~~801~~603			~~(412~~3,271	)		(17.09	)		(~~1,198~~412	)		(21.80	)
Amortization expense		54,~~531~~937			5254,~~965~~531			5052,~~765~~965			~~1,566~~406			3.0.7			21,~~200~~566			4.3.0
Acquisition-related items		-			~~(4,638~~-	)		2(4,~~616~~638	)		~~4,638~~-			~~(100.0~~-	)		(74,~~254~~638	)		**(100.0	)
Impairment loss		-3,318			~~160,150~~-			3160,~~500~~150			~~(160~~3,~~150~~318	)		~~(100.0~~-	)		~~156~~(160,~~650~~150	)		**(100.0	)
Loss on disposition of fixed assets		-			-			1,175			-			**			(1,175	)		**
Total operating expenses		207,089			202,368			358,372			4,721			2.3			(156,004	)		(43.5	)
Total operating expenses		202,368			358,372			191,017			(156,004	)		(43.5	)		167,355			87.6
Income (loss) from operations		28,914			43,273			(109,950	)		(14,359	)		(33.2	)		153,223			**
Income (loss) from operations		43,273			(109,950	)		36,744			153,223			**			(146,694	)		**
Non-operating (expense) income:
Interest income		~~145~~135			36145			2836			~~109~~(10	)		**(6.9	)		8109			~~28.6~~**
Interest expense		(8990,~~421~~535	)		(8889,~~304~~421	)		(9088,~~830~~304	)		(1,~~117~~114	)		1.32			2(1,~~526~~117	)		(21.83	)
Loss on extinguishment of debt		-			-			(9,111	)		-			-			9,111			**
Other, net		(244	)		878			45			(1,122	)		**			833			**
Other, net		878			45			(539	)		833			**			584			**
Total non-operating net expense		(90,644	)		(88,398	)		(88,223	)		(2,246	)		2.5			(175	)		0.2
Total non-operating net expense		(88,398	)		(88,223	)		(100,452	)		(175	)		0.2			12,229			(12.2	)
Loss before income taxes		(61,730	)		(45,125	)		(198,173	)		(16,605	)		36.8			153,048			(77.2	)
Loss before income taxes		(45,125	)		(198,173	)		(63,708	)		153,048			(77.2	)		(134,465	)		211.1
Provision (benefit) for income taxes		(17,963	)		15,600			(15,916	)		(33,563	)		**			31,516			**
Provision (benefit) for income taxes		15,600			(15,916	)		(24,566	)		31,516			(198.0	)		8,650			(35.2	)
Net loss		(43,767	)		(60,725	)		(182,257	)		16,958			(27.9	)		121,532			(66.7	)
Net loss	$	(60,725	)		(182,257	)		(39,142	)		121,532			(66.7	)		(143,115	)		365.6
Net loss attributable to noncontrolling interest		(1,677	)		-			-			(1,677	)		-			-			-
Net loss attributable to Immucor, Inc.	$	(42,090	)		(60,725	)		(182,257	)		18,635			(30.7	)		121,532			(66.7	)

(*) Cost of sales is exclusive of amortization expense which is shown separately within operating expenses. ~~(**) Calculation is not meaningful.~~

(**) Calculation is not meaningful.

Years Ended May 31, 2016 and 2015:

Net sales were $380.0 million in fiscal year 2016 as compared with $389.3 million in fiscal year 2015, a decrease of $9.3 million, or 2.4%. This decrease in net sales is primarily driven by unfavorable foreign currency exchange rate fluctuations partially offset by a higher number of ship cycles in fiscal year 2016. After adjusting for the impact of foreign exchange rate fluctuations and ship cycles, net sales in fiscal year 2016 were 1% lower than fiscal year 2015 net sales. Net sales by product group are presented in the following table (in thousands except percentages):

	Year Ended May 31				Change
	2016		2015		Amount			%
Net sales by product group:
Transfusion	$	317,345	$	326,850		(9,505	)		(2.9	)
Transplant & Molecular		62,627		62,450		177			0.3
Total	$	379,972	$	389,300		(9,328	)		(2.4	)

Transfusion: Net sales of our transfusion products were $317.3 million in fiscal year 2016 as compared with $326.9 million in fiscal year 2015, a decrease of $9.5 million, or 2.9%. Transfusion product net sales were lower in fiscal year 2016 primarily due to an unfavorable effect of changes in foreign currency exchange rates as compared with the fiscal year 2015, macroeconomic conditions affecting our international markets and reduction of blood demand in the U.S., offset by a higher number of ship cycles in fiscal year 2016 compared with fiscal year 2015. After adjusting for the impact of ship cycles and foreign currency exchange rate fluctuations, net sales for fiscal year 2016 decreased by 1.9% when compared with fiscal year 2015.

~~Years~~Transplant ~~Ended~~& ~~May~~Molecular: 31Net sales of our transplant and molecular products were $62.6 million in fiscal year 2016 as compared with $62.4 million in fiscal year 2015, an increase of $0.2 million, or 0.3%. After adjusting for the impact of the foreign currency exchange rate fluctuations, net sales for fiscal year 2016 increased by 4.2% compared to fiscal year 2015. ~~and~~This ~~2014:~~increase in net sales was primarily due to higher sales of our PreciseType HEA molecular immunohematology product in the U.S. Net sales of our transplant products were also higher, mainly in the emerging markets as we continue to make progress in penetrating those markets.

~~Net~~Gross ~~sales~~profit ~~were~~decreased by $~~389~~9.36 million in fiscal ~~2015~~year 2016 as compared with ~~$388~~fiscal year 2015, or 3.19%. ~~million~~Gross profit as a percentage of consolidated net sales was 62.1% in fiscal ~~2014,~~year an2016 ~~increase~~compared ofwith $163.21% ~~million,~~in orfiscal 0year 2015.~~3%.~~ ~~This~~The ~~increase~~lower ingross ~~net~~profit ~~sales~~and isgross ~~described~~profit inpercentage were mainly due to the ~~discussion~~unfavorable effect of ~~net~~changes ~~sales~~in byforeign ~~product~~exchange ~~group~~rates, ~~below.~~unfavorable ~~Net~~product ~~sales~~mix, byand ~~product~~the ~~group~~additional ~~are~~expenses ~~presented~~related into the ~~following~~start-up ~~table~~of ~~(in~~our ~~thousands~~newly ~~except~~acquired ~~percentages):~~reference lab business.

	Year Ended May 31				Change
	2015		2014		Amount			%
Net sales by product group:
Transfusion	$	326,850		330,547		(3,697	)		(1.1	)
Transplant & Molecular		62,450		57,509		4,941			8.6
Total	$	389,300		388,056		1,244			0.3

Research and development expenses were $30.3 million in fiscal year 2016 as compared with $28.8 million in fiscal year 2015, an increase of $1.5 million, or 5.1%. The increase was primarily due to additional expenses associated with our recently acquired Sirona operation and increased activities relating to Sentilus, offset by a reduction of expenses for other projects.

~~Transfusion:~~Selling ~~Net~~and ~~sales~~marketing ofexpenses ~~our Transfusion products~~ were $~~326~~56.87 million in fiscal ~~2015~~year 2016 as compared with $~~330~~57.58 million in fiscal ~~2014~~year 2015, a decrease of $31.72 million, or 12.10%. ~~Transfusion~~The ~~product~~decrease ~~net~~in ~~sales~~selling ~~were~~and ~~lower~~marketing inexpenses ~~fiscal~~was ~~2015~~ primarily due to athe ~~lower~~favorable ~~number of ship cycles, and an unfavorable~~ effect of changes in foreign ~~currency~~ exchange rates on expenses in our international operations. asThe ~~compared~~decrease ~~with~~from ~~the~~exchange ~~same~~rates ~~period~~was ~~in fiscal 2014,~~ partially offset by ~~the~~additional ~~residual~~costs ~~benefit~~related ofto anregistering ~~increase~~new ~~in our installed base of instruments. Our Transfusion net sales had a higher concentration of sales from our Capture reagent~~ products ~~(reagents~~for ~~used~~the intransplant ~~our~~business ~~semi-automated diagnostic testing instruments),~~ and aexpanding ~~lower~~registration ~~concentration~~ of ~~sales~~Transfusion ~~from our Red Cell~~ products ~~(reagents used~~ in our traditional, manual diagnostic testing instruments) in fiscal 2015 as compared with fiscal 2014. This shift in product mix reflects a growing trend of users moving to our automated diagnostic solution. In addition, net sales of our Red Cell products were lower in fiscal 2015 as compared with fiscal 2014 due to an increase in pricing pressures in the ~~U.S.~~emerging ~~market~~markets. ~~After adjusting for the impact of ship cycles and foreign currency exchange rate fluctuations, net sales for fiscal 2015 would have increased by 2.1% when compared to fiscal 2014.~~

~~Transplant~~Distribution &expenses ~~Molecular: Net sales of our Transplant and Molecular products~~ were $6217.45 million in fiscal ~~2015~~year 2016 as compared with $5720.50 million in fiscal ~~2014~~year 2015, ana ~~increase~~decrease of $42.96 million, or 812.68%. The ~~increase~~decrease in ~~net~~distribution ~~sales~~expenses ~~in fiscal 2015~~ was primarily ~~driven~~due ~~by continued efforts~~ to ~~expand~~changes ~~our~~that ~~market~~were ~~reach~~implemented ~~and~~in ~~strong~~fiscal ~~customer~~year ~~acceptance~~2015 ofto ~~our~~consolidate ~~Transplant~~ and ~~Molecular~~outsource ~~products in~~ the ~~European,~~Transfusion ~~and~~product ~~Emerging~~distribution ~~markets.~~process ~~This increase~~ in ~~net~~Europe. ~~sales~~The ~~was~~favorable ~~partially offset by an unfavorable~~ effect of changes in ~~foreign currency~~ exchange rates ~~on our international operations as~~ compared ~~with the same period in fiscal 2014. The increase in net sales was largely due~~ to ~~a higher volume of Transplant product shipments which partially offset lower volume of sales of our Molecular products. Management believes that the lower volume of Molecular products sold in~~ fiscal ~~2015~~year reflects a delay in orders as our customers converted their existing systems to incorporate our new blood typing assay, the PreciseTypeTM human erythrocyte antigen (“HEA”) test, which was approved for commercial use by the FDA in May 2014. Net sales of our Molecular products increased in each quarter of fiscal 2015, ~~with~~also ~~reported~~reduced ~~net~~distribution ~~sales~~expenses in the ~~fourth~~international ~~quarter nearly double that of the first quarter of fiscal 2015~~markets. ~~After adjusting for the impact of the foreign currency exchange rate fluctuations, net sales for fiscal 2015 compared to fiscal 2014, would have increased by 13.3%.~~

~~Gross~~General ~~margin~~and ~~decreased~~administrative byexpenses were $244.85 million in fiscal ~~2015~~year 2016 as compared with ~~fiscal~~$41.2 ~~2014,~~million orin ~~1.1%,~~fiscal ~~reflecting~~year 2015, an increase ~~in cost~~ of ~~sales in the fiscal 2015 period~~$3.3 ~~And~~million, inor ~~fiscal 2014, gross margin included $2~~7.9%. ~~million~~The ofincrease ~~costs~~was ~~for~~mainly ~~the~~due ~~amortization~~to ofstock-based ~~the~~compensation ~~fair~~costs, ~~value~~legal offees ~~inventory~~ related to the ~~acquisition~~spin-off of ~~our~~Sentilus ~~LIFECODES~~and ~~business~~acquisition ~~that was not included in fiscal 2015. Gross margin as a percentage~~ of ~~consolidated~~Sirona, ~~net~~and ~~sales~~one-time ~~was~~costs ~~approximately~~related ~~0.9%~~to ~~lower~~staffing ~~in fiscal 2015 as compared with fiscal 2014~~changes. The ~~lower~~increases ~~gross~~were ~~margin~~partially ~~percentage~~offset ~~was~~by ~~primarily~~the ~~due to a less~~ favorable ~~product mix and an unfavorable~~ effect of changes in foreign ~~currency~~ exchange rates onin ~~the conversion of net sales from~~ our international ~~operations partially offset by lower destruction and medical device excise tax costs in fiscal 2015~~markets.

~~Research~~Amortization ~~and~~expense ~~development~~was ~~expenses were~~ $2854.89 million in the fiscal ~~2015~~year 2016 period as compared with $2954.15 million in the fiscal ~~2014~~year 2015 period, aan ~~decrease~~increase of $0.34 million, or 0.97%. The ~~decrease~~increase was primarily due to the completion of certain significant development projects in fiscal 2014, including the development work related to the PreciseTypeTM HEA test that was completed in the fourth quarter of fiscal 2014. This decrease in research and development expenses was partially offset by additional expenses associated with development activities from recently acquired businesses, and the development of new technologies in transplant diagnostics as well as the development of new technologies for our transfusion products. The development costs related to ~~new technologies in transplant diagnostics were mainly for~~ the ~~study~~Sirona ~~of antigens and proteins that appear to be associated with renal transplant rejections to determine their commercial applications~~acquisition. The development costs related to new technologies for our transfusion products were primarily for the development of new products, such as ABO titrations, and to improve certain existing assay products that are sold in our international markets.

An impairment loss of $3.3 million was recorded in the fourth quarter of fiscal year 2016. Two in-process research and development (“IPR&D”) projects totaling $3.0 million were no longer considered economically feasible and therefore abandoned with the costs fully written-off. One project related to the Transfusion Diagnostics business with a value of $2.5 million and the other project related to the Transplant and Molecular Diagnostics business with value of $0.5 million. In addition, a $0.3 million loss was recognized on the disposition of certain capital work-in-progress equipment assets that were determined to no longer be economically viable.

Non-operating net expense was $90.6 million in fiscal year 2016 and $88.4 million in fiscal year 2015, an increase of $2.2 million, or 2.5%. The increase was mainly due to the change in exchange gains and losses and an increase of interest expense. The increase in interest expense was primarily due to higher interest accreted on the contingent consideration liabilities, which is a non-cash expense.

The effective tax rate for fiscal year 2016 and fiscal year 2015 was 29.1% and (34.6)%, respectively. The effective tax rate for fiscal year 2016 was higher than the effective tax rate for the corresponding period in fiscal year 2015 primarily due to the impact of changes in uncertain income tax positions during fiscal year 2016 and because of discrete items recorded during fiscal year 2015 that did not occur in fiscal year 2016. During the fourth quarter of fiscal year 2016, the Company recognized additional income tax expense related to the tax liability for unrecognized tax benefits and a corresponding change in the competent authority asset related to the expected tax settlement of the Bilateral Advanced Pricing Agreement between the Company, its Canadian subsidiary, the Internal Revenue Service and the Canada Revenue Agency. During fiscal year 2015, the Company recorded discrete tax expense items of $23.7 million due to the Company’s change in election related to its treatment of foreign tax credits (“FTCs”) and a $7.6 million change in the valuation allowance for its FTC carryovers.

~~Selling~~Years ~~and~~Ended ~~marketing~~May ~~expenses~~31, ~~were $57.8 million in fiscal~~ 2015 ~~as compared with $59.0 million in fiscal 2014, a decrease of $1.2 million, or 2.1%. The decrease in selling~~ and marketing expenses is due to a reduction in expenses from cost containment efforts initiated by management and a more favorable effect of changes in foreign currency exchange rates on international expenses in fiscal 2015. These decreases were partially offset by additional marketing expenses related to business acquisitions completed since May 2014. :

~~Distribution~~Net ~~expenses~~sales were $20389.03 million in fiscal year 2015 as compared with $20388.1 million in fiscal year 2014, aan ~~decrease~~increase of $0.1.2 million, or 0.73%. ~~The~~This ~~decrease~~increase in ~~distribution~~net ~~expenses~~sales ~~was~~is ~~primarily~~described ~~due~~in tothe adiscussion ~~more favorable effect~~ of ~~changes~~net insales ~~foreign currency exchange rates on international expenses partially offset~~ by ~~higher~~product ~~distribution~~group ~~costs recorded in our European market~~below. ~~The~~Net ~~higher~~sales ~~distribution costs recorded in our European market were primarily driven~~ by ~~improvements~~product ingroup ~~the~~are ~~packaging~~presented ~~materials of our temperature sensitive products, and a one-time increase~~ in ~~costs from a strategic initiative to consolidate and outsource~~ the ~~distribution~~following ~~process~~table (in ~~Europe.~~thousands ~~This~~except strategic initiative is expected to reduce distribution costs on a long-term basis. Distribution costs in the fourth quarter of fiscal 2015 were lower than any of the previous quarters in fiscal 2015 and fiscal 2014. percentages):

General and administrative expenses were $41.2 million in fiscal 2015 as compared with $41.6 million in fiscal 2014, a decrease of $0.4 million, or 1.0%. This decrease was mainly due to a more favorable effect of changes in foreign currency exchange rates on international expenses in fiscal 2015 partially offset by higher acquisition-related costs, and additional bad debt expense recorded in fiscal 2015 and a one-time credit that was recorded in fiscal 2014 that was not included in fiscal 2015. The higher acquisition-related transaction costs reflect the increase in acquisition activities in fiscal 2015 as compared with fiscal 2014. The increase in bad debt expense in fiscal 2015 reflects an additional allowance for international distributors with past due amounts and the one-time credit recorded in fiscal 2014 reduced bad debt expense by $1.9 million which resulted from a change in estimate of our allowance for doubtful accounts to better reflect our actual bad debt experience.

	Year Ended May 31				Change
	2015		2014		Amount			%
Net sales by product group:
Transfusion	$	326,850		330,547		(3,697	)		(1.1	)
Transplant & Molecular		62,450		57,509		4,941			8.6
Total	$	389,300	$	388,056		1,244			0.3

~~Amortization~~Transfusion: ~~expense~~Net ~~was~~sales of our transfusion products were $54326.58 million in ~~the~~ fiscal year 2015 ~~period~~ as compared with $52330.95 million in ~~the~~ fiscal ~~2014~~year ~~period~~2014, ana ~~increase~~decrease of $13.67 million, or 31.01%. ~~The~~Transfusion ~~increase~~product ~~was~~net sales were lower in fiscal year 2015 primarily due to ~~additional~~a ~~costs~~lower ~~related~~number toof ~~acquisitions~~ship ~~completed~~cycles, ~~since~~and ~~May~~an ~~30,~~unfavorable effect of changes in foreign currency exchange rates on our international operations as compared with the same period in fiscal year 2014. After adjusting for the impact of ship cycles and foreign currency exchange rate fluctuations, net sales for fiscal year 2015 would have increased by 2.1% when compared to fiscal year 2014.

~~Non-operating~~Transplant ~~net~~& ~~expense~~Molecular: ~~was~~Net sales of our transplant and molecular products were $8862.4 million in fiscal year 2015 ~~and~~as compared with $8857.25 million in fiscal year 2014, an increase of $04.29 million, or 08.26%. The increase in ~~non-operating~~ net ~~expense~~sales in fiscal year 2015 was ~~mainly~~primarily ~~due~~driven toby acontinued ~~favorable~~efforts ~~change~~to inexpand ~~exchange~~the ~~gains~~market ~~and~~reach ~~losses~~of ~~partially~~our ~~offset~~transplant byand anmolecular ~~increase~~products in ~~interest~~the ~~expense~~European inand ~~fiscal~~emerging ~~2015~~markets. ~~The~~In ~~increase~~the US, we experienced a delay in ~~interest~~orders ~~expense~~for ~~was~~our ~~primarily~~PreciseType ~~due~~HEA toFDA ~~higher~~approved ~~interest~~product. ~~accreted~~Net onsales ~~the~~of ~~contingent~~our ~~consideration~~Molecular ~~liabilities~~products increased in each quarter of fiscal year 2015 ~~resulting~~with ~~from~~reported net sales in the ~~three~~fourth ~~acquisitions~~quarter ~~completed~~nearly ~~since~~double ~~May~~that ~~30,~~of ~~2014~~the first quarter of fiscal year 2015. ~~Exchange~~These ~~gains~~increases ~~and~~in ~~losses~~net ~~are~~sales ~~recorded~~were ~~for~~partially ~~foreign~~offset ~~currency~~by ~~transactions~~an ~~denominated~~unfavorable effect of changes in aforeign currency ~~other~~exchange ~~than~~rates ~~the~~on ~~functional~~our ~~currency~~international ofoperations as compared with the ~~reporting~~same ~~entity,~~period ~~and~~in ~~the~~fiscal ~~ineffective~~year ~~portion~~2014. After adjusting for the impact of ~~our~~the ~~interest~~foreign currency exchange rate ~~swap~~fluctuations, ~~arrangements~~net ~~used~~sales for fiscal year 2015 compared to ~~hedge~~fiscal ~~against~~year ~~interest~~2014, ~~rate~~would ~~exposure.~~have increased by 13.3%.

~~The~~Gross ~~effective~~profit ~~tax~~decreased ~~rate~~by ~~for~~$2.8 million in fiscal year 2015 ~~and~~as compared with fiscal year 2014, ~~was~~or ~~(34~~1.6)1% ~~and 8~~.~~0%,~~ ~~respectively.~~Gross ~~The~~profit ~~effective~~as ~~tax~~a ~~rate~~percentage ~~for~~of ~~fiscal~~consolidated ~~2015~~net sales was ~~lower~~63.1% ~~than~~in ~~the~~fiscal ~~effective~~year ~~tax~~2015 ~~rate~~compared ~~for~~with ~~the~~64.0% ~~corresponding period~~ in fiscal year 2014. ~~primarily~~And, ~~due~~in tofiscal ~~the~~year ~~impact~~2014, ofgross ~~discrete~~profit ~~items~~included ~~recorded~~$ ~~during~~2.9 ~~the~~million ~~third quarter~~ of ~~fiscal~~costs ~~2015.~~for ~~These~~the ~~discrete~~amortization ~~items primarily consisted~~ of ~~$23.7 million due to~~ the ~~Company’s~~fair ~~change~~value inof ~~election~~inventory related to ~~its~~the ~~treatment~~acquisition of ~~foreign~~our ~~tax~~LIFECODES ~~credits~~business ~~(“FTCs”)~~that ~~and~~was anot ~~$7.6~~included ~~million change~~ in ~~the~~fiscal ~~valuation~~year ~~allowance for its FTC carryovers~~2015. ~~Excluding~~The ~~these~~lower ~~discrete~~gross ~~items,~~profit ~~the~~percentage ~~effective~~was ~~tax~~primarily ~~rate~~due ~~for~~to ~~fiscal~~a ~~2015~~less ~~would~~favorable ~~have~~product ~~been~~mix ~~34.8%.~~and ~~The~~an ~~effective~~unfavorable ~~tax~~effect ~~rate~~of ~~for~~changes ~~fiscal~~in ~~2014~~foreign ~~was~~currency ~~primarily~~exchange ~~impacted~~rates byon the ~~impairment~~conversion of ~~goodwill~~net ~~which~~sales isfrom ~~not~~our ~~deductible~~international ~~for~~operations ~~income~~partially ~~tax~~offset ~~purposes.~~by ~~Excluding~~lower ~~the~~destruction ~~impairment~~and ofmedical ~~goodwill,~~device ~~the~~excise ~~effective~~ tax ~~rate~~costs ~~for~~in fiscal ~~2014~~year ~~would have been 36~~2015.~~3%.~~

Research and development expenses were $28.8 million in fiscal year 2015 as compared with $29.1 million in fiscal year 2014, a decrease of $0.3 million, or 0.9%. The decrease was primarily due to the completion of certain significant development projects in fiscal year 2014, including the development work related to the PreciseType HEA test that was completed in the fourth quarter of fiscal year 2014. This decrease in research and development expenses was partially offset by additional expenses associated with development activities from recently acquired businesses, and the development of new technologies in our transplant business as well as the development of new technologies for our transfusion products.

Selling and marketing expenses were $57.8 million in fiscal year 2015 as compared with $59.0 million in fiscal year 2014, a decrease of $1.2 million, or 2.1%. The decrease in selling and marketing expenses is due to a reduction in expenses from cost containment efforts initiated by management and a more favorable effect of changes in foreign currency exchange rates on international expenses in fiscal year 2015. These decreases were partially offset by additional marketing expenses related to business acquisitions completed since May 2014.

Distribution expenses were $20.0 million in fiscal year 2015 as compared with $20.1 million in fiscal year 2014, a decrease of $0.1 million, or 0.7%. The decrease in distribution expenses was primarily due to a more favorable effect of changes in foreign currency exchange rates on international expenses partially offset by higher distribution costs recorded in our European market. The higher distribution costs recorded in our European market were primarily driven by improvements in the packaging materials of our temperature sensitive products, and a one-time increase in costs from a strategic initiative to consolidate and outsource the distribution process in Europe. This strategic initiative is expected to reduce distribution costs on a long-term basis. Distribution costs in the fourth quarter of fiscal year 2015 were lower than any of the previous quarters in fiscal year 2015 and fiscal year 2014.

~~Years~~General ~~Ended~~and ~~May~~administrative 31expenses were $41.2 million in fiscal year 2015 as compared with $41.6 million in fiscal year 2014, a decrease of $0.4 million, or 1.0%. This decrease was mainly due to a more favorable effect of changes in foreign currency exchange rates on international expenses in fiscal year 2015 partially offset by higher acquisition-related costs and additional bad debt expense recorded in fiscal year 2015 and a one-time credit that was recorded in fiscal year 2014 that was not included in fiscal year 2015. The higher acquisition-related transaction costs reflect the increase in acquisition activities in fiscal year 2015 as compared with fiscal year 2014. The increase in bad debt expense in fiscal year 2015 reflects an additional allowance for international distributors with past due amounts and ~~2013:~~the one-time credit recorded in fiscal year 2014 reduced bad debt expense by $1.9 million which resulted from a change in estimate of our allowance for doubtful accounts to better reflect our actual bad debt experience.

~~Net~~Amortization ~~sales~~expense ~~were~~was $~~388~~54.15 million in the fiscal ~~2014~~year 2015 period as compared with $~~347~~52.89 million in the fiscal ~~2013~~year 2014 period, an increase of $401.36 million, or 113.60%. ~~This~~The increase inwas ~~net~~primarily ~~sales~~due isto ~~described~~additional incosts ~~the~~related ~~discussion~~to ofacquisitions ~~net~~completed ~~sales~~since byMay ~~product~~30, ~~group below~~2014. ~~Net sales by product group are presented in the following table (in thousands except percentages):~~

	Year Ended May 31				Change
	2014		2013		Amount			%
Net sales by product group:
Transfusion	$	330,547		330,931		(384	)		(0.1	)
Transplant & Molecular		57,509		16,857		40,652			241.2
Total	$	388,056		347,788		40,268			11.6

Non-operating net expense was $88.4 million in fiscal year 2015 and $88.2 million in fiscal year 2014, an increase of $0.2 million, or 0.2%. The increase in non-operating net expense was mainly due to a favorable change in exchange gains and losses partially offset by an increase in interest expense in fiscal year 2015. The increase in interest expense was primarily due to higher interest accreted on the contingent consideration liabilities in 2015 resulting from the three acquisitions completed since May 30, 2014. Exchange gains and losses are recorded for foreign currency transactions denominated in a currency other than the functional currency of the reporting entity, and the ineffective portion of our interest rate swap arrangements used to hedge against interest rate exposure.

~~Transfusion:~~The ~~Net~~effective ~~sales~~tax ofrate ~~our~~for ~~transfusion~~fiscal ~~products~~year in2015 and fiscal year 2014 ~~were~~was ~~$330~~(34.56)% ~~million~~and as8.0%, ~~compared~~respectively. ~~with~~The ~~$330.9~~effective ~~million~~tax inrate for fiscal ~~2013,~~year a2015 ~~decrease~~was oflower ~~$0.4~~than ~~million,~~the oreffective ~~0.1%.~~tax ~~The~~rate ~~decrease~~for the corresponding period in ~~net~~fiscal ~~sales~~year ~~was~~2014 primarily due to ~~fewer~~the ~~ship~~impact ~~cycles~~of ~~partially~~discrete ~~offset~~items byrecorded during the ~~favorable~~third ~~effect~~quarter of ~~changes~~fiscal inyear ~~foreign~~2015. ~~currency~~These ~~exchange~~discrete ~~rates~~items onprimarily ~~our~~consisted ~~international~~of ~~operations~~$23.7 inmillion ~~fiscal~~due ~~2014~~to asthe ~~compared~~Company’s ~~with~~change ~~fiscal~~in ~~2013.~~election ~~The~~related ~~increase~~to inits ~~revenue~~treatment ~~generated~~of ~~from~~foreign atax ~~higher~~credits ~~number~~(“FTCs”) ofand ~~instrument~~a ~~placements~~$7.6 million change in ~~fiscal~~the ~~2014~~valuation asallowance ~~compared~~for ~~with~~its ~~fiscal~~FTC ~~2013~~carryovers. ~~was~~Excluding ~~offset~~these bydiscrete items, the ~~impact~~effective oftax arate ~~disruption~~for infiscal ~~the~~year ~~production~~2015 ofwould ~~certain~~have ~~transfusion~~been ~~products~~34.8%. inThe ~~fiscal~~effective ~~2014~~tax ~~resulting~~rate infor ~~lost~~fiscal ~~sales.~~year ~~After~~2014 ~~adjusting~~was ~~for~~primarily impacted by the ~~impact~~impairment of ~~foreign~~goodwill ~~currency~~which ~~exchange~~is ~~rate~~not ~~fluctuations~~deductible ~~and~~for ~~ship~~income ~~cycles,~~tax ~~net~~purposes. ~~sales~~Excluding inthe ~~fiscal~~impairment ~~2014~~of ~~were~~goodwill, ~~comparable with~~ the ~~net~~effective ~~sales~~tax ofrate for fiscal ~~2013.~~year 2014 would have been 36.3%.

Transplant & Molecular: Net sales of our transplant and molecular products for fiscal 2014 were $57.5 million as compared with $16.8 million for the fiscal 2013 periods, an increase of $40.7 million, or over 200%. This increase was primarily due to additional net sales from our newly acquired product lines from the LIFECODES acquisition completed on March 22, 2013.

Gross margin increased by $20.7 million for fiscal 2014 as compared with fiscal 2013, or 9.1%, mainly due to the higher net sales generated in 2014. Gross margin as a percentage of consolidated net sales was approximately 1.5% lower in fiscal 2014 as compared with fiscal 2013. The lower gross margin percentage was primarily due to a less favorable product mix, a lower gross margin percentage on our transfusion products, and additional amortization of the adjustment in fair value of inventory of $1.5 million related to recent acquisitions that was included in fiscal 2014 that was not included in fiscal 2013. The lower gross margin percentage on our transfusion products was mainly due to the production disruption in fiscal 2014 resulting in lost sales. Gross margin as a percentage of consolidated net sales was also lower due to the medical device excise tax that became effective in January 2013 which increased our production costs by approximately $1.2 million. These decreases in gross margin percentage were partially offset by lower depreciation expense of approximately $6.3 million in fiscal 2014 related to a change in the anticipated benefit period of our instrument equipment assets as discussed in the section entitled “Change in Estimates” below.

Research and development expenses were $29.1 million in fiscal 2014 as compared with $21.3 million in the fiscal 2013 periods. The overall increase of $7.8 million, or 36.4%, was primarily due to additional expenses related to LIFECODES and continued investment in development projects. One of the most significant projects underway is our new molecular blood typing assay (now marketed as the PreciseTypeTM HEA test). This new product is an in vitro diagnostic test and is our core molecular test for extended typing of red blood cell antigens which was approved by the FDA in May 2014. We anticipate introducing this new product to the market in the near term.

Selling and marketing expenses were $59.0 million in fiscal 2014 as compared with $50.1 million in fiscal 2013. The increase of $8.9 million, or 17.8%, was primarily due to additional costs related to LIFECODES.

Distribution expenses were $20.1 million in fiscal 2014 as compared with $18.7 million in fiscal 2013, an increase of $1.4 million, or 7.7%. The increase was primarily due to additional costs related to LIFECODES.

General and administrative expenses were $41.6 million in the fiscal 2014 period as compared with $42.8 million in the fiscal 2013 periods, a decrease of $1.2 million, or 2.8%. The decrease was primarily due to cost reduction efforts made by management in fiscal 2014, synergies achieved from our LIFECODES acquisition, and a reduction in bad debt expense of $1.9 million resulting from a change in estimate of the allowance for doubtful accounts as discussed in the section entitled “Change in Estimates” below. These decreases in costs were partially offset by additional expenses related to LIFECODES.

Amortization expense was $53.0 million for fiscal 2014 as compared with $50.8 million for fiscal 2013, an increase of $2.2 million, or 4.3%. The increase was primarily due to a full year of amortization of intangible assets related to the LIFECODES acquisition in fiscal 2014 as compared with two months of amortization in fiscal 2013.

Acquisition-related items was a gain of $4.6 million for fiscal 2014 resulting from a decrease in the contingent consideration liability related to the acquisition of LIFECODES. Based upon information available in fiscal 2014, management determined that the likelihood of the LIFECODES business achieving the financial performance target was lower than previously estimated and decreased the fair value of the related contingent consideration liability by $4.6 million to zero in fiscal 2014. See Note 2 to the consolidated financial statements for additional information related to the LIFECODES acquisition.

An impairment loss on goodwill of $160.0 million was recorded for one of our reporting units in the fourth quarter of fiscal 2014. The Company has six reporting units with goodwill from prior acquisitions reported on the balance sheet at May 31, 2014. The annual evaluation for impairment utilizes the financial projections of the next fiscal year and the five year strategic plans that are prepared in the fourth quarter and reflect Management’s continuing knowledge of the operations and the markets in which the reporting units operate. Because goodwill is evaluated on a reporting unit basis, an impairment was generated for one of the six reporting units, although the overall aggregate value of the Company’s six reporting units exceeds the aggregate carrying amount of goodwill for these units. (See Note 7 to the consolidated financial statements for additional information on the goodwill impairment). In addition, an impairment loss on an in-process research and development (“IPR&D”) project of $0.2 million was recorded in fiscal 2014. It was determined that a project related to our transplant and molecular diagnostics business was no longer economically feasible and therefore was abandoned and its costs were fully written-off.

Non-operating expense was $88.2 million in the fiscal 2014 period and $100.4 million in the fiscal 2013 periods, a decrease of $12.2 million, or 12.2%. The most significant component of non-operating expense is interest expense from our long-term debt which was first issued at the time of the Immucor Acquisition, in August 2011. The decrease in non-operating net expense for fiscal 2014 as compared with fiscal 2013 was mainly due to a $9.1 million loss on the extinguishment of debt incurred from refinancing of our Senior Credit Facilities twice during fiscal 2013 that did not reoccur in fiscal 2014. Non-operating net expense was also lower in fiscal 2014 due to a decrease in interest expense of $2.5 million on our outstanding debt. The lower interest expense was mainly due to a lower interest rate, partially offset by a higher average long-term debt balance in fiscal 2014 as compared with fiscal 2013. The higher average debt balance was mainly a result of the acquisition of LIFECODES during the fourth quarter of fiscal 2013.

The effective tax rate for the fiscal 2014 period and the fiscal 2013 period was 8.0% and 38.6%, respectively. The effective tax rate for fiscal 2014 was lower as compared with the effective tax rate for the fiscal 2013 periods primarily because the impairment of goodwill is not deductible for tax purposes. Other items that impacted the lower rate are the fact that the acquisition-related items are not taxable, the impact of lower foreign income tax rates, discrete tax items recognized during the fiscal 2014 as compared to fiscal 2013 period, and the expiration of the statute of limitations of the benefits associated with uncertain tax positions.

Liquidity and Capital Resources

Cash flow

Our principal source of liquidity is our operating cash flow. This cash-generating capability is one of our fundamental strengths and provides us with ~~substantial~~the financial flexibility into ~~meeting~~meet our operating, investing and financing requirements.

In fiscal ~~2015~~year 2016, our cash and cash equivalents decreased by $58.31 million to $1810.43 million as of May 31, ~~2015~~2016. The decrease was primarily due to $1118.78 million of cash used for investments in new businesses and the Sirona collaboration, $119.49 million for the purchase of additional property and equipment, and $6.7 million used to repay long-term debt. These decreases in cash and cash equivalents were partially offset by $2527.61 million of positive cash flow contributed by our operating activities. The cash balance at May 31, ~~2015~~2016 includes cash of $116.54 million that is held by our subsidiaries outside of the United States. We are not permanently reinvested in our subsidiaries and can repatriate these funds, if needed, to support future debt payments.

Operating activities

Operating activities provided cash of $27.1 million and $25.6 million in ~~both~~ fiscal ~~2015~~years 2016 and ~~2014~~2015, respectively. The increase in ~~net~~ cash provided by ~~our~~ operating ~~results~~activities ~~after adjusting for non-cash items~~ was offset by an increase in working capital requirements in fiscal 2015. The increase in our working capital requirements was primarily driven by a decrease in collections on our accounts receivable balances and an increase in payments to our vendors mainly due to ~~the~~improvements ~~timing of payments received and paid. These increases~~ in our working capital ~~requirements were partially offset by lower purchases of our inventories in fiscal 2015~~management.

Investing activities

During ~~the~~ fiscal ~~2015~~year 2016, we used ~~cash of~~ $119.79 million ~~for~~of ~~investments~~cash into ~~new~~purchase ~~businesses~~property and ~~the~~equipment ~~Sirona~~and ~~collaboration,~~to ~~and~~upgrade our enterprise resource planning system, $~~11.~~4.9 million ~~for~~to ~~purchases~~fund ofan additional ~~property~~loan ~~and~~to ~~equipment~~Sirona prior to its acquisition, ~~including~~$13.1 ~~the~~million ~~upgrade~~to acquire 100% of ~~certain~~the ~~financial~~common ~~systems~~stock of Sirona, and $0.8 million to acquire the ~~implementation~~assets of a ~~new~~Reference ~~financial consolidation application~~Lab. During the fiscal ~~2014~~year 2015, we used cash of $1711.27 million tofor ~~acquire~~investments in new businesses and ~~received~~the Sirona collaboration, and $111.14 million ~~due~~for ~~from~~purchases ~~the~~of ~~seller~~additional ofproperty ~~LIFECODES~~and asequipment, aincluding ~~result~~the upgrade of ~~finalizing~~ certain ~~purchase~~financial ~~price~~systems ~~adjustments.~~and ~~For~~the ~~other~~implementation ~~investing activities, we used cash~~ of ~~$9.2~~a ~~million~~new tofinancial ~~purchase~~consolidation ~~property and equipment in fiscal 2014~~application.

Financing activities

In fiscal ~~2015~~year 2016, we used cash for financing activities of $6.7 million for repayments of our long-term debt, and $0.4 million for a dividend related to a stock redemption and tax payments to be made by Holdings. We also borrowed and repaid $5575.50 million on our Revolving ~~Facility~~Facilities during fiscal ~~2015~~year 2016 and had no amounts outstanding under the Revolving Facilities at May 31, 2016. In fiscal ~~2014~~year 2015, we used cash for financing activities of $6.7 million for repayments of our long-term debt and had no amounts outstanding under our Revolving ~~Facility~~Facilities.

Contingencies

We record contingent liabilities resulting from asserted and unasserted claims against us when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. We disclose contingent liabilities when there is a reasonable possibility that the ultimate loss will exceed the recorded liability. Estimating probable losses requires analysis of multiple factors, in some cases including judgments about the potential actions of third-party claimants and courts. Therefore, actual losses in any future period are inherently uncertain.

Although, from time to time, we are a party to certain legal proceedings in the ordinary course of business, one or more of such matters, or any future legal matters, may have an adverse effect on our consolidated financial position, results of operations or cash flows. We are currently not involved in any material legal proceedings (see Part I, Item 3 – Legal Proceedings for further discussion). Contingent liabilities are described in Note 24 of our consolidated financial statements.

Contingent liabilities are described in Note 23 of our consolidated financial statements.

Future Cash Requirements and Restrictions

Our Term Loan Facility requires quarterly principal payments equal to 0.25% of the original principal amount of the loan with the balance due and payable on August 19, 2018. Required principal and interest payments related to our Term Loan Facility are $6.6 million and $32.84 million, respectively, for the next 12 months. Required interest payments related to the Notes is $44.5 million for the next 12 months. The Senior Credit Facilities are secured by substantially all of the tangible and intangible assets of our U.S. subsidiaries and the pledge of 65% of the stock of our foreign subsidiaries. As of May 31, ~~2015~~2016, we had principal of $1,~~048~~041.48 million of long-term borrowings outstanding under our Term Loan Facility and the Notes. Our net total available borrowings under our Revolving ~~Facility~~Facilities were $~~100~~80.0 million as of May 31, ~~2015~~2016.

We expect that recurring capital expenditures during fiscal ~~2016~~year 2017 will range from $10 million to $1512 million. These expenditures will be used to purchase equipment that increases or enhances ~~capacity and~~ productivity, ~~and to~~ upgrade certain financial systems, and expand capacity at our Waukesha facility. These expenditures exclude the purchase of instrument assets that are used in equipment rental agreements with our customers, which is reflected in non-cash investing and financing activities in our consolidated statements of cash flows.

Management believes that existing cash and cash equivalent balances, cash provided from operations, and borrowings available under the Revolving ~~Facility~~Facilities of our Senior Credit Facilities will provide sufficient liquidity to meet the operating and capital expenditure needs for existing operations during the next twelve months.

AsWe ~~part~~and ofour ~~the~~officers, ~~Sirona~~directors, ~~collaboration~~employees, wesubsidiaries, ~~have~~affiliates, anincluding ~~exclusive~~IVD ~~option~~Holdings, toInc. ~~acquire~~(our ~~100%~~indirect ofparent ~~the~~company), ~~common~~or ~~stock~~directors, ~~of Sirona~~subsidiaries, ~~and~~stockholders ~~have~~or aaffiliates ~~potential~~of ~~obligation~~IVD toHoldings, ~~provide~~Inc., ~~additional~~may ~~funding~~from oftime up to ~~$3.6~~time ~~million~~seek into ~~the~~retire ~~form~~or ofpurchase ~~interest~~our ~~bearing~~outstanding ~~loans.~~debt As(including ofpublicly ~~the~~issued ~~date~~debt) ofthrough ~~this~~cash ~~collaborative~~purchases ~~agreement~~and/or ~~in October 2014~~exchanges, wein ~~had~~open ~~lent~~market ~~Sirona~~purchases, ~~$4.6~~privately ~~million.~~negotiated ~~As of May 31~~transactions, ~~2015,~~by wetender ~~had~~offer ~~committed~~or tootherwise. ~~lend~~Such anrepurchases ~~additional~~or ~~$3.1~~exchanges, ~~million~~if ~~to Sirona~~any, ~~and~~will ~~funded~~depend ~~that payment~~ on ~~June~~prevailing 1market conditions, ~~2015.~~liquidity ~~Additional~~requirements, ~~loans~~contractual ~~are~~restrictions ~~subject to the achievement of certain development milestones~~ and other ~~terms of the arrangements~~factors. ~~Refer~~The toamounts ~~Note~~involved 3may ofbe ~~our consolidated financial statements for additional information on the Sirona collaboration~~material.

2625

Contractual Obligations and Commercial Commitments

Contractual obligations and commercial commitments for the next five years are detailed in the table below (in thousands):

Contractual Obligations

Payments Due by Period

Total

Less than 1 year

1-3 years

4 - 5 years

After 5 years

Senior Credit Facilities (1) (2)

~~648~~641,~~410~~777

6,632

13635,~~264~~145

~~628,514~~-

Notes (2)

400,000

Purchase obligations

4544,~~328~~130

1620,~~611~~400

1716,~~784~~846

86,~~366~~884

~~2,567~~-

Operating and capital leases

3027,~~302~~090

5,~~916~~610

87,~~159~~834

5,~~505~~062

108,~~722~~584

Minimum royalty obligations

1412,~~717~~487

2,~~553~~616

5,~~199~~382

54,~~345~~484

~~1,620~~5

Unrecognized tax benefits (3)

915,~~066~~191

Acquisition costs for earn-out provision (4)

1840,~~596~~356

13,~~819~~051

1016,~~950~~694

214,~~578~~772

35,~~249~~839

Interest (5)

~~311~~234,~~832~~092

7877,~~469~~539

~~154~~134,~~316~~115

7922,~~047~~438

Total contractual cash obligations

1,~~478~~415,~~251~~123

~~112~~115,~~000~~848

~~209~~816,~~672~~016

1453,~~129,355~~640

2729,~~224~~619

(1) The Senior Credit Facilities are comprised of a $~~655~~641.08 million Term Loan Facility and aan $~~100~~80.0 million Revolving ~~Facility~~Facilities. These are minimum scheduled payments of the Term Loan Facility.

(2)

Amounts shown do not include interest.

(3) Approximately $1321.82 million of unrecognized tax benefits, including accrued interest of $12.45 million, have been recorded as liabilities in accordance with Accounting Standards Codification (“ASC”) 740, “Income Taxes”, and we are uncertain as to if or when such amounts may be settled. However, as none of these amounts are expected to be settled within the current period, all amounts are presented as due after 5 years. We recorded $46.70 million as an offset to long-term deferred tax liabilities and included $915.12 million in other long-term liabilities. In addition, certain payments related to unrecognized tax benefits would be partially offset by reductions in payments in other jurisdictions (see Note 1819 to the consolidated financial statements for additional information).

(4) This earn-out provision is calculated using the present value of the expected (probability-weighted) payments based on the likelihood of achieving each of the financial performance targets. The total cash payments will total $89134.3 million assuming that the full earn-out amount is achieved (see Note 16 to the consolidated financial statements for additional information).

(5) Interest on the Term Loan Facility and Notes is computed based on the scheduled loan balance multiplied by the minimum rate currently required for a LIBOR loan under the credit agreement. Interest on the Notes is computed using the stated interest rate. Also, includes expected interest on the interest rate hedge at the stated rates and the unused line fees on the Revolving ~~Facility~~Facilities, assuming that the Revolving ~~Facility~~Facilities is not used.

The expected timing of payment of the obligations discussed above is estimated based on current information. The timing of payments and actual amounts paid may differ depending on the timing of receipt of services, or, for some obligations, changes to agreed-upon amounts.

Off-Balance Sheet Arrangements

We have no off-balance sheet financial arrangements as of May 31, ~~2015~~2016.

Non-GAAP Disclosures

EBITDA and Adjusted EBITDA are both non-GAAP financial measures and are presented in this report because we consider them important supplemental measures of our performance and believe that they are frequently used by interested parties in the evaluation of companies in the industry. EBITDA, as we use it, is net income (loss) before interest, taxes, depreciation and amortization. We believe that the presentation of EBITDA enhances an investor’s understanding of our financial performance. Adjusted EBITDA is calculated in a similar manner as EBITDA except that certain non-cash charges, unusual or non-recurring items and other items that we believe are not representative of our core business are excluded. We believe that Adjusted EBITDA is also a useful financial metric to assess our operating performance from period to period. EBITDA and Adjusted EBITDA do not purport to be an alternative to net income (loss) as a measure of operating performance or to cash flows from operating activities as a measure of liquidity or any other performance measure derived in accordance with GAAP. EBITDA and Adjusted EBITDA have limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• EBITDA and Adjusted EBITDA doare ~~not~~both ~~reflect~~non-GAAP ~~all~~financial ~~cash~~measures ~~expenditures,~~and ~~future~~are ~~requirements~~presented ~~for~~in ~~capital~~this ~~expenditures~~report orbecause ~~contractual~~we ~~commitments;~~consider •them ~~EBITDA~~important supplemental measures of our performance and ~~Adjusted~~believe ~~EBITDA~~that dothey ~~not~~are ~~reflect~~frequently ~~changes~~used by interested parties in the evaluation of companies in the industry. EBITDA, oras ~~cash~~we ~~requirements~~use ~~for~~it, ~~working~~is ~~capital~~net ~~needs;~~income •(loss) before interest, taxes, depreciation and amortization. We believe that the presentation of EBITDA enhances an investor’s understanding of our financial performance as the metric provides a view of the financial performance before financing and tax considerations. Adjusted EBITDA dois ~~not~~calculated ~~reflect~~in ~~the~~a ~~significant~~similar ~~interest~~manner ~~expense~~as EBITDA except that certain non-cash charges, unusual or ~~the~~non-recurring ~~cash~~items ~~requirements~~and ~~necessary~~other toitems ~~service~~that ~~interest~~we orbelieve ~~principal~~are ~~payments,~~not onrepresentative of our ~~debt;~~core ~~and~~business •are excluded. We believe that Adjusted EBITDA is also a useful financial metric to assess our operating performance from period to period as the metric provides a view of the financial performance that is applied to valuation scenarios by investors. EBITDA and Adjusted EBITDA ~~can~~do ~~differ~~not ~~significantly~~purport ~~from~~to ~~company~~be an alternative to ~~company~~net ~~depending~~income on(loss) ~~long-term~~as ~~strategic~~a ~~decisions~~measure ~~regarding~~of ~~capital~~operating ~~structure,~~performance ~~the~~or ~~tax~~to ~~jurisdictions~~cash flows from operating activities as a measure of liquidity or any other performance measure derived in ~~which~~accordance ~~companies~~with ~~operate~~GAAP. EBITDA and ~~capital~~Adjusted ~~investments~~EBITDA have limitations as an analytical tool, ~~limiting~~and ~~its~~should ~~usefulness~~not be considered in isolation, or as a ~~comparative~~substitute ~~measure~~for analysis of our results as reported under GAAP. Some of these limitations are:

27• EBITDA and Adjusted EBITDA do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in our business. We compensate for these limitations by relying primarily on the GAAP results and using EBITDA and Adjusted EBITDA as supplemental information. Adjusted EBITDA for the fiscal years ended May 31, 2015, 2014 and 2013 are as follows (in thousands): 26

	Year Ended May 31
	2015			2014			2013
Net loss	$	(60,725	)		(182,257	)		(39,142	)
Interest expense (income), net		89,276			88,268			90,802
Income tax expense (benefit)		15,600			(15,916	)		(24,566	)
Depreciation and amortization		71,271			71,287			71,746
EBITDA		115,422			(38,618	)		98,840
Adjustments to EBITDA:
Share-based compensation (i)		2,087			1,512			1,423
Acquisition expenses, net (ii)		2,272			(2,397	)		3,072
Sponsor fee (iii)		3,700			3,916			4,390
Non-cash impact of purchase accounting (iv)		442			3,284			2,119
Impairments		-			160,150			3,500
Loss on extinguishment of debt		-			-			9,111
Certain non-recurring expenses and other (v)		11,721			13,903			17,368
Adjusted EBITDA	$	135,644			141,750			139,823

•

EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs;

•

EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; and

•

EBITDA and Adjusted EBITDA can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments, limiting its usefulness as a comparative measure.

	Year Ended May 31
	2016			2015			2014

Net loss	$	(43,767	)		(60,725	)		(182,257	)
Interest expense (income), net		90,400			89,276			88,268
Income tax (benefit) expense		(17,963	)		15,600			(15,916	)
Depreciation and amortization		69,487			71,271			71,287

EBITDA		98,157			115,422			(38,618	)

Adjustments to EBITDA:
Share-based compensation (i)		5,326			2,087			1,512
Acquisition expenses, net (ii)		1,450			2,272			(2,397	)
Sponsor fee (iii)		3,549			3,700			3,916
Non-cash impact of purchase accounting (iv)		451			442			3,284
Impairments		3,318			-			160,150
Certain other expenses (v)		15,622			11,721			13,903
Adjusted EBITDA	$	127,873			135,644			141,750

Adjusted EBITDA attributable to Immucor, Inc. (vi)	$	130,207			-			-

Represents non-cash stock-based compensation.

ii. Represents ~~non-recurring~~ items related to acquisition activities including legal, accounting and other costs. The items included in fiscal year 2014 also include the non-cash gains resulting from decreases in the contingent consideration liability related to the LIFECODES acquisition.

iii.

Represents management fees and other charges associated with a management services agreement with TPG Capital, L.P.

iv. Represents non-cash expenses, such as inventory valuation adjustments,. The items included in fiscal year 2014 were primarily incurred as a result of the LIFECODES acquisition.

v. Represents ~~non-recurring~~certain orother non-cash items and items we believe are not representative of our core business that are not included in ~~captions~~the adjustments above, including personnel and business optimization costs,. ~~and~~The items included in fiscal year 2014 also included the effect ofin the change in estimate in the allowance for doubtful accounts recorded in fiscal year 2014 which decreased the adjustment for non-recurring expenses and non-cash items by $1.9 million for that period.

~~Under the Revolving Facility, the senior secured leverage ratio is the sole financial covenant~~vi. ~~The~~Excludes ~~senior~~adjusted ~~secured leverage ratio is defined by our credit agreement governing the Senior Credit Facilities as consolidated senior secured net debt divided by the total of the last twelve months Adjusted~~ EBITDA. ~~Adjusted~~amounts ~~EBITDA~~attributable ~~used in this leverage ratio is calculated in a similar manner~~ to ~~that~~Sentilus included in the table presented above, except that it includes certain additional adjustments such as projected cost savings and synergies calculated on a pro forma basis that we expect to realize in future periods related to actions already taken or expected to be taken within twelve months of the end of the applicable periodLLC. ~~As of May 31, 2015, we were in compliance with our senior secured net leverage ratio covenant.~~

2827

Critical Accounting Policies and Estimates

General

We have identified the policies below as critical to our business operations and the understanding of our financial statements. The impact and any associated risks related to these policies on our business operations are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the notes to the consolidated financial statements included with this report. We believe that our most critical accounting policies and estimates relate to the following:

Revenue recognition

ii.

Trade accounts receivable and allowance for doubtful accounts

iii.

Inventories

iv.

Goodwill

v. ~~Income~~Contingent ~~taxes~~consideration

vi.

Income taxes

i) Revenue Recognition

Revenue is recognized in accordance with Accounting Standards Codification (“ASC”) Topic No. 605, “Revenue Recognition,” when the following four basic criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services are rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured.

We enter into arrangements in which we commit to delivering multiple products or services to our customers. In these cases, total arrangement consideration is allocated to all deliverables, which primarily include the delivery of products such as reagents and part kits, instrument (sold and leased) and the performance of services such as training and general support services, based on their relative selling prices. The following hierarchy is used to determine the selling price to be used for allocating revenue to deliverables: (i) vendor specific objective evidence (“VSOE”) of fair value for reagents and general support services, (ii) third-party evidence of selling price (“TPE”), and (iii) management’s best estimate of selling price (“MBESP”) for all other deliverables. VSOE generally exists only when we sell the deliverable separately and it is the price actually charged by us for that deliverable. TPE represents the selling price of a similar product or service by another vendor. MBESPs reflect management’s best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis.

ii) Trade Accounts Receivable and Allowance for Doubtful Accounts

The allowance for doubtful accounts represents a reserve for estimated losses resulting from the inability of our customers to pay their debts. The collectability of trade receivable balances is regularly evaluated based on a combination of factors such as customer credit-worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment patterns. If it is determined that a customer will be unable to fully meet its financial obligation, such as in the case of a bankruptcy filing or other material events impacting its business, a specific allowance for doubtful accounts is recorded to reduce the related receivable to the amount expected to be recovered.

iii) Inventories

Typically inventories are stated at the lower of cost (first-in, first-out basis) or ~~market (~~net realizable value), net of reserves. We record adjustments to the carrying value of inventory based upon assumptions about historic usage, future demand, and market conditions.

In connection with the LIFECODES acquisition on March 22, 2013, a fair value adjustment of approximately $4.5 million increased inventory to fair value, which was greater than replacement cost. As of May 31, 2013, approximately $1.7 million of the fair value adjustment was expensed through cost of sales in the fiscal 2013 period. The remaining fair value adjustment was expensed through cost of sales by the end of the second quarter of fiscal 2014, at which time inventories were again stated at the lower of cost or market, net of reserves.

iv) Goodwill

Consistent with ASC 350, “Intangibles – Goodwill and Other,” goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment annually or more frequently if impairment indicators arise. Intangible assets that have finite lives are amortized over their useful lives.

We evaluate the carrying value of goodwill during the fourth quarter of each fiscal year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired we first assesses qualitative factors to determine if it is more likely than not (defined as 50% or more) that the fair value of the reporting unit is less than its carrying amount. If it is determined that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, no additional steps are taken. If it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, we then compare the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. The fair value of the reporting unit is estimated using primarily the income, or discounted cash flows, approach. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of the reporting unit’s goodwill to its carrying amount. In calculating the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value.

~~v) Income Taxes~~28

v) Contingent consideration

Contingent consideration primarily consists of earn-out provisions related to acquisitions and payable by us if specified future events occur or conditions are met. This liability is measured at fair value by applying a form of the income approach based upon the probability-weighted payment amounts discounted to present value at a rate appropriate for the risk of achieving the performance targets. The present value of the expected payments considers the time at which the obligations are expected to be settled and a discount rate that reflects the risk associated with the performance payments. The fair value of the contingent consideration at each reporting date will be updated by reflecting the changes in fair value reflected in our statement of operations. Significant increases or decreases in any of the probabilities of successes or changes in expected timeliness for achievement of any of these milestones could result in a significantly higher or lower fair value of the liability.

vi) Income Taxes

Deferred income taxes are computed using the asset and liability method. We record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carry-forwards. The value of our deferred tax assets assumes that we will be able to generate sufficient future taxable income in applicable tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the future, we may be required to record additional valuation allowances against deferred tax assets resulting in additional income tax expense in our consolidated statements of operations. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, and we consider the Company’s history of taxable income (loss), the scheduled reversal of deferred tax liabilities, projected future taxable income, carry-back opportunities, and tax-planning strategies in making this assessment. Management assesses the need for additional valuation allowances quarterly.

The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Although ASC 740, “Income Taxes,” provides clarification on the accounting for uncertainty in income taxes recognized in the financial statements, the threshold and measurement attribute will continue to require significant judgment by management. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations.

Effective with the Immucor Acquisition, our taxable income or loss is included in the consolidated income tax returns of Holdings. Current and deferred income taxes are allocated to the members of the consolidated group as if each member were a separate taxpayer.

Recently Issued Accounting Standards

Refer to the section entitled, “Impact of Recently Issued Accounting Standards” in Note 1 of our consolidated financial statements.

~~Item 7A. — Quantitative and Qualitative Disclosures about Market Risk.~~29

WeItem ~~are exposed to market risks for foreign currency exchange rates~~7A. ~~Our~~— ~~financial~~Quantitative ~~instruments that can be affected by foreign currency fluctuations~~ and ~~exchange~~Qualitative ~~risks~~Disclosures ~~consist~~about ~~primarily~~Market of cash and cash equivalents, and trade receivables and trade payables denominated in currencies other than the U.S. dollar. We attempt to manage our exposure primarily by balancing assets and liabilities and maintaining cash positions in foreign currencies only at levels necessary for operating purposes. It has not been our practice to actively hedge our foreign subsidiaries’ assets or liabilities denominated in foreign currencies. To manage these risks, we regularly evaluate our exposure and, if warranted, may enter into various derivative transactions when appropriate. We do not hold or issue derivative instruments for trading or other speculative purposes. As part of accumulated other comprehensive income in shareholders’ equity, we recorded a foreign currency translation loss of $26.7 million in fiscal 2015, a gain of $4.3 million in fiscal 2014, and a gain of $1.6 million in fiscal 2013.Risk

We are ~~subject~~exposed to ~~interest~~market ~~rate~~risks ~~risk~~for inforeign ~~connection~~currency ~~with~~exchange ~~our long-term debt~~rates. Our ~~principal~~financial ~~interest~~instruments ~~rate~~that ~~risk~~can ~~relates~~be toaffected ~~the~~by ~~Term~~foreign ~~Loan~~currency ~~Facility~~fluctuations ~~outstanding~~and ~~under~~exchange ~~our~~risks ~~Senior~~consist ~~Credit~~primarily ~~Facilities.~~of Wecash ~~have~~and ~~approximately~~cash ~~$648.4~~equivalents, ~~million~~and ~~outstanding~~trade ~~under~~receivables ~~our~~and ~~Senior~~trade ~~Credit~~payables ~~Facilities,~~denominated ~~bearing~~in ~~interest~~currencies atother ~~variable~~than ~~rates~~the U.S. ~~A 0~~dollar.~~125%~~ ~~increase~~We inattempt ~~these floating rates applicable~~ to ~~the~~manage ~~indebtedness outstanding under~~ our ~~Senior~~exposure ~~Credit~~primarily ~~Facilities~~by ~~would~~balancing ~~increase~~assets ~~should~~and ~~interest~~liabilities ~~rates~~and ~~exceed~~maintaining ~~the~~cash ~~1.25%~~positions ~~floor~~in ~~our~~foreign ~~pro~~currencies ~~forma~~only ~~annual~~at ~~interest~~levels ~~expense~~necessary byfor ~~approximately~~operating $0purposes.8 ~~million,~~It ~~assuming~~has ~~there~~not ~~are~~been noour ~~borrowings~~practice ~~under~~to ~~the~~actively ~~Revolving~~hedge ~~Credit~~our ~~Facility.~~foreign ~~The~~subsidiaries’ ~~Senior~~assets ~~Credit~~or ~~Facilities~~liabilities ~~also~~denominated ~~allow~~in upforeign tocurrencies. anTo ~~aggregate~~manage ofthese ~~$100.0~~risks, ~~million~~we ~~(or~~regularly aevaluate ~~greater~~our ~~amount~~exposure and, if wewarranted, ~~meet~~may ~~specified~~enter ~~financial~~into ~~ratios)~~various inderivative ~~uncommitted~~transactions ~~incremental~~when ~~facilities,~~appropriate. ~~the~~We ~~availability~~do ofnot ~~which~~hold ~~are~~or ~~subject~~issue toderivative ~~our~~instruments ~~meeting~~for ~~certain~~trading ~~conditions,~~or ~~bearing~~other ~~interest~~speculative ~~at variable rates~~purposes. WeAs ~~have~~part ~~interest~~of ~~rate~~accumulated ~~swaps~~other oncomprehensive ~~approximately~~income ~~24%~~in ofshareholders’ ~~our~~equity, ~~outstanding~~we ~~Term~~recorded ~~Loan~~a ~~Facility.~~foreign ~~These~~currency ~~swaps~~translation ~~reduce~~loss ~~the risk~~ of ~~variability~~$0.2 million in ~~the~~fiscal ~~interest~~year ~~rates~~2016, ~~by fixing~~ a ~~portion~~loss of ~~the interest costs~~$26.7 Wemillion ~~consider~~in ~~these~~fiscal ~~swaps~~year to2015, ~~be effective hedges~~ and ~~they~~a ~~are~~gain ~~marked-to-market~~of ~~with~~$4.3 ~~the~~million ~~changes~~ in ~~other~~fiscal ~~comprehensive~~year ~~income~~2014.

We are subject to interest rate risk in connection with our long-term debt. Our principal interest rate risk relates to the Term Loan Facility outstanding under our Senior Credit Facilities. We have approximately $641.8 million outstanding under our Senior Credit Facilities, bearing interest at variable rates. A 0.125% increase in these floating rates applicable to the indebtedness outstanding under our Senior Credit Facilities would increase our pro forma annual interest expense by approximately $0.9 million, assuming that the entire amount of our Revolving Facilities were fully drawn. We have interest rate swaps on approximately 10.9% of our outstanding Term Loan Facility. These swaps reduce the risk of variability in the interest rates by fixing a portion of the interest costs. We consider these swaps to be effective hedges and they are marked-to-market with the changes in other comprehensive income.

Item 8. — Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	Page
Report of Grant Thornton LLP Independent Registered Public Accounting Firm	32
Consolidated Balance Sheets as of May 31, 2015 and as of May 31, 2014	33
Consolidated Balance Sheets as of May 31, 2016 and as of May 31, 2015	33
Consolidated Statements of Operations for the fiscal year ended May 31, 2015, fiscal year ended May 31, 2014, and fiscal year ended May 31, 2013	34
Consolidated Statements of Operations for the fiscal year ended May 31, 2016, fiscal year ended May 31, 2015, and fiscal year ended May 31, 2014	34
Consolidated Statements of Comprehensive (Loss) Income for the fiscal year ended May 31, 2015, fiscal year ended May 31, 2014, and fiscal year ended May 31, 2013	35
Consolidated Statements of Comprehensive Loss for the fiscal year ended May 31, 2016, fiscal year ended May 31, 2015, and fiscal year ended May 31, 2014	35
Consolidated Statements of Changes in Shareholders’ Equity for the fiscal year ended May 31, 2015, fiscal year ended May 31, 2014, and fiscal year ended May 31, 2013	36
Consolidated Statements of Changes in Equity for the fiscal year ended May 31, 2016, fiscal year ended May 31, 2015, and fiscal year ended May 31, 2014	37
Consolidated Statements of Cash Flows for the fiscal year ended May 31, 2015, fiscal year ended May 31, 2014, and fiscal year ended May 31, 2013	37
Consolidated Statements of Cash Flows for the fiscal year ended May 31, 2016, fiscal year ended May 31, 2015, and fiscal year ended May 31, 2014	37
Notes to Consolidated Financial Statements	38
Consolidated Financial Statement Schedule	7877

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Immucor, Inc.

We have audited the accompanying consolidated balance sheets of Immucor, Inc. (a Georgia corporation) and subsidiaries (the “Company”) as of May 31, ~~2015~~2016 and ~~2014~~2015, and the related consolidated statements of operations, comprehensive (loss) income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended May 31, ~~2015~~2016. Our audits of the basic consolidated financial statements included the financial statement schedule listed in the index appearing under Item 8. These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Immucor, Inc. and subsidiaries as of May 31, ~~2015~~2016 and ~~2014~~2015, and the results of their operations and their cash flows for each of the three years in the period ended May 31, ~~2015~~2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

GRANT THORNTON LLP

/s/ GRANT THORNTON LLP

Atlanta, Georgia

August 2122, ~~2015~~2016

Consolidated Financial Statements ~~IMMUCOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share data)~~

	As of May 31
	2015			2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	18,363			23,621
Trade accounts receivable, net of allowance for doubtful accounts of $1,669 and $898 at May 31, 2015 and 2014, respectively		67,674			69,629
Inventories, net		41,847			49,151
Deferred income tax assets, current portion		5,931			8,251
Prepaid expenses and other current assets		11,161			12,582
Total current assets		144,976			163,234
PROPERTY AND EQUIPMENT, net		73,574			76,311
GOODWILL		842,258			851,563
OTHER INTANGIBLE ASSETS, net		650,294			692,870
DEFERRED FINANCING COSTS, net		26,399			33,116
OTHER ASSETS		15,185			7,320
Total assets	$	1,752,686			1,824,414
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	13,866			15,665
Accrued interest and interest rate swap liability		19,288			19,605
Accrued expenses and other current liabilities		26,208			23,716
Income taxes payable		3,496			4,927
Deferred revenue, current portion		2,703			2,813
Current portion of long-term debt, net of debt discounts		4,469			4,591
Total current liabilities		70,030			71,317
LONG-TERM DEBT, net of debt discounts		1,033,276			1,037,183
DEFERRED INCOME TAX LIABILITIES		236,487			223,379
OTHER LONG-TERM LIABILITIES		29,212			23,919
Total liabilities		1,369,005			1,355,798
COMMITMENTS AND CONTINGENCIES (Note 23)
SHAREHOLDERS' EQUITY:
Common stock, $0.00 par value, 100 shares authorized, issued and outstanding as of May 31, 2015 and May 31, 2014, respectively		-			-
Additional paid-in capital		755,234			753,147
Accumulated deficit		(331,989	)		(271,264	)
Accumulated other comprehensive loss		(39,564	)		(13,267	)
Total shareholders' equity		383,681			468,616
Total liabilities and shareholders' equity	$	1,752,686			1,824,414

IMMUCOR, INC.

~~The~~CONSOLIDATED ~~accompanying~~BALANCE ~~notes are an integral part of these Consolidated Financial Statements.~~SHEETS

(Amounts in thousands, except share data)

	As of May 31
	2016			2015

ASSETS

Current Assets:
Cash and cash equivalents	$	10,263			18,363
Trade accounts receivable, net of allowance for doubtful accounts of $2,114 and $1,669 at May 31, 2016 and May 31, 2015, respectively		62,043			67,674
Inventories, net		46,894			41,847
Prepaid expenses and other current assets		8,479			11,161
Total current assets		127,679			139,045

Property and equipment, net		76,015			73,574
Goodwill		857,023			842,258
Other intangible assets, net		633,097			650,294
Other assets		13,819			15,167
Total assets	$	1,707,633			1,720,338

LIABILITIES AND EQUITY

Current Liabilities:
Accounts payable	$	22,229			13,866
Accrued interest and interest rate swap liability		18,869			19,288
Accrued expenses and other current liabilities		22,009			26,132
Income taxes payable		2,585			3,496
Deferred revenue, current portion		2,864			2,703
Current portion of long-term debt		6,806			6,640
Total current liabilities		75,362			72,125

Long-term debt, excluding current portion		1,007,948			1,004,706
Deferred income tax liabilities		222,357			230,614
Other long-term liabilities		57,420			29,212
Total liabilities		1,363,087			1,336,657
Commitments and Contingencies (Note 24)
Equity:
Shareholders' equity of Immucor, Inc.:
Common stock, $0.00 par value, 100 shares authorized, issued and outstanding as of May 31, 2016 and May 31, 2015, respectively		-			-
Additional paid-in capital		753,709			755,234
Accumulated deficit		(374,079	)		(331,989	)
Accumulated other comprehensive loss		(39,407	)		(39,564	)
Total shareholders' equity of Immucor, Inc.		340,223			383,681
Equity of noncontrolling interest (Note 4)		4,323			-
Total equity		344,546			383,681
Total liabilities and equity	$	1,707,633			1,720,338

The accompanying notes are an integral part of these consolidated financial statements.

IMMUCOR, INC. ~~AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands)~~

	Year Ended May 31
	2015			2014			2013
NET SALES	$	389,300			388,056			347,788
COST OF SALES (exclusive of amortization shown separately below)		143,659			139,634			120,027
GROSS MARGIN		245,641			248,422			227,761
OPERATING EXPENSES
Research and development		28,791			29,070			21,313
Selling and marketing		57,833			59,057			50,129
Distribution		20,022			20,165			18,718
General and administrative		41,191			41,603			42,801
Amortization expense		54,531			52,965			50,765
Acquisition-related items		-			(4,638	)		2,616
Impairment loss		-			160,150			3,500
Loss on disposition of fixed assets		-			-			1,175
Total operating expenses		202,368			358,372			191,017
INCOME (LOSS) FROM OPERATIONS		43,273			(109,950	)		36,744
NON-OPERATING (EXPENSE) INCOME
Interest income		145			36			28
Interest expense		(89,421	)		(88,304	)		(90,830	)
Loss on extinguishment of debt		-			-			(9,111	)
Other, net		878			45			(539	)
Total non-operating net expense		(88,398	)		(88,223	)		(100,452	)
LOSS BEFORE INCOME TAXES		(45,125	)		(198,173	)		(63,708	)
PROVISION (BENEFIT) FOR INCOME TAXES		15,600			(15,916	)		(24,566	)
NET LOSS	$	(60,725	)		(182,257	)		(39,142	)

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

	Year Ended May 31
	2016			2015			2014

Net sales	$	379,972			389,300			388,056
Cost of sales (exclusive of amortization shown separately below)		143,969			143,659			139,634
Gross profit		236,003			245,641			248,422

Operating expenses:
Research and development		30,255			28,791			29,070
Selling and marketing		56,655			57,833			59,057
Distribution		17,462			20,022			20,165
General and administrative		44,462			41,191			41,603
Amortization expense		54,937			54,531			52,965
Acquisition-related items		-			-			(4,638	)
Impairment loss		3,318			-			160,150
Total operating expenses		207,089			202,368			358,372

Income (loss) from operations		28,914			43,273			(109,950	)

Non-operating (expense) income:
Interest income		135			145			36
Interest expense		(90,535	)		(89,421	)		(88,304	)
Other, net		(244	)		878			45
Total non-operating net expense		(90,644	)		(88,398	)		(88,223	)

Loss before income taxes		(61,730	)		(45,125	)		(198,173	)
(Benefit) provision for income taxes		(17,963	)		15,600			(15,916	)
Net loss		(43,767	)		(60,725	)		(182,257	)
Net loss attributable to noncontrolling interest		(1,677	)		-			-
Net loss attributable to Immucor, Inc.	$	(42,090	)		(60,725	)		(182,257	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

IMMUCOR, INC. ~~AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (in thousands)~~

	Year Ended May 31
	2015			2014			2013
NET LOSS	$	(60,725	)		(182,257	)		(39,142	)
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustment		(26,712	)		4,315			1,644
Changes in fair value of cash flow hedges:
Portion of cash flow hedges recognized in other comprehensive income		672			(313	)		(535	)
Less: reclassification adjustment for losses included in net income		(257	)		653			712
Net changes in fair value of cash flow hedges		415			340			177
OTHER COMPREHENSIVE (LOSS) INCOME		(26,297	)		4,655			1,821
COMPREHENSIVE LOSS	$	(87,022	)		(177,602	)		(37,321	)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

~~The~~(in ~~accompanying notes are an integral part of these Consolidated Financial Statements.~~thousands)

	Year Ended May 31
	2016			2015			2014


Net loss	$	(43,767	)		(60,725	)		(182,257	)

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment		(174	)		(26,712	)		4,315

Changes in fair value of cash flow hedges:
Portion of cash flow hedges recognized in other comprehensive income		530			672			(313	)
Less: reclassification adjustment for (losses) gains included in net income		(199	)		(257	)		653
Net changes in fair value of cash flow hedges		331			415			340

Other comprehensive income (loss)		157			(26,297	)		4,655

Comprehensive loss		(43,610	)		(87,022	)		(177,602	)

Comprehensive loss attributable to the noncontrolling interest		(1,677	)		-			-

Comprehensive loss attributable to shareholders of Immucor, Inc.	$	(41,933	)		(87,022	)		(177,602	)

The accompanying notes are an integral part of these consolidated financial statements.

IMMUCOR, INC. ~~AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (in thousands)~~

										Accumulated
					Additional					Other			Total
	Common Stock				Paid-In		Retained			Comprehensive			Shareholders’
	Shares		Amount		Capital		Earnings			Income (Loss)			Equity
BALANCE, MAY 31, 2012		100	$	-		706,986		(49,865	)		(19,743	)		637,378
Capital contribution from Parent, net of costs		-		-		42,500		-			-			42,500
Share-based compensation expense		-		-		1,423		-			-			1,423
Net loss		-		-		-		(39,142	)		-			(39,142	)
Tax benefit from tax deduction contributed by Holdings		-		-		726		-			-			726
Other comprehensive loss (net of taxes):
Foreign currency translation adjustments		-		-		-		-			1,644			1,644
Cash flow hedges, net of tax		-		-		-		-			177			177
BALANCE, MAY 31, 2013		100		-		751,635		(89,007	)		(17,922	)		644,706
Share-based compensation expense		-		-		1,512		-			-			1,512
Net loss		-		-		-		(182,257	)		-			(182,257	)
Other comprehensive loss (net of taxes):
Foreign currency translation adjustments		-		-		-		-			4,315			4,315
Cash flow hedges, net of tax		-		-		-		-			340			340
BALANCE, MAY 31, 2014		100		-		753,147		(271,264	)		(13,267	)		468,616
Share-based compensation expense		-		-		2,087		-			-			2,087
Net loss		-		-		-		(60,725	)		-			(60,725	)
Other comprehensive loss (net of taxes):
Foreign currency translation adjustments		-		-		-		-			(26,712	)		(26,712	)
Cash flow hedges, net of tax		-		-		-		-			415			415
BALANCE, MAY 31, 2015		100	$	-		755,234		(331,989	)		(39,564	)		383,681

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

~~The~~(in ~~accompanying notes are an integral part of these Consolidated Financial Statements.~~thousands)

	Equity accounts attributable to Immucor, Inc.

											Accumulated
					Additional			Retained			Other			Non-
	Common Stock				Paid-In			Earnings			Comprehensive			controlling
	Shares (1)		Amount (1)		Capital (1)			(Deficit) (1)			Income (Loss) (1)			Interest			Total
Balance, May 31, 2013		100	$	-		751,635			(89,007	)		(17,922	)		-			644,706
Share-based compensation expense		-		-		1,512			-			-			-			1,512
Net loss		-		-		-			(182,257	)		-			-			(182,257	)
Other comprehensive income (net of taxes):
Foreign currency translation adjustments		-		-		-			-			4,315			-			4,315
Cash flow hedges, net of tax		-		-		-			-			340			-			340
Balance, May 31, 2014		100		-		753,147			(271,264	)		(13,267	)		-			468,616
Share-based compensation expense		-		-		2,087			-			-			-			2,087
Net loss		-		-		-			(60,725	)		-			-			(60,725	)
Other comprehensive (loss) income (net of taxes):
Foreign currency translation adjustments		-		-		-			-			(26,712	)		-			(26,712	)
Cash flow hedges, net of tax		-		-		-			-			415			-			415
Balance, May 31, 2015		100		-		755,234			(331,989	)		(39,564	)		-			383,681
Share-based compensation expense		-		-		5,326			-			-			-			5,326
Activities with IVD Holdings, Inc.		-		-		(851	)		-			-			-			(851	)
Non-cash dividend distributed		-		-		(6,000	)		-			-			-			(6,000	)
Equity of noncontrolling interest		-		-		-			-			-			6,000			6,000
Net loss		-		-		-			(42,090	)		-			(1,677	)		(43,767	)
Other comprehensive (loss) income (net of taxes):
Foreign currency translation adjustments		-		-		-			-			(174	)		-			(174	)
Cash flow hedges, net of tax		-		-		-			-			331			-			331
Balance, May 31, 2016		100	$	-		753,709			(374,079	)		(39,407	)		4,323			344,546

(1) - Shareholders’ equity of Immucor, Inc.

The accompanying notes are an integral part of these consolidated financial statements.

IMMUCOR, INC. ~~AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)~~

	Year Ended May 31
	2015			2014			2013
OPERATING ACTIVITIES:
Net loss	$	(60,725	)		(182,257	)		(39,142	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		71,271			71,287			71,746
Noncash interest expense		10,222			8,761			7,471
Loss on disposition and retirement of fixed assets		374			93			1,306
Inventory fair value adjustment		-			2,889			1,745
Loss on extinguishment of debt		-			-			9,111
Asset impairment loss		-			160,150			3,500
Provision (recoveries) for doubtful accounts		970			(1,666	)		203
Share-based compensation expense		2,087			1,512			1,423
Deferred income taxes		12,127			(21,059	)		(28,573	)
Change in fair value of contingent consideration		-			(4,638	)		104
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, trade		(5,614	)		2,154			7,665
Income taxes		111			(179	)		1,976
Inventories		(3,097	)		(15,589	)		(9,774	)
Other assets		(340	)		(1,301	)		105
Accounts payable		(1,375	)		1,700			(305	)
Deferred revenue		64			413			(651	)
Accrued expenses and other liabilities		(485	)		3,331			(3,376	)
Cash provided by operating activities		25,590			25,601			24,534
INVESTING ACTIVITIES:
Purchases of property and equipment		(11,393	)		(9,193	)		(9,639	)
Receipt from acquisition of business related to finalizing certain working capital adjustments		-			1,151			-
Other investments		(5,300	)		-			-
Acquisitions of businesses, net of cash acquired		(6,396	)		(17,151	)		(84,762	)
Cash used in investing activities		(23,089	)		(25,193	)		(94,401	)
FINANCING ACTIVITIES:
Proceeds from long-term debt		-			-			338,076
Proceeds from capital contributions, net of costs		-			-			42,500
Payment of debt issuance costs		-			-			(11,412	)
Repayments of long-term debt		(6,653	)		(6,674	)		(288,332	)
Proceeds from Revolving Facility		55,500			-			49,000
Repayments of Revolving Facility		(55,500	)		-			(49,000	)
Cash (used in) provided by financing activities		(6,653	)		(6,674	)		80,832
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		(1,106	)		499			(155	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(5,258	)		(5,767	)		10,810
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		23,621			29,388			18,578
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	18,363			23,621			29,388
SUPPLEMENTAL INFORMATION:
Income taxes paid, net of refunds	$	4,571			5,423			4,161
Interest paid		79,218			79,762			85,033
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Movement from inventory to property and equipment of instruments placed on rental agreements	$	8,670			10,383			12,037
Fair value of contingent consideration liabilities at the date of acquisition		6,469			11,300			4,400
Exchange of debt instruments due to debt amendment August 2012		-			-			468,241
Exchange of debt instruments due to debt amendment February 2013		-			-			467,406
Tax benefit from tax deductions contributed by IVD Holdings Inc.		-			-			726

CONSOLIDATED STATEMENTS OF CASH FLOWS

~~The~~(in ~~accompanying notes are an integral part of these Consolidated Financial Statements.~~thousands)

	Year Ended May 31
	2016			2015			2014
Operating activities:
Net loss	$	(43,767	)		(60,725	)		(182,257	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		69,487			71,271			71,287
Noncash interest expense		11,541			10,222			8,761
Loss on disposition and retirement of fixed assets		1,027			374			93
Inventory fair value adjustment		-			-			2,889
Asset impairment loss		3,318			-			160,150
Provision for doubtful accounts		572			970			(1,666	)
Share-based compensation expense		5,326			2,087			1,512
Deferred income taxes		(21,936	)		12,127			(21,059	)
Change in fair value of contingent consideration		-			-			(4,638	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, trade		5,443			(5,614	)		2,154
Income taxes		(160	)		111			(179	)
Inventories		(11,967	)		(3,097	)		(15,589	)
Other assets		1,394			(340	)		(1,301	)
Accounts payable		8,333			(1,375	)		1,700
Deferred revenue		130			64			413
Accrued expenses and other liabilities		(1,650	)		(485	)		3,331
Cash provided by operating activities		27,091			25,590			25,601
Investing activities:
Purchases of property and equipment		(9,922	)		(11,393	)		(9,193	)
Proceeds from sale of property and equipment		352			-			-
Receipt from acquisition of business related to finalizing certain working capital adjustments		-			-			1,151
Other investments		(4,850	)		(5,300	)		-
Acquisitions of businesses, net of cash acquired		(13,936	)		(6,396	)		(17,151	)
Cash used in investing activities		(28,356	)		(23,089	)		(25,193	)
Financing activities:
Repayments of long-term debt		(6,698	)		(6,653	)		(6,674	)
Dividend payment		(350	)		-			-
Proceeds from revolving facilities		75,000			55,500			-
Repayments of revolving facilities		(75,000	)		(55,500	)		-
Cash used in financing activities		(7,048	)		(6,653	)		(6,674	)
Effect of exchange rates on cash and cash equivalents		213			(1,106	)		499
Decrease in cash and cash equivalents		(8,100	)		(5,258	)		(5,767	)
Cash and cash equivalents at beginning of period		18,363			23,621			29,388
Cash and cash equivalents at end of period	$	10,263			18,363			23,621
Supplemental information:
Income taxes paid, net of refunds	$	4,519			4,571			5,423
Interest paid		78,830			79,218			79,762
Non-cash investing and financing activities:
Movement from inventory to property and equipment of instruments placed on rental agreements	$	6,689			8,670			10,383
Fair value of contingent consideration liabilities at the date of acquisition		20,000			6,469			11,300
Non-cash dividend		6,000			-			-

The accompanying notes are an integral part of these consolidated financial statements.

IMMUCOR, INC. ~~AND SUBSIDIARIES~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business – Founded in 1982, Immucor, Inc., a Georgia corporation (“Immucor” or the “Company”), develops, manufactures and sells transfusion and transplantation diagnostics products used by hospitals, donor centers and reference laboratories around the world. ~~Our~~The Company’s products are used in a number of tests performed in the typing and screening of blood, organs or stem cells to ~~identify certain properties of the cell and serum components of human blood and tissue to~~ ensure donor-recipient compatibility for blood transfusion, and organ and stem cell transplantations. The Company operates manufacturing facilities in North America with both direct ~~affiliate offices~~ and third-party distribution arrangements worldwide.

Basis of Presentation – The Company (Immucor, Inc. together with its wholly owned subsidiaries) was acquired on August 19, 2011 through a merger transaction with IVD Acquisition Corporation (“Merger Sub”), a wholly owned subsidiary of IVD Intermediate Holdings B Inc. (the “Parent”). The Parent is a wholly owned indirect subsidiary of IVD Holdings Inc. (“Holdings”) which was formed by investment funds affiliated with TPG Capital, L.P. (“the Sponsor”). The acquisition was accomplished through a merger of the Merger Sub with and into the Company, with the Company being the surviving company (the “Immucor Acquisition”). As a result of the merger, the Company became a wholly owned subsidiary of Parent. Prior to August 19, 2011, the Company operated as a public company with common stock traded on the NASDAQ Stock Market.

The accompanying consolidated statements of operations, comprehensive (loss~~) income~~, changes in shareholders’ equity, and cash flows are presented for the fiscal years ended May 31, ~~2015~~2016, ~~2014~~2015, and ~~2013~~2014. Certain reclassifications have been made to the fiscal year 2015 consolidated financial statements to conform to the 2016 presentation. We have also performed an evaluation of subsequent events through the date the financial statements were issued.

~~Consolidation~~Basis ~~Policy~~of Consolidation – The consolidated financial statements include the accounts of ~~the~~Immucor, ~~Company~~Inc., its wholly owned subsidiaries, and ~~all~~a ofvariable ~~its~~interest ~~subsidiaries~~entity (“VIE”) that is required to be consolidated in accordance with U.S. GAAP (Refer to Note 4 for additional information on our consolidated VIE). All ~~inter-company~~significant intercompany balances and transactions have been eliminated in consolidation. There are no other entities controlled by the Company, either directly or indirectly.

~~Use~~Variable ofInterest ~~Estimates~~Entities – ~~The~~In ~~preparation~~determining ofwhether ~~financial~~we ~~statements~~are inthe ~~conformity~~primary ~~with~~beneficiary ~~generally~~of ~~accepted~~an ~~accounting~~entity ~~principles~~and intherefore the ~~U.S.~~VIE ~~requires~~is ~~management~~required to ~~make~~be ~~estimates~~consolidated, ~~and~~we ~~assumptions~~apply a qualitative approach that ~~affect~~determines whether we have both (1) the ~~amounts~~power ~~reported~~to indirect the ~~financial~~economically ~~statements~~significant activities of the entity, and ~~accompanying~~(2) ~~notes.~~the ~~Actual~~obligation ~~results~~to ~~could~~absorb ~~differ~~losses of, or the right to receive benefits from, ~~those~~the ~~estimates~~entity that could potentially be significant to that entity. We continually assess whether we are the primary beneficiary of a VIE as changes to existing relationships, contractual arrangements, and business transactions occur.

Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Share-Based Compensation – Consistent with the provisions of Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation,” compensation cost for grants of all share-based payments is based on the estimated grant date fair value. The value of share-based compensation is attributed to expense over the requisite service period using the graded-vesting method for performance-based options, and the straight-line method for service-based options.

~~The~~As ~~fair~~of ~~value~~fiscal ofyear 2016, the Company’s ~~share-based~~uses ~~payment~~the ~~awards~~Black-Scholes isvaluation ~~estimated~~model ~~using a Monte Carlo simulation approach. The Monte Carlo method is used~~ to ~~calculate~~estimate the fair value of anits ~~option with multiple sources of uncertainty by creating random price paths for the underlying~~ share-based ~~and~~payment ~~expected future value, then discounting the average of those paths to determine the fair value~~awards. Key input assumptions used to estimate the fair value of stock options and stock appreciation rights include the initial value of common stock, expected term until the exercise of the equity award, the expected volatility of the equity, risk-free rates of return and dividend yields, if any.

~~Concentration~~Prior ofto ~~Credit~~fiscal ~~Risk~~year –2016, ~~Financial~~the ~~instruments~~Company ~~that~~used ~~potentially subject~~ the ~~Company~~Monte toCarlo ~~concentrations~~simulation ofapproach. ~~credit~~The ~~risk~~Monte ~~consist~~Carlo ~~primarily~~method ofis ~~cash~~used ~~and~~to ~~cash~~calculate ~~equivalents~~the ~~and~~fair ~~trade~~value ~~accounts~~of ~~receivable.~~an Inoption ~~order~~with tomultiple ~~mitigate~~sources ~~the~~of ~~concentration~~uncertainty ofby ~~credit~~creating ~~risk,~~random ~~the~~price ~~Company~~paths ~~places~~for ~~its~~the ~~cash~~underlying share and ~~cash~~expected ~~equivalents~~future ~~with~~value, ~~multiple~~then ~~financial~~discounting ~~institutions.~~the ~~Cash~~average ~~and~~of ~~cash~~those ~~equivalents~~paths ~~were~~to ~~$18.4~~determine ~~million~~the ~~and~~fair ~~$23~~value.6 ~~million~~Key atinput ~~May~~assumptions ~~31,~~used ~~2015~~to ~~and~~estimate ~~2014,~~the ~~respectively.~~fair ~~Cash~~value ~~and~~of ~~cash~~stock ~~equivalents~~options ~~located~~and instock ~~the~~appreciation ~~U.S.~~rights ~~were~~are ~~approximately~~similar ~~37%~~to ~~and~~those ~~19%~~used atin ~~May~~the ~~31,~~Black-Scholes ~~2015~~valuation ~~and 2014, respectively~~model.

~~Concentrations~~Concentration of ~~credit~~Credit ~~risk~~Risk ~~with~~– ~~respect~~Financial toinstruments ~~trade~~that ~~accounts~~potentially ~~receivable~~subject ~~are limited because a large number of geographically diverse customers make up~~ the Company’s ~~customer~~to ~~base,~~concentrations ~~thus~~of ~~spreading the trade~~ credit risk. Atconsist ~~May~~primarily ~~31,~~of ~~2015,~~cash ~~2014~~ and ~~2013,~~cash noequivalents ~~single~~and ~~customer represented more than 10% of total consolidated net sales or~~ trade accounts receivable. ~~The~~In ~~Company~~order ~~controls~~to ~~credit~~mitigate ~~risk~~the ~~through~~concentration of credit ~~limits~~risk, ~~and~~the ~~monitoring~~Company ~~procedures.~~places Atits ~~May~~cash ~~31,~~and ~~2015~~cash ~~and~~equivalents ~~2014,~~with ~~the~~multiple ~~Company’s~~financial ~~net~~institutions. ~~trade~~Cash ~~accounts~~and ~~receivable~~cash ~~balances~~equivalents were $6710.73 million and $6918.64 million, ~~respectively,~~at ~~with~~May ~~about~~31, ~~50% of~~2016 ~~these~~and ~~accounts being of foreign origin~~2015, ~~predominantly European in both years~~respectively. ~~Companies~~Cash and ~~government~~cash ~~agencies~~equivalents located in ~~some European countries require longer payment terms as a part of doing business. This may subject~~ the ~~Company to a higher risk of uncollectibility~~U.S. ~~This~~were ~~risk~~approximately is38% ~~considered~~and ~~when~~37% ~~the~~at ~~allowance~~May ~~for~~31, ~~doubtful~~2016 ~~accounts~~and is2015, ~~evaluated~~respectively. ~~The Company generally does not require collateral from its customers.~~

~~During~~Concentrations ~~fiscal~~of ~~2014,~~credit ~~the~~risk ~~Company~~with ~~reviewed~~respect to trade accounts receivable are limited because a large number of geographically diverse customers make up the ~~valuation~~Company’s ~~method~~customer ~~used~~base, tothus ~~determine~~spreading the ~~estimate~~trade ofcredit ~~our~~risk. ~~allowance~~At ~~for~~May ~~doubtful~~31, ~~accounts~~2016, 2015 and ~~determined~~2014, ~~that~~no asingle ~~change~~customer inrepresented ~~estimate~~10% ~~was~~or ~~needed~~more toof ~~better~~total ~~reflect~~consolidated ~~the~~net ~~actual~~sales ~~bad~~or ~~debt~~trade ~~experience~~accounts receivable. AsThe aCompany ~~result,~~controls ~~the~~credit ~~Company~~risk ~~revised~~through ~~its~~credit ~~valuation~~limits ~~method,~~and ~~effective~~monitoring ~~November~~procedures. ~~30,~~At ~~2013~~May 31, 2016 and ~~reduced~~2015, the ~~estimate~~Company’s ofnet ~~allowance~~trade ~~for~~accounts ~~doubtful~~receivable ~~accounts~~balances onwere ~~uncollected~~$62.0 ~~receivables~~million and $67.7 ~~The~~million, ~~effect~~respectively, with about 45% of ~~this~~these ~~change~~accounts being of foreign origin, predominantly European, in ~~estimate~~both ~~was~~years. aCompanies ~~reduction~~and government agencies in ~~bad~~some ~~debt~~European ~~expense~~countries require longer payment terms as a part of $1doing business.9 ~~million,~~This ~~and~~may asubject ~~decrease~~the inCompany ~~net~~to ~~loss~~a higher risk of ~~approximately~~uncollectibility. $1This risk is considered when the allowance for doubtful accounts is evaluated.1 ~~million~~The inCompany ~~fiscal~~generally ~~2014~~does not require collateral from its customers.

During fiscal year 2014, the Company reviewed the valuation method used to determine the estimate of our allowance for doubtful accounts and determined that a change in estimate was needed to better reflect the actual bad debt experience. As a result, the Company revised its valuation method, effective November 30, 2013, and reduced the estimate of allowance for doubtful accounts on uncollected receivables. The effect of this change in estimate was a reduction in bad debt expense of $1.9 million, and a decrease in net loss of approximately $1.1 million in fiscal year 2014.

Cash and Cash Equivalents – The Company considers deposits and investments with an original maturity of three months or less when purchased to be cash and cash equivalents. Generally, cash and cash equivalents held at financial institutions are in excess of insurance limit. The Company limits its exposure to credit loss by placing its cash and cash equivalents in liquid investments with high quality financial institutions.

Inventories, net – Typically inventories are stated at the lower of cost (first-in, first-out basis) or ~~market (~~net realizable value), net of reserves. The Company records adjustments to the carrying value of inventory based upon assumptions about historic usage, future demand, and market conditions.

InFair ~~connection~~Value ~~with~~of ~~the~~Financial ~~LIFECODES~~Instruments ~~acquisition~~– onThe ~~March~~Company ~~22,~~measures ~~2013, a~~ fair value ~~adjustment~~using ofa ~~approximately~~three-level ~~$4.5~~hierarchy ~~million~~that ~~increased~~prioritizes ~~inventories~~the toinputs ~~fair~~used. ~~value~~This ~~which~~hierarchy ~~was~~maximizes ~~greater~~the ~~than~~use ~~replacement cost. As~~ of ~~May~~observable ~~31,~~inputs ~~2013,~~and ~~approximately~~minimizes ~~$1.7~~the ~~million~~use of ~~the~~unobservable ~~fair~~inputs. ~~value~~The ~~adjustment~~three ~~had~~levels ~~been~~of ~~expensed~~inputs ~~through~~used ~~cost~~to ofmeasure ~~sales~~fair invalue ~~the~~are ~~fiscal~~explained ~~2013~~in ~~period.~~Note ~~The~~16 ~~remaining~~of ~~fair~~the ~~value~~Company’s ~~adjustment~~consolidated ~~was~~financial ~~expensed~~statements. ~~through~~The ~~cost~~carrying ofamounts ~~sales~~reported byin the ~~end~~consolidated ofbalance ~~the~~sheets ~~second~~for ~~quarter~~cash ofand ~~fiscal~~cash ~~2014~~equivalents, attrade ~~which~~accounts ~~time~~receivable, ~~inventories~~accounts ~~were~~payable ~~again~~and ~~stated~~other atcurrent ~~the~~liabilities ~~lower~~approximate offair ~~cost~~value orbecause ~~market,~~of ~~net~~their ofshort-term ~~reserves~~nature.

Fair Value of Financial Instruments – The Company measures fair value using a three-level hierarchy that prioritizes the inputs used. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are explained in Note 15 of the Company’s consolidated financial statements. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, trade accounts receivable, accounts payable and other current liabilities approximate fair value because of their short-term nature.

Derivative Instruments – The Company may from time to time use derivatives as a risk management tool to mitigate the potential impact of interest rate and foreign exchange risk. All derivatives are carried at fair value in the Company’s consolidated balance sheets. The Company does not enter into speculative derivatives. The derivatives are cash flow hedges which are considered effective. Changes in fair value are recognized through other comprehensive income. Any portion considered ineffective is recognized directly into operating income.

Property and Equipment, net – Property and equipment is stated at cost less accumulated depreciation. Expenditures for replacements are capitalized, and the replaced items are retired. Normal maintenance and repairs are charged to operations. Major maintenance and repair activities that significantly enhance the useful life of the asset are capitalized. When property and equipment are retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Depreciation is computed using the straight-line method over the estimated lives of the related assets ranging from three to thirty years. Carrying values of these assets are evaluated if impairment indicators arise.

The Company reviews the estimated useful lives of its fixed assets on an ongoing basis. During fiscal year 2014, this review indicated that the actual lives of the Company’s instrument equipment were longer than the estimated useful lives used for depreciation purposes in our financial statements. As a result, the Company changed its estimates of the useful lives of its instrument equipment, effective June 1, 2013, to better reflect the estimated periods during which these assets will remain in service. As a result, the estimated useful lives of these assets increased from approximately 5 years to 10 years. The effect of this change in estimate was a reduction in depreciation expense of $6.3 million and a decrease in net loss of approximately $3.6 million for fiscal year 2014, respectively.

Deferred Financing Costs, net – Deferred financing costs are capitalized and are amortized over the life of the related debt agreements using the effective interest rate method, except the Revolving ~~Facility~~Facilities which uses the straight -line method. The amortization expense is included in interest expense in the consolidated statements of operations. The deferred financing cost asset is netted against the Company’s debt obligations and included in long-term debt, excluding current portion in the consolidated balance sheets.

Goodwill – Consistent with ASC 350, “Intangibles – Goodwill and Other,” goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment annually or more frequently if impairment indicators arise. Intangible assets that have finite lives are amortized on a straight line basis over their useful lives.

~~The~~Goodwill ~~Company~~– ~~evaluates~~Consistent ~~the~~with ~~carrying~~ASC ~~value~~350, of“Intangibles ~~goodwill~~– asGoodwill ofand ~~March~~Other,” ~~1st~~goodwill ~~of each fiscal year~~ and ~~between~~other ~~annual~~intangible ~~evaluations~~assets ifwith ~~events~~indefinite ~~occur~~lives orare ~~circumstances change that would more likely than~~ not ~~reduce~~amortized ~~the fair value of the reporting unit below its carrying amount. Such circumstances could include,~~ but are ~~not~~tested ~~limited~~for ~~to:~~impairment ~~(1)~~annually ~~a significant adverse change in legal factors~~ or inmore ~~business~~frequently ~~climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired the Company first assesses qualitative factors to determine~~ if itimpairment isindicators ~~more likely than not (defined as 50% or more) that the fair value of the reporting unit is less than its carrying amount~~arise. IfIntangible itassets ~~is determined~~ that ithave isfinite ~~not~~lives ~~more likely than not that the fair value of the reporting unit is less than its carrying amount, no additional steps~~ are ~~taken.~~amortized Ifon it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company then compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. The fair value of the reporting unit is estimated using primarily the income, or discounted cash flows, approach. If the carrying amount of a ~~reporting~~straight ~~unit~~line ~~exceeds~~basis ~~its~~over fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of the reporting unit’s goodwill to its carrying amount. In calculating the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their ~~fair~~useful values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. The Company’s evaluation of goodwill and other intangible assets with indefinite lives ~~completed during fiscal years 2015 and 2013 resulted in no impairment charges, and resulted in $160~~.0 ~~million in impairment charges in fiscal 2014. Refer to Footnote 8 of the Company’s consolidated financial statements for additional information.~~

~~Other~~The ~~Intangible~~Company ~~Assets,~~evaluates ~~net~~the –carrying ~~Other~~value ~~intangible~~of ~~assets~~goodwill ~~primarily~~as of March 1st of each fiscal year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, ~~customer~~but ~~relationships~~are not limited to: (1) a significant adverse change in legal factors or in business climate, ~~deferred~~(2) ~~licensing~~unanticipated ~~costs~~competition, ~~existing~~or ~~technology~~(3) ~~and~~an ~~trade~~adverse ~~names~~action or assessment by a regulator. ~~These~~When ~~other~~evaluating ~~intangible~~whether ~~assets~~goodwill ~~are~~is ~~amortized~~impaired ~~over~~the ~~their~~Company ~~anticipated~~first ~~benefit~~assesses ~~period~~qualitative factors to determine if it is more likely than not (defined as 50% or more) that the fair value of the reporting unit is less than its carrying amount. ~~Carrying~~If ~~values~~it is determined that it is not more likely than not that the fair value of ~~these~~the ~~assets~~reporting unit is less than its carrying amount, no additional steps are ~~evaluated~~taken. ~~when~~If ~~impairment~~it ~~indicators~~is ~~arise~~determined that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company then compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. ~~There~~The ~~was~~fair novalue of the reporting unit is estimated using primarily the income, or discounted cash flows, approach. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment ~~charge~~loss ~~related~~must be measured. The impairment loss would be calculated by comparing the implied fair value of the reporting unit’s goodwill to its carrying amount. In calculating the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. The Company’s evaluation of goodwill and other intangible assets inwith indefinite lives completed during fiscal years 2016 and 2015 resulted in no impairment charges, and resulted in $160.0 million in impairment charges in fiscal year 2014. orRefer ~~2013~~to Footnote 9 of the Company’s consolidated financial statements for additional information.

~~In-process~~Other ~~research~~Intangible ~~and~~Assets, ~~development~~net ~~(“IPR&D”)~~– isOther ~~also included in other~~ intangible assets. ~~IPR&D~~primarily ~~has~~include ancustomer ~~indefinite~~relationships, ~~life~~deferred ~~until~~licensing ~~the~~costs, ~~completion~~existing ortechnology ~~abandonment~~and oftrade ~~the individual project~~names. ~~When~~These aother ~~project~~intangible isassets ~~completed,~~are ~~its value will be~~ amortized over ~~the~~their ~~useful~~anticipated ~~life.~~benefit ~~If a project is abandoned, its value is written off~~period. ~~The~~Carrying ~~carrying~~values ~~value~~ of ~~IPR&D~~these isassets ~~tested~~are ~~for~~evaluated ~~impairment~~when ~~annually or more frequently if~~ impairment indicators arise. There was no impairment charge related to ~~IPR&D~~other ~~during~~intangible ~~fiscal~~assets ~~2015.~~subject Anto ~~impairment~~amortization ~~charge of $0.2 million and $3.5 million was recorded~~ in fiscal ~~2014~~years ~~and fiscal 2013~~2016, ~~respectively,~~2015 ~~for~~or ~~IPR&D projects that were determined not to be economically feasible, and therefore were abandoned~~2014.

In-process research and development (“IPR&D”) is also included in other intangible assets. IPR&D has an indefinite life until the completion or abandonment of the individual project. When a project is completed, its value will be amortized over its estimated useful life. If a project is abandoned, its value is written-off. The carrying value of IPR&D is tested for impairment annually or more frequently if impairment indicators arise. There was no impairment charge related to IPR&D during fiscal year 2015. An impairment charge of $3.0 million and $0.2 million was recorded in fiscal years 2016 and 2014, respectively, for IPR&D projects that were determined not to be economically feasible, and therefore were written-off.

Foreign Currency Translation – The financial statements of foreign subsidiaries have been translated into U.S. Dollars in accordance with ASC 830-30, “Translation of Financial Statements”. The financial position and results of operations of the Company’s foreign subsidiaries are measured using the foreign subsidiary’s local currency as the functional currency. Revenues and expenses of such subsidiaries have been translated into U.S. Dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments.

Gains and losses that result from foreign currency transactions are included in “other non-operating (expense) income” in the consolidated statements of operations.

Revenue Recognition – The Company recognizes revenue in accordance with ASC 605, “Revenue Recognition,” when the following four basic criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services are rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.

The Company enters into arrangements in which the Company commits to delivering multiple products or services to its customers. In these cases, total arrangement consideration is allocated to all deliverables based on their relative selling prices. The following hierarchy is used to determine the selling price to be used for allocating revenue to deliverables: (i) vender specific objective evidence (“VSOE”) of fair value, (ii) third-party evidence of selling price (“TPE”), and (iii) management’s best estimate of selling price (“MBESP”). VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. TPE represents the selling price of a similar product or service by another vendor. MBESPs reflect management’s best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis. In determining MBESP, the Company considers the following: (1) pricing practices as they relate to future price increases, and (2) the overall economic conditions.

The significant deliverables included in the Company’s arrangements are the delivery of products such as reagents and part kits, instrument (sold and leased) and the performance of services such as training and general support services. Each of these significant deliverables qualify as separate units of accounting.

The ~~Company~~significant ~~recognizes~~deliverables ~~revenue~~included ~~from~~in ~~product sales, such as reagents and part kits, when~~ the ~~goods~~Company’s arrangements are ~~shipped or when~~ the ~~goods~~delivery ~~are delivered, title passes, and risk~~ of ~~loss passes to the customer. The~~ products ~~selling~~such ~~price,~~as ~~which~~reagents isand ~~used~~part ~~to allocate the total arrangement consideration to each deliverable~~kits, ~~is based on either VSOE or MBESP. The revenue from~~ instrument ~~sales~~(sold orand ~~leases~~leased) ~~is recognized when the instrument has been installed~~ and ~~accepted by~~ the ~~customer.~~performance ~~The selling price~~ of ~~instrument~~services ~~sales~~such ~~or leases is based on MBESP. Training revenue is recognized~~ as ~~the~~ training ~~services~~and ~~are~~general ~~provided. The selling price of training is based on MBESP. General~~ support ~~service revenue is recognized over the term of the agreement~~services. ~~The~~Each ~~selling price~~ of ~~general~~these ~~support~~significant ~~services~~deliverables isqualify ~~based~~as onseparate ~~VSOE~~units byof ~~reference to the price our customers are required to pay for the general support services when sold separately as renewal agreements~~accounting.

~~Shipping~~The ~~and~~Company ~~Handling~~recognizes ~~Charges~~revenue from product sales, such as reagents and ~~Sales~~part ~~Tax~~kits, –when ~~The~~the ~~amounts~~goods ~~billed~~are toshipped ~~customers~~or ~~for~~when ~~shipping~~the goods are delivered, title passes, and ~~handling~~risk of ~~orders~~loss ~~are~~passes ~~classified~~to asthe ~~revenue~~customer. ~~and~~The ~~reported~~product’s inselling price, which is used to allocate the ~~statements~~total ofarrangement ~~operations~~consideration asto ~~net~~each ~~sales.~~deliverable, ~~The~~is ~~costs~~based ofon ~~handling~~either ~~and~~VSOE ~~shipping~~or ~~customer~~MBESP. ~~orders~~The ~~are~~revenue ~~reported~~from ininstrument ~~the~~sales ~~operating~~or ~~expense~~leases ~~section~~is ofrecognized when the ~~consolidated~~instrument ~~statements~~has ofbeen ~~operations~~installed asand ~~distribution~~accepted ~~expense~~by the customer. ~~For~~The ~~fiscal~~selling ~~2015,~~price ~~2014,~~of ~~and~~instrument ~~2013,~~sales ~~these~~or ~~costs~~leases ~~were~~is ~~$20.0~~based ~~million,~~on ~~$20~~MBESP.2 ~~million,~~Training ~~and~~revenue ~~$18.7~~is ~~million,~~recognized ~~respectively.~~as ~~Sales~~the ~~taxes~~training ~~invoiced~~services toare ~~customers~~provided. ~~and~~The ~~payable~~selling toprice ~~government~~of ~~agencies~~training ~~are~~is ~~recorded~~based on aMBESP. ~~net~~General ~~basis~~support ~~with~~service revenue is recognized over the ~~sales~~term ~~tax~~of ~~portion~~the agreement. The selling price of ageneral ~~sales~~support ~~invoice~~services ~~directly~~is ~~credited~~based toon aVSOE ~~liability~~by ~~account~~reference ~~and~~to the ~~balance~~price ofour customers are required to pay for the ~~sales~~general ~~invoice~~support ~~credited~~services towhen asold ~~revenue~~separately ~~account~~as renewal agreements.

Shipping and Handling Charges and Sales Tax – The amounts billed to customers for shipping and handling of orders are classified as revenue and reported in the statements of operations as net sales. The costs of handling and shipping customer orders are reported in the operating expense section of the consolidated statements of operations as distribution expense. Sales taxes invoiced to customers and payable to government agencies are recorded on a net basis with the sales tax portion of a sales invoice directly credited to a liability account and the balance of the sales invoice credited to a revenue account.

Trade Accounts Receivable and Allowance for Doubtful Accounts –The allowance for doubtful accounts represents a reserve for estimated losses resulting from the inability of the Company’s customers to pay their debts. The collectability of trade accounts receivable balances is regularly evaluated based on a combination of factors such as customer credit-worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment patterns. If it is determined that a customer will be unable to fully meet its financial obligation, such as in the case of a bankruptcy filing or other material events impacting its business, a specific allowance for doubtful accounts is recorded to reduce the related receivable to the amount expected to be recovered.

Research and Development costs – Research and development costs are expensed as incurred and are disclosed as a separate line item in the consolidated statements of operations.

Loss contingencies – Certain conditions may exist as of the date the financial statements are issued that may result in a loss to the Company, but which will only be determined and resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss is likely to occur and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not accrued or disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. Legal costs relating to loss contingencies are expensed as incurred.

Contingent consideration liabilities resulting from a business combination are recorded at fair value at the time of acquisition. The fair value is calculated by applying a form of the income approach, based on the probability-weighted projected payment amounts discounted to a present value at a rate appropriate for the risk of achieving the performance targets according to the terms of the arrangements. Key assumptions are the earn-out period probabilities and an appropriate discount rate. Contingent consideration liabilities are then reevaluated on a quarterly basis and adjusted as needed to reflect changes in fair value, and to reflect interest accretion. The contingent consideration liability exists until the earn-out is achieved and subsequently paid or the earn-out is not achieved and the fair value of the liability is reduced.

Income Taxes – Effective with the Immucor Acquisition, the Company’s taxable income or loss is included in the consolidated income tax returns of Holdings. Current and deferred income taxes are allocated to the members of the consolidated group as if each member were a separate taxpayer.

Deferred income taxes are computed using the asset and liability method. The Company records the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carry-forwards. The value of the Company’s deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in applicable tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets resulting in additional income tax expense in the Company’s consolidated statements of operations. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, and the Company considers the Company’s history of taxable income (loss), the scheduled reversal of deferred tax liabilities, projected future taxable income, carry-back opportunities, and tax-planning strategies in making this assessment. Management assesses the need for additional valuation allowances quarterly.

The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Although ASC 740, “Income Taxes,” provides clarification on the accounting for uncertainty in income taxes recognized in the financial statements, the threshold and measurement attribute will continue to require significant judgment by management. Resolution of these uncertainties in a manner inconsistent with the Company’s expectations could have a material impact on its results of operations.

Business Combinations – Transactions classified as an acquisition of a business are recognized in accordance with ASC 805, “Business Combinations.” Results of operations of acquired companies are included in the Company’s results of operations as of the respective acquisition dates. The purchase price of each acquisition is allocated to the acquired assets and liabilities based on estimates of their fair values at the date of the acquisition. Contingent consideration is recognized at the estimated fair value on the acquisition date. Subsequent changes to the fair value of contingent consideration liabilities are recognized in earnings. Any purchase price in excess of these acquired assets and liabilities is recorded as goodwill. The allocation of purchase price in certain circumstances may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date.

Impact of Recently Issued Accounting Standards –

Adopted by the Company in fiscal ~~2015~~year 2016

In the fourth quarter of ~~fiscal 2015~~2016, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. ~~2015~~2016-0209, ~~Amendments~~Compensation-Stock Compensation: Improvements to ~~the~~Employee ~~Consolidation~~Share-Based ~~Analysis~~Payment Accounting (“ASU 2016-09”). ~~Update~~ASU ~~2015~~2016-0209 ~~amended~~simplifies several aspects of the ~~process~~accounting ~~that~~for aemployee ~~reporting~~share-based ~~entity~~payments, ~~must~~including ~~perform~~accounting tofor ~~determine~~income ~~whether~~taxes, itforfeitures, ~~should~~statutory ~~consolidate~~tax ~~certain~~withholding ~~types~~requirements, and classification on the statement of ~~legal~~cash ~~entities~~flows. ~~Update~~This ~~2015-02~~standard is effective for ~~the~~annual ~~Company~~periods inbeginning after December 15, 2016, which corresponds to the Company’s first quarter of fiscal ~~2017~~year 2018, and interim periods within annual periods beginning after December 15, 2018. Early ~~application~~adoption is permitted but must adopt all the amendments in the same period and reflected as of the beginning of the fiscal year that interim period. The adoption of ASU ~~2015~~2016-0209 did not have a material impact on the Company’s consolidated financial ~~statement~~statements.

In the fourth quarter of ~~fiscal 2015~~2016, the Company adopted the FASB ASU ~~2014-12~~No. ~~on stock~~2015-~~based compensation~~17, ~~Compensation~~Income –Taxes: ~~Stock~~Balance ~~Compensation,~~Sheet ~~Accounting~~Classification ~~for~~of ~~Share-Based~~Deferred ~~Payments~~Taxes ~~When~~(“ASU ~~the~~2015-17”). ~~Terms~~ASU of2015-17 anrequires ~~Award~~that ~~Provide~~deferred ~~That~~income atax ~~Performance~~liabilities ~~Target~~and ~~Could~~assets Bebe ~~Achieved~~classified ~~after~~as ~~the~~noncurrent ~~Requisite~~in ~~Service Period (~~a ~~consensus~~classified statement of ~~the~~financial ~~FASB~~position. ~~Emerging~~This ~~Issues~~standard ~~Task~~is ~~Force)~~effective ~~(“ASU~~for ~~2014-12”). The~~annual ~~guidance~~periods ~~applies~~beginning toafter ~~all~~December ~~reporting~~15, ~~entities~~2016, ~~that~~and ~~grant~~interim ~~their~~periods ~~employees~~within ~~share-based~~those ~~payments~~annual inperiods, which ~~the~~corresponds ~~terms~~to of the ~~award~~Company’s ~~provide~~first ~~that~~quarter aof ~~performance~~fiscal ~~target~~year ~~that~~2018. ~~affects~~Earlier ~~vesting~~adoption ~~could~~is bepermitted ~~achieved~~as ~~after~~of the ~~requisite~~beginning ~~service~~of ~~period.~~an ~~The~~interim ~~amendments~~or ~~require~~annual ~~that~~reporting aperiod. ~~performance~~We ~~target~~early ~~that~~adopted ~~affects~~ASU ~~vesting~~2015-17 ~~and~~on ~~that~~a ~~could~~retrospective bebasis. ~~achieved~~Adoption ~~after~~resulted ~~the~~in ~~requisite service period be treated as~~ a ~~performance condition~~$5.9 ~~For~~million ~~all~~decrease ~~entities,~~in the ~~amendments~~current inportion ~~this~~of ~~Update~~the ~~are~~Company’s ~~effective~~deferred ~~for~~income ~~annual~~tax ~~periods~~assets, and ~~interim~~the ~~periods~~long-term ~~within~~portion ~~those~~of ~~annual~~the ~~periods~~Company’s ~~beginning~~deferred ~~after~~income ~~December~~tax ~~15,~~liabilities ~~2015,~~in ~~which~~our ~~corresponds~~consolidated tobalance ~~the~~sheet ~~Company’s~~at ~~first~~May ~~quarter~~31, ~~of fiscal 2017~~2015. ~~Earlier~~ ~~adoption is permitted.~~ The adoption of ASU ~~2014~~2015-1217 ~~did~~had ~~not~~no ~~have a~~ material impact on ~~the~~our ~~Company’s~~results ~~consolidated~~of ~~financial statement~~operations.

In the ~~second~~fourth quarter of ~~2015~~2016, the Company adopted the FASB ASU No. ~~2014~~2015-1711, ~~Business Combinations~~Inventory: ~~Pushdown~~Simplifying ~~Accounting~~the Measurement of Inventory (“ASU ~~2014~~2015-1711”). ASU ~~2014~~20115-1711 ~~provides~~requires anthat ~~acquired~~inventory ~~entity~~within ~~with~~the anscope ~~option~~of tothis ~~apply~~update ~~pushdown~~be ~~accounting~~measured inat ~~its~~the ~~separate~~lower ~~financial statements upon occurrence~~ of ancost ~~event~~and innet ~~which~~realizable anvalue. ~~acquirer~~Net ~~obtains~~realizable ~~control~~value ofis the ~~acquired~~estimated ~~entity.~~selling ~~The~~price ~~acquired~~in ~~entity~~the ~~may~~ordinary ~~elect~~course ~~the~~of ~~option~~business, toless ~~apply~~reasonable ~~pushdown~~predictable ~~accounting~~costs inof ~~the~~completion, ~~reporting~~disposal, ~~period~~and intransportation. ~~which~~The ~~the~~amendments ~~change-~~in~~-control~~ ~~event~~this ~~occurs.~~update Ifdo ~~pushdown accounting is~~ not ~~applied~~apply into ~~the~~inventory ~~reporting~~that ~~period~~is inmeasured ~~which~~using ~~the change~~last-in~~-control event occurs~~, anfirst-out ~~acquired~~(“LIFO”) ~~entity~~or ~~will have~~ the ~~option~~retail toinventory ~~elect~~method. toThe amendments apply ~~pushdown~~to ~~accounting~~all inother ~~a subsequent reporting period as a change in accounting principle in accordance with ASC Topic 250~~inventory, ~~Accounting~~which ~~Changes~~includes ~~and~~inventory ~~Error~~that ~~Corrections. If pushdown accounting~~ is ~~applied~~measured tousing ~~an individual change~~first-in~~-control event~~, ~~that election is irrevocable. ASU 2014~~first-17out ~~also~~(“FIFO”) ~~requires~~or anaverage ~~acquired~~cost. ~~entity~~This ~~that~~standard ~~elects~~is ~~the~~effective ~~option~~for toannual ~~apply~~periods ~~pushdown~~beginning ~~accounting~~after inDecember ~~its~~15, ~~separate~~2016, ~~financial~~and ~~statements~~interim toperiods ~~disclose~~within ~~information~~those inannual ~~the~~periods, ~~current~~which ~~reporting~~corresponds ~~period that enables users of financial statements~~ to ~~evaluate~~ the ~~effect of pushdown accounting. The~~ Company’s ~~adopted~~first ~~the~~quarter ~~amendments~~of infiscal ~~ASU~~year ~~2014-17,~~2018. ~~effective~~Early ~~November~~adoption ~~18,~~is ~~2014, as the amendments in the update were effective upon issuance~~permitted. The adoption of ASU ~~2014~~2015-17 did not have a material impact on the Company’s consolidated financial statements.

~~Accounting~~In ~~Changes~~the ~~Not~~fourth ~~Yet~~quarter ~~Adopted~~of 2016, the Company adopted the FASB ASU No. 2015-03, Interest – Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 changes the presentation of debt issuance costs for term debt in the balance sheet by requiring the debt issuance costs to be presented as a direct deduction from the related debt liability, rather than recorded as an asset. In August 2015, ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (“ASU 2015-15”), was issued to provide clarification to ASU 2015-03. This standard specifies that the SEC would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding balances on the line-of-credit arrangement. This standard is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, which corresponds to the company’s first quarter of fiscal year 2017. This standard is to be applied retrospectively and early adoption is permitted. We early adopted ASU 2015-03 on a retrospective basis. Adoption resulted in a $26.4 million decrease in the noncurrent portion the Company’s assets, and the long-term portion of the Company’s debt in our consolidated balance sheet at May 31, 2015. The adoption of ASU 2015-03 had no material impact on our results of operations.

In ~~May~~the ~~2014,~~fourth ~~the~~quarter ~~FASB~~of ~~and~~2016, ~~International~~the ~~Accounting~~Company ~~Standards~~adopted ~~Board~~the ~~issued~~FASB ~~their~~ASU ~~converged~~No. ~~standard~~2015-16, onBusiness ~~revenue~~Combinations: ~~recognition,~~Simplifying ~~ASU~~the ~~2014-09,~~Accounting ~~Revenue~~for ~~from~~Measurement ~~Contracts~~– ~~with~~Period ~~Customers~~Adjustments (“ASU ~~2014~~2015-0916”). ~~This~~ASU ~~standard~~2015-16 ~~outlines~~requires athat ~~single~~an ~~comprehensive~~acquirer ~~model~~recognize ~~for~~adjustments ~~companies~~ to ~~use~~provisional inamounts ~~accounting~~that ~~for~~are ~~revenue~~identified ~~arising~~during ~~from~~the ~~contracts~~measurement ~~with~~period ~~customers~~in ~~and~~the ~~supersedes~~reporting ~~most~~period ~~current~~in ~~revenue~~which ~~recognition~~the ~~guidance,~~adjustment ~~including~~amounts ~~industry-specific~~are ~~guidance~~determined. The ~~core~~amendments ~~principle~~in ofthis update require that the ~~revenue~~acquirer ~~model~~record, isin ~~that~~the ~~revenue~~same isperiod’s ~~recognized~~financial ~~when~~statements, athe ~~customer~~effect ~~obtains~~on ~~control~~earnings of achanges ~~good~~in depreciation, amortization, or ~~service.~~other Aincome ~~customer~~effects, ~~obtains~~if ~~control~~any, ~~when~~as ita ~~has~~result of the ~~ability~~change to ~~direct~~ the ~~use~~provisional ofamounts, ~~and~~calculated ~~obtain~~as if the ~~benefits~~accounting ~~from~~had ~~the~~been ~~good~~completed orat ~~service.~~the ~~Transfer~~acquisition ofdate. ~~control~~The isamendments ~~not~~in ~~the~~this ~~same~~update asrequire ~~transfer~~an ofentity ~~risks~~to ~~and~~present ~~rewards,~~separately ason itthe isface ~~considered~~of inthe ~~current~~income ~~guidance.~~statement ~~The~~or ~~Company~~disclose ~~will~~in ~~also~~the ~~need~~notes tothe ~~apply~~portion ~~new~~of ~~guidance~~the toamount ~~determine~~recorded ~~whether~~in ~~revenue~~current-period ~~should~~earnings beby ~~recognized~~line ~~over~~item ~~time~~that orwould athave abeen ~~point~~recorded in ~~time.~~previous Anreporting ~~amendment~~periods ~~was~~if ~~made~~the inadjustment ~~July 2015~~ to ~~change~~ the ~~effective~~provision ~~date~~amounts ofhad ~~this~~been ~~standard~~recognized ~~from~~as of the ~~first~~acquisition ~~interim~~date. ~~period~~This ~~within~~standard ~~annual~~is ~~reporting~~effective ~~periods~~for fiscal years beginning after December 15, ~~2016~~2015, toincluding ~~December~~interim ~~16,~~periods ~~2017~~within those fiscal years, which corresponds to ~~our~~the Company’s first quarter of fiscal ~~2019~~year 2017. NoEarly ~~early~~ adoption is permitted. ~~under~~The ~~this~~adoption ~~standard,~~of ~~and~~ASU it2015-16 isdid tonot behave ~~applied either retrospectively or as~~ a ~~cumulative-effect~~material ~~adjustment~~impact ason of the ~~date of adoption. The~~ Company’s ~~is evaluating the effect of the adoption of ASU 2014-09 on its~~ consolidated financial statements.

InAccounting ~~April~~Standards ~~2015,~~Not ~~the~~Yet ~~FASB~~Adopted issued ASU 2015-03, Interest — Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 changes the presentation of debt issuance costs for term debt in the balance sheet by requiring the debt issuance costs to be presented as a direct deduction from the related debt liability, rather than recorded as an asset. The standard is required to be adopted in interim and annual periods beginning on or after December 15, 2015, which corresponds to our first quarter of fiscal 2017. This standard is to be applied retrospectively and early adoption is permitted. The Company is evaluating the effect of the adoption of ASU 2015-03 on its consolidated financial statements.

2In February 2016, the FASB issued ASU No. ~~BUSINESS~~2016-02, ~~COMBINATIONS~~Leases, which will replace most existing lease accounting guidance in U.S. GAAP. The core principle of ASU 2016-02 is that an entity should recognize the rights and obligations resulting from leases as assets and liabilities. ASU 2016-02 requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of the entity’s leasing activities, including significant judgements and changes in judgements. ASU 2016-02 will be effective for the Company for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which corresponds to the Company’s first quarter of fiscal year 2020. Early adoption is permitted. The Company is evaluating the effect of the adoption of ASU 2016-02 on its consolidated financial statements.

~~Business~~In ~~combinations~~May ~~completed~~2014, the FASB and International Accounting Standards Board issued their converged standard on revenue recognition, ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This standard outlines a single comprehensive model for companies to use in ~~fiscal~~accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that revenue is recognized when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of and obtain the benefits from the good or service. Transfer of control is not the same as transfer of risks and rewards, as it is considered in current guidance. The Company will also need to apply new guidance to determine whether revenue should be recognized over time or at a point in time. An amendment was made in July 2015: to change the effective date of this standard from the first interim period within annual reporting periods beginning after December 15, 2016 to December 15, 2017, which corresponds to our first quarter of fiscal year 2019. No early adoption is permitted under this standard, and it is to be applied either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the effect of the adoption of ASU 2014-09 on its consolidated financial statements.

Acquisition of Sentilus – On October 1, 2014, the Company completed the acquisition of Sentilus, Inc. (“Sentilus”). Sentilus was a privately-held company focused on developing a novel, inkjet-printed antibody microarray-based technology, FemtoarraysTM. Among other uses, Sentilus has been developing FemtoarraysTM and the underlying technology for use in a variety of in vitro diagnostics areas, including transfusion diagnostics, and could potentially serve as a next generation technology platform for our transfusion diagnostics business. The total cash purchase price of the Sentilus business was $6.0 million which was paid in the second quarter of fiscal 2015. The purchase agreement includes two contingent consideration arrangements, one for achieving certain regulatory milestones with a potential earn-out for $4.0 million in cash over the next three years, and the other in the form of performance payments based on a percentage of net future sales of the to-be-developed products over approximately the next twenty years. Management estimated that the fair value of the contingent consideration arrangements, as of the acquisition date, was approximately $6.3 million, which is included in Other long-term liabilities on the consolidated balance sheet. This was determined by applying a form of the income approach, based upon the probability-weighted projected payment amounts discounted to present value at a rate appropriate for the risk of achieving the financial performance targets. The key assumptions were the earn-out period payment probabilities, projected revenues, discount rate and the timing of payments. The present value of the expected payments considers the time at which the obligations are expected to be settled and a discount rate that reflects the risk associated with the performance payments. These assumptions are considered to be level 3 inputs by ASC Topic 820, Fair Value Measurement (“ASC Topic 820”), which is not observable in the market. Including the contingent consideration, the aggregate estimated fair value of the consideration paid was approximately $12.3 million. The other identifiable intangible assets include in-process research and development (“IPR&D”) and a non-competition agreement, which are valued at $18.8 million in the aggregate. Goodwill is valued at $0.6 million and the long-term deferred tax liability is valued at $7.2 million. The goodwill arising from this acquisition is not deductible for tax purposes.

Acquisition of LIFECODES distribution business – The Company completed the acquisition of the LIFECODES distribution business in India effective August 1, 2014. This acquisition enables Immucor to streamline the distribution of its LIFECODES products in that region. The Company acquired the assets of the India distribution business for a total cash purchase price of $0.4 million, of which a total of $0.2 million was paid in both the first and second quarters of fiscal 2015. The purchase price also included a potential earn-out of up to $0.2 million if certain financial targets are met during the two year period ending July 2016.

Business combinations completed in fiscal 2014:

Acquisition of Organ-i – On May 30, 2014, the Company completed the acquisition of Organ-i, Inc. (“Organ-i”) a privately-held company focused on developing non-invasive tests to monitor and predict organ health for transplant recipients. This acquisition expands our product offering for post-transplant testing and directly complements our existing LIFECODES business. The total cash purchase price of this business was $12.0 million plus a potential earn-out of up to $18.0 million if certain product and financial targets during fiscal years 2015 through 2020 are met. Management estimated that the fair value of the contingent consideration arrangement as of the acquisition date was approximately $11.3 million. This was determined by applying a form of the income approach, based on the probability-weighted projected payment amounts discounted to present value at a rate appropriate for the risk of achieving the performance targets. The key assumptions were the earn-out period payment probabilities and an appropriate discount rate. These assumptions are considered to be level 3 inputs by ASC Topic 820, Fair Value Measurement, which is not observable in the market. Including the contingent consideration, the aggregate estimated fair value of the consideration paid was approximately $23.3 million. The other identifiable intangible assets including existing technology, IPR&D and non-competition agreements are valued at $26.7 million. Goodwill is valued at $5.8 million and the long-term deferred tax liability is valued at $9.1 million. The operating results of the acquired business are included in the Company’s consolidated results of operations from the date of acquisition. The contingent consideration liability is considered long-term and is included in long-term liabilities in the Company’s consolidated balance sheet. In the third quarter of fiscal 2015, the long-term deferred tax liability was revised to $8.9 million due to the Company finalizing the amount of the tax attributes acquired in the acquisition and goodwill was revised to $5.6 million. The goodwill arising from this acquisition is not deductible for tax purposes.

~~Acquisition of LIFECODES distribution businesses – The Company completed the acquisition of both the LIFECODES distribution businesses in the United Kingdom (“UK”) and Italy on January 31, 2014~~2. ~~These~~BUSINESS ~~acquisitions enable Immucor to streamline the distribution of its LIFECODES products in Europe.~~ COMBINATIONS

~~The~~Business ~~Company~~combinations ~~acquired~~completed the stock of the UK distribution business for a total cash purchase price of $4.0 million, including acquired cash of $1.2 million. The Company acquired the assets of the Italy distribution business for a total cash purchase price of $2.4 million. In total, the Company acquired other identifiable intangible assets of $3.5 million and $1.1 million of goodwill, respectively, in ~~these~~fiscal ~~acquisitions. The~~year other identifiable intangible assets are mainly customer relationships, which represent the fair value of the existing customer base. The tangible assets acquired in these acquisitions were not material to the Company’s consolidated financial statements. All of the goodwill arising from the Italy asset acquisition is deductible for income tax purposes. The goodwill arising from the UK acquisition is not deductible for tax purposes. 2016:

~~Business~~Acquisition ~~combinations~~of ~~completed~~Sirona - On March 4, 2016, the Company exercised its warrant and acquired 100% of the common stock of Sirona Genomics, Inc. (“Sirona”). The cash paid for the Sirona business was $15.0 million, of which $14.4 million was paid in the fourth quarter of fiscal ~~2013:~~year 2016. The purchase agreement included two contingent consideration arrangements, one for achieving certain revenue targets in each of the next five years and the other for achieving a certain revenue milestone during the next five years. The combined potential earn-out for these arrangements is $45.0 million in cash over the next five years. Management estimated that the fair value of the contingent consideration arrangements, as of the acquisition date, was approximately $20.0 million, which is included in Other long-term liabilities on the Company’s consolidated balance sheet. Including the contingent consideration, the aggregate estimated fair value of the consideration paid was approximately $35.0 million. The fair value of the assets and liabilities acquired was $40.6 million for identifiable intangible assets (existing technologies), $14.8 million for goodwill, $2.1 million for property and equipment, $1.3 million of cash, $1.5 million for current liabilities, $9.7 million for a Promissory Note payable to Immucor, and $12.5 million for a long-term deferred tax liability. The purchase price allocation for this acquisition is preliminary and is subject to material valuation adjustments or tax matters that may be identified within the measurement period. The goodwill arising from this acquisition is not deductible for tax purposes.

~~Acquisition~~The ofCompany ~~LIFECODES~~determines –contingent ~~The~~consideration ~~Company~~liabilities ~~completed~~by ~~the~~applying ~~acquisition~~a form of the ~~LIFECODES~~income ~~business~~approach, onbased ~~March~~upon ~~22,~~the ~~2013.~~probability-weighted ~~This~~projected ~~acquisition~~payment ~~enables~~amounts ~~Immucor~~discounted to ~~enter~~present value at a rate appropriate for the ~~field~~risk of ~~transplantation~~achieving ~~diagnostics~~the –financial aperformance ~~close~~targets. ~~adjacency~~The tokey ~~our~~assumptions ~~current~~were ~~business~~the ofearn-out ~~transfusion~~period ~~medicine~~payment probabilities, projected revenues, discount rate and the timing of payments. The ~~LIFECODES~~present ~~business~~value ~~specializes~~of inthe ~~pre-transplant~~expected ~~human~~payments ~~leukocyte~~considers ~~antigen~~the ~~(HLA)~~time ~~typing~~at ~~and~~which ~~screening~~the obligations are expected to ~~ensure~~be ~~the~~settled ~~most~~and ~~compatible~~a ~~match~~discount ~~between~~rate ~~patient~~that ~~and~~reflects ~~donor,~~the asrisk ~~well~~associated aswith ~~post-transplant~~the ~~patient~~performance ~~monitoring~~payments. These assumptions are considered to ~~aid~~be inlevel ~~the~~3 ~~identification~~inputs ofby ~~graft~~ASC ~~rejection.~~Topic ~~LIFECODES~~820, ~~also~~Fair ~~offers~~Value ~~other~~Measurement ~~immune-monitoring~~(“ASC ~~products.~~Topic 820”), which are not observable in the market.

~~Purchase~~Immucor ~~Price~~has ~~Allocation~~ been in a collaborative arrangement with Sirona since October 2014 for the development and commercialization of a next generation sequencing HLA typing product for transplant diagnostics. Refer to Note 3 for additional information.

~~The~~Acquisition ~~total cash purchase price~~ of ~~the~~reference ~~LIFECODES~~lab ~~business~~– ~~was~~On ~~$86.2~~August ~~million~~3, ~~of which $87.3 was paid in fiscal 2013~~2015, ~~and $1.1 million was returned by~~ the ~~seller~~Company incompleted the ~~first~~asset ~~quarter~~purchase of ~~fiscal 2014 as~~ a ~~result of finalizing certain purchase price adjustments~~U.S. ~~The~~reference ~~purchase~~lab ~~agreement included a contingent consideration arrangement~~ for a ~~potential~~total ~~earn-out totaling $10.0 million in~~ cash ~~based~~purchase ~~upon~~price ~~the LIFECODES business attaining certain operating targets for fiscal year 2013. Management estimated that the fair value~~ of ~~the contingent consideration arrangement as of the acquisition date was approximately~~ $40.48 million. This ~~was~~acquisition ~~determined~~will byenable ~~applying a form of~~ the ~~income~~Company ~~approach,~~to ~~based~~deliver oncurrent ~~the~~Immucor ~~probability-weighted~~products ~~projected~~as ~~payment~~a ~~amounts~~service ~~discounted~~ to ~~present~~customers ~~value~~as atwell aas ~~rate~~commercialize ~~appropriate~~newly ~~for~~developed ~~the risk of achieving the performance targets~~products. The ~~key~~fair ~~assumptions~~values ~~were~~of the ~~earn-out~~acquired ~~period~~assets ~~payment~~were ~~probabilities, and an appropriate discount rate~~$0. ~~These assumptions are considered to be level~~ 3 ~~inputs~~million ~~which~~for ~~are~~equipment, ~~not observable in the market~~$0.2 ~~Including~~million ~~the~~for ~~contingent~~identifiable ~~consideration,~~intangible ~~the~~assets ~~aggregate~~and ~~estimated fair value of the consideration was approximately~~ $900.63 million for goodwill. The ~~contingent~~goodwill ~~consideration~~is ~~liability~~deductible ~~was~~for ~~included~~tax ~~in current liabilities in the Company’s consolidated balance sheet as of May 31, 2013~~purposes.

~~During~~Business ~~fiscal~~combinations ~~2013,~~completed the Company recognized accretion of $0.1 million of the fair value amount which increased the contingent consideration liability to $4.5 million as of May 31, 2013. This fair value adjustment was included in ~~interest~~fiscal ~~expense~~year ~~in the consolidated statement of operations.~~ 2015:

~~During~~Acquisition ~~fiscal~~of Sentilus – On October 1, 2014, the ~~fair~~Company ~~value~~completed the acquisition of ~~the~~Sentilus, ~~contingent~~Inc. ~~consideration~~(“Sentilus”). ~~liability~~Sentilus was ~~decreased~~a toprivately-held ~~zero~~company tofocused ~~reflect~~on developing a ~~change~~novel, inkjet-printed antibody microarray-based technology, FemtoarraysTM. Among other uses, Sentilus has been developing FemtoarraysTM and the underlying technology for use in a variety of in vitro diagnostics areas, including transfusion diagnostics, and could potentially serve as a next generation technology platform for our transfusion diagnostics business. The total cash purchase price of the Sentilus business was $6.0 million. The purchase agreement included two contingent consideration arrangements, one for achieving certain regulatory milestones with a potential earn-out ~~payment~~for ~~probabilities~~$4.0 million in cash over the next three years, and the ~~accretion~~other in the form of performance payments based on a percentage of net future sales of the to-be-developed products over approximately the next twenty years. Management estimated that the fair value ~~amount~~of the contingent consideration arrangements, as of the acquisition date, was approximately $6.3 ~~These~~million, ~~decreases~~which was included in Other long-term liabilities on the Company’s consolidated balance sheet. Including the contingent consideration, ~~liability~~the ~~are~~aggregate ~~reflected~~estimated asfair avalue ~~gain~~ of the consideration paid was approximately $412.63 million. The other identifiable intangible assets include in-process ~~the~~research ~~acquisition~~and development (“IPR&D”) and a non-~~related~~competition ~~items~~agreement, which was valued at $18.8 million in the ~~consolidated~~aggregate. ~~statements~~Goodwill ofwas ~~operations~~valued inat ~~fiscal~~$0.6 ~~2014~~million and the long-term deferred tax liability was valued at $7.2 million. The goodwill arising from this acquisition was not deductible for tax purposes.

~~The~~Acquisition of LIFECODES ~~acquisition~~distribution ~~was~~business ~~recorded~~– ~~under~~The ~~the acquisition method of accounting by the~~ Company ~~and~~completed ~~pushed-down to~~ the ~~acquired~~acquisition ~~businesses by allocating the purchase consideration~~ of ~~$90.6 million to~~ the ~~cost~~LIFECODES ofdistribution ~~the~~business ~~assets~~in ~~acquired,~~India ~~including~~effective ~~intangible~~August ~~assets~~1, ~~based~~2014. onThis ~~their~~acquisition ~~estimated~~enables ~~fair values at~~ the ~~acquisition~~Company ~~date.~~to ~~The~~streamline ~~allocation~~the distribution of ~~purchase~~its ~~price~~LIFECODES ~~was~~products ~~based~~in onthat ~~management’s judgment after evaluating several factors including valuation assessments of tangible and intangible assets~~region. The ~~excess~~Company ofacquired the ~~total~~assets ~~purchase~~of ~~price over~~ the ~~fair~~India ~~value~~distribution ofbusiness ~~assets~~for ~~acquired~~a ~~and~~total ~~the~~cash ~~liabilities~~purchase ~~assumed~~price of $360.94 million ~~was recorded as goodwill~~. The ~~goodwill~~purchase ~~resulting~~price ~~from~~also ~~the~~included ~~LIFECODES~~a ~~acquisition~~potential isearn-out ~~largely~~of ~~attributable~~up to ~~the~~$0.2 ~~synergies~~million itif iscertain ~~expected~~financial totargets ~~achieve~~were ~~with~~met ~~the~~during ~~existing Immucor business, future technologies management expects to develop, and~~ the ~~value~~two ofyear ~~its~~period ~~assembled~~ending ~~workforce~~July 2016.

~~The~~Business ~~fair~~combinations ~~values~~completed ~~of major classes of assets acquired and liabilities assumed along with the contingent consideration liability recorded at the date of acquisition is included~~ in ~~the~~fiscal ~~reconciliation~~year ~~of the total consideration as follows (in thousands)~~2014:

Cash on hand	$	2,558
Accounts receivable		7,697
Inventories		16,800
Property and equipment		13,432
Intangible assets		33,240
Goodwill		36,889
Current liabilities		(4,669	)
Deferred tax assets and liabilities - net		(15,197	)
Other assets and liabilities - net		(146	)
Total consideration paid		90,604
Less: Contingent consideration liability		(4,400	)
Total cash purchase price	$	86,204

Acquisition of Organ-i – On May 30, 2014, the Company completed the acquisition of Organ-i, Inc. (“Organ-i”) a privately-held company focused on developing non-invasive tests to monitor and predict organ health for transplant recipients. This acquisition expands our product offering for post-transplant testing and directly complements our existing LIFECODES business. The total cash purchase price of this business was $12.0 million plus a potential earn-out of up to $18.0 million if certain product and financial targets during fiscal years 2015 through 2020 are met. Management estimated that the fair value of the contingent consideration arrangement as of the acquisition date was approximately $11.3 million. Including the contingent consideration, the aggregate estimated fair value of the consideration paid was approximately $23.3 million. The other identifiable intangible assets including existing technology, IPR&D and non-competition agreements were valued at $26.7 million. Goodwill was valued at $5.8 million and the long-term deferred tax liability was valued at $9.1 million. The contingent consideration liability is considered long-term and is included in long-term liabilities in the Company’s consolidated balance sheet. In the third quarter of fiscal year 2015, the long-term deferred tax liability was revised to $8.9 million due to the Company finalizing the amount of the tax attributes acquired in the acquisition and goodwill was revised to $5.6 million. The goodwill arising from this acquisition was not deductible for tax purposes.

~~The~~Acquisition ~~Company~~of ~~has acquired identifiable intangible assets, not including goodwill, totaling approximately $33.2 million in the~~ LIFECODES ~~acquisition. Identifiable~~distribution ~~intangible~~businesses ~~assets~~– ~~of $31.8 million are subject to amortization over their anticipated benefit period, as indicated in the table below.~~ The Company ~~did~~completed ~~not incur costs to renew or extend~~ the ~~term~~acquisition of ~~acquired~~both ~~intangible assets during~~ the ~~period~~LIFECODES ~~ended~~distribution ~~May~~businesses ~~31,~~in ~~2013. IPR&D assets of $1.4 million are not subject to amortization until~~ the ~~projects~~United ~~are~~Kingdom ~~complete~~(“UK”) ~~or abandoned. The amortization of these intangibles is not deductible for tax purposes~~ and ~~hence~~Italy ~~the~~on ~~Company~~January ~~recorded~~31, ~~a deferred tax liability of approximately $12~~2014.7 ~~million~~These toacquisitions ~~offset~~enable ~~the~~Immucor ~~future book amortization related~~ to ~~these~~streamline ~~intangibles. Substantially all of~~ the ~~$36.9~~distribution ~~million~~ of ~~goodwill~~its ~~resulting from the~~ LIFECODES ~~acquisition~~products isin ~~not deductible for tax purposes~~Europe.

The ~~valuation~~Company ~~method~~acquired ~~and~~the ~~assumptions~~stock ~~used~~of tothe ~~determine~~UK ~~fair~~distribution ~~value~~business for a total cash purchase price of ~~major~~$4.0 ~~classes~~million, including acquired cash of $1.2 million. The Company acquired the assets of the Italy distribution business for a total cash purchase price of $2.4 million. In total, the Company acquired other identifiable intangible assets of $3.5 million and ~~liabilities~~$1.1 ~~assumed~~million of goodwill, respectively, in ~~accordance~~these ~~with~~acquisitions. The ~~ASC~~other ~~Topic~~identifiable ~~820~~intangible assets are asmainly ~~follows:~~customer relationships, which represent the fair value of the existing customer base. The tangible assets acquired in these acquisitions were not material to the Company’s consolidated financial statements. All of the goodwill arising from the Italy asset acquisition was deductible for income tax purposes. The goodwill arising from the UK acquisition is not deductible for tax purposes.

● Cash, receivables, current liabilities, and other assets and liabilities, net – The carrying amounts of each of these items approximated fair value because of the short-term maturity of these instruments.

● Inventories, net were valued on the basis of estimated selling prices less the sum of (a) costs of disposal and (b) a reasonable profit allowance on the selling effort. The inventory values were established separately for raw materials and supplies (including instruments and genotyping inventories), work-in-process, and finished goods.

● Property and equipment were valued based on a cost and market approach. The cost approach quantifies value by examining either the historical cost to reproduce or the estimated current cost to replace at a given level of functionality and estimated physical deterioration. A physical deterioration factor was considered for the loss in value brought about by wear and tear of the elements, disintegration, use in service, and physical factors that reduce the life and serviceability of the property. In addition to the cost approach, certain assets were valued through a market approach. The market approach measures the value of an asset through an analysis of recent sales.

● Intangible assets were valued primarily through application of the income approach. The income approach is a valuation technique that provides an estimation of the fair value of an asset based on the cash flows that an asset can be expected to generate over its remaining useful life. The Company used a variation of the income approach called the Multi-Period Excess Earnings Method (the “Excess Earnings Method”) to estimate the fair value of the Customer Relationships and the IPR&D projects. In estimating the fair value of the Existing Technology and the Trade Name intangible assets, a variation of the income approach, the relief from royalty method, was applied. In addition, the analysis provides an estimate for the remaining useful life of acquired intangible assets. For intangible assets without any contractual terms, the employment of certain statistical approaches to the economic pattern of asset utilization and qualitative assessments was used.

● Goodwill results from the application of ASC Topic 805 since it requires that the acquirer subsume into goodwill the value of any acquired intangible asset that is not identifiable and the value attributed to items that do not qualify for separate recognition as assets at the acquisition date.

● Deferred tax assets and liabilities were determined in accordance with ASC Topic 740, Income Taxes. Since this business combination was a stock acquisition, the assets are not adjusted to fair value for income tax reporting purposes. Therefore, deferred tax assets and liabilities are reflected for the expected income tax effects of the difference in bases for financial reporting and income tax purposes that result from applying the acquisition method of accounting for financial reporting purposes.

● Contingent consideration liability was calculated based on the expected (probability-weighted) payment based on the likelihood of achieving the financial performance target. Information as of March 22, 2013 was used to determine the likelihood of achievement. Assumptions included in the calculation were cumulative probability of success, discount rate and time of payment. The present value of the expected payment considers the time at which the obligation will be settled and a discount rate that reflects the risk associated with the performance payment.

Identifiable Intangible Assets

In performing the purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analyses of historical financial performance and estimates of future performance. The following table sets forth the components of intangible assets as of the date of the LIFECODES acquisition (in thousands):

			Useful Life
Intangible Asset	Fair Value		in Years
Customer relationships	$	16,000		20
Existing technology		13,250		10
Trade name		2,250		22
Below market leasehold interests		340		2 to 12
In-process research and development		1,400	n/a
	$	33,240

Customer relationships represent the fair value of the existing customer base.

Existing technologies relate to existing intellectual property related to patents, trade secrets and accumulated know-how, from which LIFECODES derives a competitive advantage, market share and/or pricing margin.

Trade name represents the LIFECODES® company brand. LIFECODES is well recognized by customers as a company that provides a selection of quality products including products that are not available elsewhere in the marketplace.

Below market leasehold interests represents the Company’s interest in the current leases, which provide for payments below comparable leases obtainable contemporaneously with the LIFECODES acquisition.

Useful lives of the amortizable intangible assets were based on estimated economic useful lives and are being amortized using the straight-line method.

In-process research and development (“IPR&D”) relates primarily to the development of products that detect certain types of antibodies. IPR&D is not amortized, but will be evaluated on a periodic basis to determine which projects remain in process. When a project is completed, its value will be amortized over its useful life. If a project is abandoned, its value is written off.

Sources and Uses of Funds

The sources and uses of funds in connection with the LIFECODES acquisition are summarized below (in thousands):

Sources:
Proceeds from Term Loan	$	50,000
Proceeds from equity contributions		42,500
	$	92,500
Uses:
Equity purchase price	$	86,204
Transaction costs		4,161
Additional working capital		2,135
	$	92,500

The acquisition was funded by additional borrowings of $50.0 million of Term B-2 Loans under the terms of the Amended and Restated Amendment No. 2 to the Senior Credit Facilities and an equity investment of $42.5 million from the Parent, including a $39.0 million investment by the Sponsor. The incremental funding was used to fund transaction costs of $4.2 million and to provide additional working capital of $2.1 million.

Transaction costs include legal and accounting fees, deferred financing costs related to the additional borrowings, and other external costs directly related to the LIFECODES acquisition. Of the $4.2 million of transaction costs paid at closing, $1.6 million was deferred financing costs that were capitalized and the remaining $2.6 million was incurred by the Company and included in acquisition-related charges in the consolidated statement of operations in fiscal 2013.

Financial Information

The operating results of the acquired businesses have been included in the Company’s consolidated results of operations since their dates of acquisition.

OTHER INVESTMENTS

Sirona Collaboration – On October 3, 2014, the Company entered into a collaborative arrangement with Sirona ~~Genomics, Inc. (“Sirona”)~~ for the commercialization of Sirona’s human leukocyte antigen (“HLA”) typing sample preparation and bioinformatics offering for next-generation sequencing. As part of this collaborative arrangement, the Company paid $0.7 million for a warrant with an exclusive option to acquire 100% of the common stock of Sirona and ~~loaned~~through ~~$4.6~~March ~~million~~2016, ~~bearing~~had ~~interest~~loaned atSirona a$9.5 ~~market~~million ~~rate~~ to ~~Sirona~~fund ~~for~~ development ~~funding.~~efforts ~~The~~of ~~collaborative~~its ~~arrangement~~existing ~~also~~projects. ~~includes~~Of the ~~potential~~$9.5 ~~for~~million ~~future~~loan, ~~interest~~$4.9 ~~bearing~~million ~~loans~~and ~~from the Company of up to~~ $64.76 million ~~over~~were afunded ~~two~~in ~~year~~fiscal ~~period~~years ~~from~~2016 ~~the~~and ~~date~~2015, ofrespectively. ~~the~~The ~~arrangement,~~loan ~~subject~~ to ~~the~~Sirona ~~achievement~~did ofbear ~~certain~~interest ~~development~~at ~~milestones~~a ~~and~~market ~~other~~rate. ~~terms~~The ofoutstanding ~~the~~loan ~~arrangement,~~and ofthe ~~which~~warrant ~~$3.1~~asset ~~million~~were ~~was~~both ~~payable~~included toin ~~Sirona~~Other asassets ~~an additional loan~~ on ~~May~~the ~~31,~~Company’s ~~2015,~~consolidated ~~and~~balance ~~were~~sheet ~~paid~~as onof ~~June~~May 131, 2015.

Sirona iswas considered to be a variable interest entity (“VIE”). ~~However,~~until ~~because~~March ~~Sirona~~2016, ~~retains~~when ~~sole~~it ~~responsibility~~was ~~for~~acquired. ~~and~~As ~~control~~a ~~of the operations of the business and for achieving product commercialization~~VIE, ~~the~~Sirona’s ~~Company~~results iswere not ~~required~~consolidated towith ~~consolidate~~ the results of ~~Sirona.~~Immucor ~~The~~since ~~maximum~~Sirona ~~loss~~retained ~~exposure~~sole ~~associated~~responsibility ~~with~~for ~~the~~and ~~VIE~~control ~~is $12.0 million, which includes the outstanding loan to Sirona~~ of ~~$7.7 million and~~ the ~~amount~~operations ~~paid for the warrant~~ of ~~$0.7~~its ~~million~~business, and ~~any~~for ~~future~~achieving ~~potential~~product ~~loans to be made by Immucor~~commercialization. ~~The outstanding loan and the warrant asset are both included in Other assets on the Company’s consolidated balance sheet as of May 31, 2015.~~

4. ~~RELATED~~CONSOLIDATED ~~PARTY~~VARIABLE ~~TRANSACTIONS~~INTEREST ENTITY

In ~~connection~~February ~~with~~2016, the ~~Immucor~~Company ~~Acquisition~~contributed inthe ~~fiscal~~assets ~~2012,~~acquired in the ~~Company~~Sentilus ~~entered~~acquisition ~~into~~to a ~~management~~newly ~~services~~formed ~~agreement~~company, ~~with~~Sentilus ~~TPG~~Holdco ~~Capital,~~LLC ~~L.P.~~ (~~the~~ “~~Sponsor~~Sentilus LLC”). ~~Pursuant~~The ~~to such agreement, and in exchange for on-going consulting and management advisory services that will be provided to the~~ Company, ~~the~~then ~~Sponsor~~distributed ~~receives~~its aninterest ~~aggregate~~in ~~annual~~Sentilus ~~monitoring~~LLC ~~fee~~via ofa ~~approximately $3.0 million. In the fiscal 2015~~dividend, ~~2014 and 2013 periods~~indirectly, ~~approximately~~to ~~$3.7~~IVD ~~million,~~Intermediate ~~$3.9~~Holdings ~~million,~~A ~~and $4~~Inc.~~4 million~~, ~~respectively,~~which ~~was recorded for monitoring fees, additional services provided by the Sponsor, and out-of-pocket expenses and~~ is ~~included in general and administrative expenses in~~ the ~~consolidated~~owner ~~statements~~ of ~~operations.~~Immucor’s AtParent ~~May 31~~company, ~~2015~~IVD ~~and~~Intermediate ~~2014,~~Holdings ~~the~~B ~~Company owed $0~~Inc.7 ~~million and $0.9 million, respectively, to the Sponsor for these fees and expenses.~~

47Sentilus LLC will continue developing FemtoarraysTM and the underlying technology for use in a variety of in vitro diagnostics areas. This business was spun-off from Immucor to be able to separately market the anticipated new product offerings that are expected to have application outside of the Company’s current transfusion and transplant markets. The book value of the assets and liabilities transferred was $6.0 million. The book value includes assets of $1.0 million of cash, $0.5 million of equipment, $18.8 million of identifiable intangible assets, and $0.1 million of goodwill, and liabilities of $7.2 million of deferred income tax liabilities, and a $7.2 million obligation to Immucor for contingent consideration liabilities.

~~5. INVENTORIES, net~~45

~~Typically~~Sentilus ~~inventories,~~LLC ~~net~~is ~~are~~considered ~~stated~~to atbe a VIE. Sentilus LLC is operated as a separate business. Sentilus LLC and the ~~lower~~Company ofhave ~~cost~~entered into management services agreements (~~first-in,~~the ~~first-out~~“Management ~~basis~~Contracts”) orpursuant ~~market~~to which Immucor will provide management, financial, legal and human resource services as well as personnel, materials and business locations to Sentilus LLC in exchange for management fees at Immucor’s cost plus a specified “arms-length” margin (~~net~~which ~~realizable~~is ~~value~~subject to periodic adjustment). ~~Inventories,~~Immucor’s ~~net~~executive ~~consist~~management will control and operate the Sentilus LLC business. Immucor is considered the primary beneficiary of Sentilus LLC because it is managing the ~~following~~Sentilus (LLC business and providing the necessary personnel and support to operate the business under the terms of the Management Contracts. Accordingly, the financial results of Sentilus LLC are included in ~~thousands):~~the consolidated financial results of the Company.

	As of May 31
	2015		2014
Raw materials and supplies	$	10,816		12,110
Work in process		9,197		9,146
Finished goods		21,834		27,895
	$	41,847		49,151

The operations of Sentilus LLC will be primarily funded through either additional potential future dividends from Immucor or from additional capital contributions from IVD Holdings Inc. (“Holdings”), the Parent company of IVD Intermediate Holdings A Inc. The Company could be exposed to a loss related to the Sentilus LLC business if there are expenses that are incurred by the Company on behalf of Sentilus LLC under the terms of the Management Contracts and are not reimbursed. This risk is deemed unlikely since all of the entities involved in this arrangement are under the common control of Holdings.

6.The ~~PREPAID~~following ~~EXPENSES~~table ~~AND~~includes ~~OTHER~~the ~~CURRENT~~carrying ~~ASSETS~~amounts and classification of the assets and liabilities of Sentilus LLC that are included in the Company’s consolidated balance sheet as of May 31, 2016 that cannot be used to settle the obligations of Immucor, and are not Immucor’s obligation to pay (in thousands):

ASSETS			LIABILITIES
Current assets:			Current liabilities:
Cash and cash equivalents	$	36	Accounts Payable	$	744
Total current assets		36	Accrued expenses and other current liabilities		4
			Total current liabilities		748

Noncurrent assets:			Noncurrent liabilities:
Property and equipment, net		644	Deferred Income Tax		6,207
Goodwill		105
Other intangible assets, net		18,820	Obligation to Immucor for contingent consideration liabilities		7,433
Total noncurrent assets		19,569	Total noncurrent liabilities		13,640
Total Assets	$	19,605	Total Liabilities	$	14,388

RELATED PARTY TRANSACTIONS

In connection with the Immucor Acquisition in fiscal year 2012, the Company entered into a management services agreement with TPG Capital, L.P. (the “Sponsor”). Pursuant to such agreement, and in exchange for on-going consulting and management advisory services that are provided to the Company, the Sponsor receives an aggregate annual monitoring fee of approximately $3.0 million. In fiscal years 2016, 2015 and 2014, approximately $3.5 million, $3.7 million, $3.9 million, respectively, was recorded for monitoring fees, additional services provided by the Sponsor, and out-of-pocket expenses and the majority is included in general and administrative expenses in the consolidated statements of operations. At May 31, 2016 and 2015, the Company owed $1.7 million and $0.7 million, respectively, to the Sponsor for these fees and expenses.

Sentilus LLC and the Company have entered into management services agreements. Refer to Note 4 of the consolidated financial statements for additional information.

INVENTORIES, NET

In May 2016, the Company adopted ASU No. 2015-11, Inventory: Simplifying the Measurement of Inventory. ASU 2015-11 requires that inventory be measured at the lower of cost or net realizable value. The adoption of this new standard did not have a material impact on our inventory valuation as of May 31, 2016. The Company measures inventories at cost using a first-in, first-out basis. Prior to May 2016, the Company measured inventories at the lower of cost or market. As of May 31, 2016 and 2015, inventories, net consist of the following (in thousands):

	As of May 31
	2016		2015

Raw materials and supplies	$	11,840		10,816
Work in process		11,944		9,197
Finished goods		23,110		21,834
Total inventories, net	$	46,894		41,847

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following (in thousands):

	As of May 31
	2015		2014
	2016		2015
Income tax prepayments	$	43,~~267~~567		54,~~736~~267
Prepaid expenses		32,~~942~~727		53,~~677~~942
Other receivables		2,~~952~~185		12,~~169~~952
Prepaid expenses and other current assets	$	118,~~161~~479		1211,~~582~~161

78. PROPERTY AND EQUIPMENT, ~~net~~NET

Property and equipment, net consists of the following (in thousands):

	As of May 31
	2015			2014
	2016			2015
Land	$	~~250~~217			~~290~~250
Buildings and improvements		2,~~494~~163			2,~~966~~494
Leasehold improvements		2526,~~639~~261			2425,~~693~~639
Capital work-in-progress		64,~~897~~275			36,~~927~~897
Furniture and fixtures		3,~~757~~861			3,~~656~~757
Machinery, equipment and instruments		94110,~~021~~145			8894,~~057~~021
		133,058			123,589
Total property and equipment		146,922			133,058
Less accumulated depreciation		(59,484	)		(47,278	)
Less: Accumulated depreciation		(70,907	)		(59,484	)
Property and equipment, net	$	7376,~~574~~015			7673,~~311~~574

Depreciation expense was $1614.86 million, $1816.38 million, and $2118.03 million in fiscal ~~2015~~years 2016, ~~2014~~2015, and ~~2013~~2014, respectively. Depreciation expense is primarily included in cost of sales in the consolidated statements of operations.

4847

89. GOODWILL

Changes in the carrying amount of goodwill for the years ended May 31, ~~2015~~2016 and ~~2014~~2015 were as follows (in thousands):

	Year Ended May 31
	May 31, 2016			May 31, 2015
	2015			2014
Balance at beginning of period	$	842,258			851,563
ABalance at beginning of period	$	851,563			1,003,463
Additions:
Acquisition of businesses		~~432~~15,131			~~6,912~~432
Foreign currency translation adjustment		(~~9,737~~366	)		1(9,~~188~~737	)
Impairment loss		-			~~(160,000~~-	)
Balance at end of period	$	~~842~~857,~~258~~023			~~851~~842,~~563~~258

The Company has six reporting units with goodwill as a result of prior acquisitions which it evaluates for impairment. The Company evaluates goodwill for impairment on an annual basis as of March 1^st, and between annual tests if a triggering event or a change in circumstances indicates that a reporting unit’s goodwill might be impaired. An impairment loss on goodwill is recognized to the extent that a reporting unit’s carrying amount of goodwill exceeds the implied fair value of goodwill of such reporting unit, determined in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC 350”). ASC 350 requires that based on an initial evaluation, if the fair value of a reporting unit is less than its carrying amount, including goodwill, further analysis is required to measure the amount of the impairment loss, if any. The amount by which the reporting unit’s carrying amount of goodwill exceeds the implied fair value of the reporting unit’s goodwill, determined in accordance with ASC 350, is to be recognized as an impairment loss.

The annual evaluation of goodwill for impairment utilizes financial projections of the following fiscal year and the five year strategic plan that is prepared during the Company’s fourth quarters and reflects Management’s continuing knowledge of the operations and the markets in which the reporting units operate. The Company estimated the fair value of each of its reporting units in a manner similar to the method used in a business combination. The Company utilized the income approach in the determination of fair value. Under the income approach, estimated fair value is based on the discounted cash flow method. The key assumptions that drive the estimated fair value of the reporting units under the income approach are level 3 inputs and include future cash flows from operations and the discount rate applied to those future cash flows, determined from a weighted-average cost of capital calculation. The future cash flows include additional key assumptions relating to revenue growth rates, ~~margins~~gross profits and costs.

During fiscal years 2016 and 2015, the estimated fair value of each of our reporting units exceeded its carrying amount, therefore no further analysis was required. For each of the six reporting units that passed step one ~~as of March 1~~, ~~2015,~~ the percentage by which the estimated fair value exceeded the carrying amount of the reporting units ranged from 6% to 134% as of March 1, 2016, and 23% to 143% as of March 1, 2015.

During fiscal year 2014, the estimated fair value of five of the Company’s six reporting units exceeded its carrying amounts. For each of the five reporting units that passed step one as of March 1, 2014, the percentage by which the estimated fair value exceeded the carrying amount of the reporting units ranged from 45% to 123%. For one of the Company’s reporting units, the estimated fair value that reflects Management’s continuing knowledge of the operations and the markets in which the reporting unit operates did not exceed the carrying amount. Therefore, the Company completed step two of the impairment testing process to measure the amount of the impairment loss. The impairment loss on goodwill was determined to be $160.0 million and was recorded in the fourth quarter of fiscal year 2014. This impairment loss represented 18% of the carrying amount of goodwill for this reporting unit.

AsThe ~~of May 31, 2014 the~~ Company had $160.0 million of accumulated impairment losses on goodwill ~~which was unchanged~~ as of May 31, ~~2015~~2016. ~~There were no accumulated impairment losses for the Company’s goodwill as of May 31, 2013.~~

4948

910. OTHER INTANGIBLE ASSETS, ~~net~~NET

Other intangible assets consist of the following (in thousands):

As of May 31

2015

2014

2016

2015

Weighted Average Life (years)

Cost

Accumulated Amortization

Net

Cost

Accumulated Amortization

Net

Other intangible assets subject to amortization:

Customer relationships

462,~~534~~602

(86109,~~052~~260

)

~~376~~353,~~482~~342

~~470~~462,~~679~~534

(6386,~~989~~052

)

~~406~~376,~~690~~482

Existing technology / trade names

1112

~~314~~355,~~850~~604

(99128,~~565~~530

)

~~215~~227,~~285~~074

314,~~350~~850

(7199,~~246~~565

)

~~243~~215,~~104~~285

Corporate trade name

40,000

(1012,~~088~~754

)

2927,~~912~~246

40,000

(710,~~421~~088

)

3229,~~579~~912

Below market leasehold interests

1,200

(~~557~~631

)

~~643~~569

1,200

(~~449~~557

)

~~751~~643

Other intangibles

428

(~~156~~262

)

~~272~~166

~~399~~428

(53156

)

~~346~~272

Total amortizable assets

~~819~~859,~~012~~834

(~~196~~251,~~418~~437

)

~~622~~608,~~594~~397

~~826~~819,~~628~~012

(~~143~~196,~~158~~418

)

~~683~~622,~~470~~594

Other intangible assets not subject to amortization:

Intangible assets not subject to amortization:

In-process research and development

2724,700

927,~~400~~700

Total non-amortizable assets

2724,700

927,~~400~~700

Other intangible assets, net

~~846~~884,~~712~~534

(~~196~~251,~~418~~437

)

~~650~~633,~~294~~097

~~836~~846,~~028~~712

(~~143~~196,~~158~~418

)

~~692~~650,~~870~~294

In fiscal ~~2014~~year 2016, it was determined that antwo in-process research and development ~~(“IPR&D”)~~projects ~~project~~were ~~related~~no tolonger ~~our~~economically ~~transplant~~feasible and ~~molecular~~therefore ~~diagnostics~~were written-off. One project related to the Transfusion business ~~was~~with noa ~~longer~~value ~~economically~~of ~~feasible~~$2.5 ~~This~~million and the other project ~~was~~related ~~therefore~~to ~~abandoned~~the Transplant and ~~fully~~Molecular ~~written-off~~business with a value of $0.5 million. As a result, a loss of $03.20 million was recorded in the fourth quarter of fiscal ~~2014,~~year ~~and~~2016 which was included in impairment loss on the Company’s consolidated statement of operations.

A portion of the Company’s customer relationships is held in functional currencies outside the U.S. Therefore, the stated cost as well as the accumulated amortization is affected by the fluctuation in foreign currency exchange rates. Amortization of other intangible assets amounted to $54.59 million in fiscal ~~2015~~year 2016, $5354.05 million in fiscal ~~2014~~year 2015, and $5053.80 million in fiscal ~~2013~~year 2014. The following table presents an estimate of amortization expense for each of the next five fiscal years (in thousands):

Year Ending May 31:
2016	$	54,565
2017	$	56,628
2017		54,408
2018		56,513
2018		54,294
2019		52,590
2019		50,370
2020		51,482
2020		49,262
2021		51,453

~~10. DEFERRED FINANCING COSTS, net~~49

Changes in deferred financing costs, net for the fiscal 2015 and 2014 periods were as follows (in thousands):

	Year Ended May 31
	2015			2014
Balance at beginning of period	$	33,116			39,449
Amortization		(6,717	)		(6,333	)
Balance at end of period	$	26,399			33,116

Deferred financing costs are capitalized and are amortized over the life of the related debt agreements using the effective interest rate method, except the Revolving Facility which uses the straight line method.

Debt issuance costs, loss on extinguishment of debt, and the Revolving Facility are further detailed in Note 13.

11.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following (in thousands):

	As of May 31
	2015		2014
	2016		2015
Salaries and wages	$	13,981		11,410
Accrued salaries and wages	$	13,075		13,981
Sales and other taxes payable		32,~~344~~626		43,~~880~~584
Other accruals		4,842		3,381
Other accrued expenses		1,368		4,526
Royalties		1,226		1,572
Royalty obligations		1,905		1,226
Pricing discount to dealers		~~446~~440		~~197~~446
Professional fees and dealer commission		1,163		1,389
Professional fees and dealer commissions		1,305		1,163
Medical claims liability		1,~~206~~290		~~887~~1,206
Accrued expenses and other current liabilities	$	2622,~~208~~009		2326,~~716~~132

12.

DEFERRED REVENUE

The additions to, and recognition of, deferred revenue for the ~~year~~years ended May 31, ~~2015~~2016 and ~~2014~~2015 were as follows (in thousands):

	Year Ended May 31
	For the Years Ended May 31
	2015			2014
	2016			2015
Balance at beginning of year	$	2,~~899~~766			2,~~413~~899
Additions to deferred revenue from new contracts		914,~~388~~314			89,~~658~~388
Revenue recognized during the year		(914,~~293~~179	)		(89,~~246~~293	)
Foreign currency translation adjustment		(~~228~~14	)		74(228	)
Balance at end of year		2,~~766~~887			2,~~899~~766
Less current portion		(2,703	)		(2,813	)
Less: Current portion		(2,864	)		(2,703	)
Deferred revenue, net of current portion	$	6323			8663

5150

13.

LONG-TERM DEBT

In May of 2016, the Company adopted ASU 2015-03, Interest – Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 changed the presentation of debt issuance costs on the balance sheet by requiring that they be presented as a direct deduction from the related debt liability, rather than represented as a separate asset. As a result, the Company’s deferred financing costs are now reflected in the Long-term debt, excluding current portion on the Company’s consolidated balance sheets for all periods presented. Long-term debt as of May 31, 2016 and 2015 consists of the following (in thousands):

	As of May 31
	2015			2014
	2016												2015
Term Loan Facility, net of $7,381 and $9,435 debt discounts, respectively	$	641,029			645,609
	Gross			OID (1)			DFC (2)			Net			Gross		OID (1)			DFC (2)			Net
Notes, net of $3,291 and $3,862 debt discounts, respectively		396,709			396,138
Term Loan Facility	$	641,777			(5,210	)		(11,049	)		625,518			648,410		(7,381	)		(15,664	)		625,365
Capital lease agreements		7			27
Notes		400,000			(2,648	)		(7,223	)		390,129			400,000		(3,291	)		(8,978	)		387,731
		1,037,745			1,041,774
Revolving Facility		-			-			(1,125	)		(1,125	)		-		-			(1,757	)		(1,757	)
Less current portion, net of discounts		(4,469	)		(4,591	)
Capital lease agreements		232			-			-			232			7		-			-			7
Long-term debt, net of current portion	$	1,033,276			1,037,183
Total long-term debt		1,042,009			(7,858	)		(19,397	)		1,014,754			1,048,417		(10,672	)		(26,399	)		1,011,346
Less: Current portion of long-term debt		6,806			-			-			6,806			6,640		-			-			6,640
Long-term debt, excluding current portion	$	1,035,203			(7,858	)		(19,397	)		1,007,948			1,041,777		(10,672	)		(26,399	)		1,004,706

(1) - OID refers to original issue discounts on the Company's long-term debt

(2) - DFC refers to deferred financing costs related to the Company's long-term debt facilities

Senior Secured Credit Facilities, Security Agreement and Guaranty

In connection with the Immucor Acquisition on August 19, 2011, the Company entered into a credit agreement and related security and other agreements for (1) a $615.0 million senior secured term loan facility with Term B Loans (the “~~Original~~ Term Loan Facility”) and (2) a $100.0 million senior secured revolving loan ~~facility~~facilities (the “Revolving ~~Facility~~Facilities,” and together with the ~~Original~~ Term Loan Facility, the “~~Original~~ Senior Credit Facilities”) with certain lenders, Citibank, N.A., as Administrative Agent and collateral agent (the “Administrative Agent”) and the other agents party thereto. In addition to borrowings upon prior notice, the Revolving ~~Facility~~Facilities ~~includes~~include borrowing capacity in the form of letters of credit and borrowings on same-day notice, referred to as swing line loans, in each case, up to $25.0 million, and is available in U.S. dollars, Euros, British Pounds, Japanese Yen, Canadian dollars and in such other currencies as the Company and the Administrative Agent under the Revolving ~~Facility~~Facilities may agree (subject to a sublimit for such non-U.S. currencies).

OnThe ~~August~~Company ~~21,~~modified ~~2012,~~ the ~~Company,~~Senior ~~the~~Credit ~~Administrative~~Facilities ~~Agent~~through various amendments during fiscal years 2012 and ~~the~~2013. ~~various~~Included ~~lenders~~in ~~party~~these ~~thereto~~amendments ~~modified~~was the ~~Original~~refinancing of the Senior Credit Facilities byin ~~entering~~August ~~into~~2012 ~~Amendment~~and Noin February 2013. 1 ~~which~~The ~~replaced~~result ~~the~~of ~~existing~~these ~~Term~~refinancings Bwas ~~Loans~~to ~~with~~lower athe ~~new~~interest ~~class~~rate ofon the Term ~~B-1~~Loan ~~Loans~~Facility inand anRevolving ~~aggregate~~Facilities ~~principal~~and ~~amount~~to extend the maturity date of ~~$610~~the Revolving Facilities to August 19, 2017.4 ~~million~~In ~~and~~addition, ~~lowered~~the amendments modified the ~~interest~~financial ~~rate~~covenant onof the ~~Original~~ Senior Credit Facilities, assuch ~~amended.~~that ~~Amendment~~the ~~No.~~financial 1covenant ~~also~~is ~~extended~~no longer applicable to the ~~maturity~~Term ~~date~~Loan ofFacility and is only applicable to the Revolving ~~Facility~~Facilities. toIn ~~August~~March 192013, ~~2017~~the Company borrowed an additional $50.0 million on the Term Loan Facility in connection with the LIFECODES acquisition. These additional borrowings were on the same terms as the Term Loan Facility, as then amended.

AsOn aDecember ~~result~~9, ~~of Amendment No. 1~~2015, the Company ~~recognized~~entered ainto $6Amendment No.7 ~~million~~5 ~~loss~~to onthe ~~debt~~credit ~~extinguishment~~agreement in(“Amendment ~~the~~No. ~~first~~5”) ~~quarter~~to ofmodify the ~~2013~~financial ~~fiscal~~covenant ~~year~~associated with ~~regards~~the toRevolving ~~certain~~Facilities. ~~portions~~Amendment ofNo. ~~the~~5 ~~deferred~~provides ~~financing~~that ~~costs~~beginning ~~($4.0~~with ~~million)~~the ~~and~~period ~~original~~ending ~~issuance~~November ~~discount~~30, ~~(“OID”)~~2015, ~~($2.7~~for ~~million)~~purposes ~~related~~of tocalculating ~~the~~its ~~Original~~compliance ~~Term~~with ~~Loan~~the ~~Facility.~~senior ~~Amendment~~secured ~~No.~~leverage 1ratio ~~had~~covenant nofor ~~significant~~any ~~impact~~trailing ~~related~~twelve-month toperiod ~~the~~for ~~Revolving~~bank ~~Facility~~reporting purposes, asthe ~~there~~Company ~~was~~may nocalculate ~~change~~EBITDA inon ~~the~~a ~~lenders~~constant orcurrency ~~decrease~~basis, as defined in the ~~Revolving Facility borrowing capacity~~amendment. InThe ~~addition,~~use of the ~~Company~~constant ~~capitalized~~currency ~~$2.5~~adjustment ~~million~~is ofsubject ~~deferred~~to ~~financing~~the ~~costs~~Company’s ~~associated~~compliance with ~~Amendment~~certain Norestrictions. 1.

On ~~January~~May 254, ~~2013~~2016, the Company, ~~the~~entered ~~Administrative~~into ~~Agent~~Amendment ~~and~~No. 6 to the ~~various~~credit ~~lenders~~agreement ~~party~~(“Amendment ~~thereto~~No. ~~further~~6”). ~~modified~~Amendment No. 6 extends the ~~Original~~maturity ~~Senior~~date ~~Credit~~of the Revolving Facilities, asand ~~previously~~amends ~~amended,~~certain byother ~~entering~~terms ~~into~~of ~~Amendment~~the NoRevolving Facilities. 2The tomargin for borrowings under the ~~credit~~Revolving ~~agreement~~Facilities ~~governing~~remains unchanged by the ~~Original~~amendment, ~~Senior~~however, ~~Credit~~a ~~Facilities~~0% LIBOR floor is imposed on future LIBOR borrowings. Amendment No. 26 ~~was~~extends the maturity date of the Revolving Facilities to ~~become~~the ~~effective~~earlier onof (i) February 19, 2020, (ii) May 19, 2018, if the maturity of the Term Loan Facility has not been extended by such date, and (iii) 90 days prior to any maturity date of certain funded material indebtedness (which maturity date shall be no earlier than October 19, 2018). Certain other Company actions would also result in a springing maturity of the ~~closing~~Revolving Facilities as early as August 20, 2017. Amendment No, 6 also reduces the aggregate principal amount of the ~~LIFECODES~~revolving ~~acquisition~~credit commitments as follows: (1) effective on May 4, 2016, from $100.0 million to $80.0 million, (2) on August 19, 2018, to $70.0 million, (3) on February 19, 2019, to $60.0 million, and ~~provided~~(4) ~~for~~on anAugust ~~incremental~~19, 2019, to $50.0 million. ofFinally, Amendment No. 6 provides that if the Term ~~B-1~~Loan ~~Loans~~Facility is amended, then certain provisions with respect to the ~~same~~interest ~~terms~~rate asmargin ~~the~~and ~~original~~negative ~~Term~~financial ~~Loan~~covenants ~~Facility~~will apply to the Revolving Facilities.

On February 19, 2013, the Company, the Administrative Agent and the various lenders party thereto modified the Original Senior Credit Facilities, as previously amended, by entering into Amendment No. 3 and Amendment No. 4 to the credit agreement governing the Original Senior Credit Facilities. Amendment No. 3 replaced the existing Term B-1 Loans with a new class of Term B-2 Loans in an aggregate principal amount of $613.3 million (the “Term Loan Facility”), including the issuance of an additional $6.0 million of Term B-2 Loans. Amendment No. 3 also lowered the interest rates on the Term B-2 Loans and removed the financial debt covenant requirement. The Term B-2 Loans mature August 19, 2018, the same maturity date as the previous Term B-1 Loans. Amendment No. 4 lowered the interest rates on the Revolving Facility. There were no other substantive changes to the Revolving Facility. The Term Loan Facility, as amended, together with the Revolving Facility, as amended, is referred to as the “Senior Credit Facilities.”51

As The aCompany ~~result~~is ofrequired ~~Amendment~~to ~~No.~~make 3,scheduled ~~the~~principal ~~Company~~payments ~~recognized~~on athe ~~$2.4~~last ~~million~~business ~~loss~~day onof ~~debt~~each ~~extinguishment~~calendar inquarter ~~the~~equal ~~third~~to ~~quarter~~0.25% of the ~~2013~~principal ~~fiscal~~amount ~~year~~of ~~with~~loans ~~regards~~under tothe ~~certain~~Term ~~portions~~Loan ofFacility ~~the~~as ~~deferred~~most ~~financing~~recently ~~costs~~amended ~~($1.7~~with ~~million)~~the ~~and~~balance ~~OID~~due ~~($0.7~~and ~~million)~~payable ~~related~~on toAugust ~~the~~19, ~~Original~~2018. ~~Term~~Currently ~~Loan~~scheduled ~~Facility,~~principal aspayments ~~previously~~are ~~amended~~$1.7 ~~Amendment~~million Noper quarter. 4The ~~had~~Company nois ~~significant~~also ~~impact~~required ~~related~~ to ~~the~~repay ~~Revolving~~loans ~~Facility,~~under asthe ~~there~~Term ~~was~~Loan noFacility ~~change~~based inon ~~the~~annual ~~lenders~~excess orcash ~~decrease~~flows as defined in the ~~Revolving~~credit ~~Facility~~agreement ~~borrowing~~governing ~~capacity.~~the InTerm ~~addition,~~Loan ~~the~~Facility ~~Company~~and ~~capitalized~~upon ~~$7.3~~the ~~million~~occurrence of ~~deferred~~certain ~~financing~~other ~~costs~~events ~~associated~~set ~~with~~forth ~~Amendments~~in ~~No.~~the 3Term ~~and~~Loan NoFacility. 4.

52Borrowings under the Senior Credit Facilities bear interest at a rate per annum equal to an applicable margin plus, at the Company’s option, either (a) in the case of borrowings in U.S. dollars, a base rate determined by reference to the highest of (1) the prime rate of Citibank, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus 1.00% or (b) in the case of borrowings in U.S. dollars or another currency, a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, which, in the case of the Term Loan Facility only, shall be no less than 1.25%. The applicable margin for borrowings under the Term Loan Facility is 2.75% with respect to base rate borrowings and 3.75% with respect to LIBOR borrowings. The applicable margin for borrowings under the Revolving Facilities is 2.75% with respect to base rate borrowings and 3.75% with respect to LIBOR borrowings, subject to a 0% LIBOR floor. The applicable margin for borrowings under the Revolving Facilities is subject to a 0.25% step-down, when the Company’s senior secured net leverage ratio at the end of a fiscal quarter is less than or equal to 3:00 to 1:00. The interest rate on the Term Loan Facility was 5.00% as of May 31, 2016 and 2015. Including the amortization of deferred financing costs and the original issue discount, the effective interest rate on the Term Loan Facility is 6.1% for fiscal year 2016. At May 31, 2016, there were no outstanding borrowings under the Revolving Facilities and no outstanding letters of credit.

On February 19, 2013 and concurrent with Amendments No. 3 and No. 4, the Company, the Administrative Agent and the various lenders party thereto modified the Original Senior Credit Facilities, as previously amended, by entering into Amended and Restated Amendment No. 2. The Amended and Restated Amendment No. 2 became effective on March 22, 2013, the date of the closing of the LIFECODES Acquisition. On that date, the Company issued an additional $50.0 million in Term B-2 Loans with the same terms and maturity date as the existing Term Loan Facility. In addition, the Company capitalized $1.6 million of deferred financing costs associated with Amended and Restated Amendment No. 2.

The credit agreement governing the Senior Credit Facilities provides that, subject to certain conditions, the Company may request additional tranches of term loans and/or increase commitments under the Revolving Facility and/or the Term Loan Facility and/or add one or more incremental revolving credit facility tranches (provided there are no more than three such tranches with different maturity dates outstanding at any time) in an aggregate amount not to exceed (a) $100.0 million plus (b) an unlimited amount at any time, subject to compliance on a pro forma basis with a senior secured first lien net leverage ratio of no greater than 4.00 to 1.00. Availability of such additional tranches of term loans or revolving credit loans and/or increased commitments is subject to, among other conditions, the absence of any default under the credit agreement governing the Senior Credit Facilities and the receipt of commitments by existing or additional financial institutions.

The Company is required to make scheduled principal payments on the last business day of each calendar quarter equal to 0.25% of the original principal amount of loans under the Term Loan Facility as most recently amended with the balance due and payable on August 19, 2018. Currently scheduled principal payments are $1.7 million per quarter. The Company is also required to repay loans under the Term Loan Facility based on annual excess cash flows as defined in the credit agreement governing the Term Loan Facility and upon the occurrence of certain other events set forth in the Term Loan Facility.

Borrowings under the Senior Credit Facilities bear interest at a rate per annum equal to an applicable margin plus, at the Company’s option, either (a) in the case of borrowings in U.S. dollars, a base rate determined by reference to the highest of (1) the prime rate of Citibank, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus 1.00% or (b) in the case of borrowings in U.S. dollars or another currency, a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, which, in the case of the Term Loan Facility only, shall be no less than 1.25%. The applicable margin for borrowings under the Term Loan Facility is 2.75% with respect to base rate borrowings and 3.75% with respect to LIBOR borrowings. The applicable margin for borrowings under the Revolving Facility is 2.75% with respect to base rate borrowings and 3.75% with respect to LIBOR borrowings. The applicable margin for borrowings under the Revolving Facility is subject to a 0.25% step-down, when the Company’s senior secured net leverage ratio at the end of a fiscal quarter is less than or equal to 3:00 to 1:00. The interest rate on the Term Loan Facility was 5.00% as of May 31, 2015 and 2014. Including the amortization of deferred financing costs and the original issue discount, the effective interest rate on the Term Loan Facility is 6.1% for fiscal 2015. At May 31, 2015, there were no outstanding borrowings under the Revolving Facility and no outstanding letters of credit.

Prior to Amendment No. 1, the interest rates on the Original Term Loan Facility had a LIBOR floor of 1.50% and the applicable margin was 5.75%. The Revolving Facility’s interest rates had an applicable margin of 4.75% with respect to base rate loans and 5.75% with respect to LIBOR loans. The interest rate on the Original Term Loan Facility for all periods prior to the effective date of Amendment No. 1 was 7.25%.

Prior to Amendments No. 3 and No. 4, the interest rates on the Original Term Loan Facility, as amended, had a LIBOR floor of 1.25% and the applicable margin was 4.50%. The Revolving Facility’s interest rates had an applicable margin of 3.50% with respect to base rate loans and 4.50% with respect to LIBOR loans. The interest rates on the Original Term Loan Facility, as amended, for all periods after the effective date of Amendment No. 1 and prior to the effective date of Amendment No. 3 was 5.75%.

All obligations under the Senior Credit Facilities are unconditionally gua

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