IMMUCOR INC - FORM 10-Q - April 10, 2015

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - IMMUCOR INC	ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - IMMUCOR INC	ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - IMMUCOR INC	ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - IMMUCOR INC	ex31-2.htm
EXCEL - IDEA: XBRL DOCUMENT - IMMUCOR INC	Financial_Report.xls

FORM 10-Q

United States

Securities and Exchange Commission

Washington, D. C. 20549

	(Mark One)
	X	Quarterly Report Pursuant to Section 13 or 15(d)
		of the Securities Exchange Act of 1934


		For the quarterly period ended: February 28, 2015

		OR
	_	Transition Report Pursuant to Section 13 or 15(d)
		of the Securities Exchange Act of 1934

Commission File Number: 0-14820

IMMUCOR, INC.

(Exact name of registrant as specified in its charter)

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

3130 Gateway Drive Norcross, Georgia 30071

(Address of principal executive offices) (Zip Code)

Registrant's telephone number: (770) 441-2051

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 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 X No

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 “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	Accelerated filer

Non-accelerated filer X	Smaller reporting company
(do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No 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 April 10, 2015, there were 100 shares of common stock outstanding.

IMMUCOR, INC. AND SUBSIDIARIES

QUARTERLY FINANCIAL STATEMENTS

INDEX

PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements:	3

Consolidated Balance Sheets (unaudited, except for May 31, 2014)		3

Consolidated Statements of Operations (unaudited)		4

Consolidated Statements of Comprehensive (Loss) Income (unaudited)		6

Consolidated Statements of Cash Flows (unaudited)		7

Notes to Consolidated Financial Statements (unaudited)		8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	37


PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 6.	Exhibits	40

	SIGNATURES	40

ITEM 1. Consolidated Financial Statements

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

	February 28, 2015			May 31, 2014
	(Unaudited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	11,491			23,621
Trade accounts receivable, net of allowance for doubtful accounts of $1,108 and $898 at February 28, 2015 and May 31, 2014, respectively		72,476			69,629
Inventories		47,060			49,151
Deferred income tax assets, current portion		8,141			8,251
Prepaid expenses and other current assets		10,612			12,582
Total current assets		149,780			163,234

PROPERTY AND EQUIPMENT, net		73,243			76,311
GOODWILL		842,849			851,563
OTHER INTANGIBLE ASSETS, net		664,398			692,870
DEFERRED FINANCING COSTS, net		28,118			33,116
OTHER ASSETS		11,853			7,320
Total assets	$	1,770,241			1,824,414

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	11,936			15,665
Accrued interest and interest rate swap liability		8,106			19,605
Accrued expenses and other current liabilities		23,251			23,716
Income taxes payable		4,780			4,927
Deferred revenue, current portion		2,786			2,813
Current portion of long-term debt, net of debt discounts		17,500			4,591
Total current liabilities		68,359			71,317

LONG-TERM DEBT, net of debt discounts		1,034,233			1,037,183
DEFERRED REVENUE		65			86
DEFERRED INCOME TAX LIABILITIES		249,398			223,379
OTHER LONG-TERM LIABILITIES		29,132			23,833
Total liabilities		1,381,187			1,355,798
COMMITMENTS AND CONTINGENCIES (Note 18)
SHAREHOLDERS' EQUITY:
Common stock, $0.00 par value, 100 shares authorized, issued and outstanding as of February 28, 2015 and May 31, 2014, respectively		-			-
Additional paid-in capital		754,948			753,147
Accumulated deficit		(325,261	)		(271,264	)
Accumulated other comprehensive loss		(40,633	)		(13,267	)
Total shareholders' equity		389,054			468,616
Total liabilities and shareholders' equity	$	1,770,241			1,824,414

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

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

(Unaudited)

	Three Months Ended
	February 28
	2015			2014

NET SALES	$	95,605			90,979
COST OF SALES (exclusive of amortization shown separately below)		33,971			32,359
GROSS MARGIN		61,634			58,620

OPERATING EXPENSES
Research and development		7,280			6,738
Selling and marketing		13,513			14,295
Distribution		4,986			5,068
General and administrative		9,362			10,310
Amortization expense		13,615			13,225
Impairment loss		-			150
Total operating expenses		48,756			49,786

INCOME FROM OPERATIONS		12,878			8,834

NON-OPERATING (EXPENSE) INCOME
Interest income		42			16
Interest expense		(21,793	)		(21,900	)
Other, net		177			(108	)
Total non-operating net expense		(21,574	)		(21,992	)

LOSS BEFORE INCOME TAXES		(8,696	)		(13,158	)
EXPENSE (BENEFIT) FOR INCOME TAXES		30,744			(5,803	)
NET LOSS	$	(39,440	)		(7,355	)

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

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

(Unaudited)

	Nine Months Ended
	February 28
	2015			2014
NET SALES	$	294,323			287,226
COST OF SALES (exclusive of amortization shown separately below)		106,571			103,092
GROSS MARGIN		187,752			184,134

OPERATING EXPENSES
Research and development		21,474			22,178
Selling and marketing		43,942			43,757
Distribution		15,342			14,624
General and administrative		30,943			29,534
Amortization expense		40,948			39,647
Acquisition-related items		-			(4,638	)
Impairment loss		-			180
Total operating expenses		152,649			145,282

INCOME FROM OPERATIONS		35,103			38,852

NON-OPERATING (EXPENSE) INCOME
Interest income		131			28
Interest expense		(66,913	)		(66,172	)
Other, net		465			(301	)
Total non-operating net expense		(66,317	)		(66,445	)

LOSS BEFORE INCOME TAXES		(31,214	)		(27,593	)
EXPENSE (BENEFIT) FOR INCOME TAXES		22,783			(11,691	)
NET LOSS	$	(53,997	)		(15,902	)

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

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

(Unaudited)

	Three Months Ended
	February 28
	2015			2014


NET LOSS	$	(39,440	)		(7,355	)

OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustment		(13,915	)		476

Changes in fair value of cash flow hedges:
Portion of cash flow hedges recognized in other comprehensive income		186			158
Less: reclassification adjustment for losses included in net income		(72	)		(49	)
Net changes in fair value of cash flow hedges		114			109

OTHER COMPREHENSIVE (LOSS) INCOME		(13,801	)		585

COMPREHENSIVE LOSS	$	(53,241	)		(6,770	)

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

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

(Unaudited)

	Nine Months Ended
	February 28
	2015			2014


NET LOSS	$	(53,997	)		(15,902	)

OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustment		(27,677	)		5,023

Changes in fair value of cash flow hedges:
Portion of cash flow hedges recognized in other comprehensive income		553			362
Less: reclassification adjustment for losses included in net income		(242	)		(108	)
Net changes in fair value of cash flow hedges		311			254

OTHER COMPREHENSIVE (LOSS) INCOME		(27,366	)		5,277

COMPREHENSIVE LOSS	$	(81,363	)		(10,625	)

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

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine Months Ended
	February 28
	2015			2014
OPERATING ACTIVITIES:
Net loss	$	(53,997	)		(15,902	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		53,843			52,858
Noncash interest expense		7,557			6,510
Loss on disposition and retirement of fixed assets		237			68
Inventory fair value adjustment		-			2,779
Asset impairment		-			180
Provision for doubtful accounts		372			(1,740	)
Share-based compensation expense		1,800			1,175
Deferred income taxes		21,496			(15,073	)
Change in fair value of contingent consideration		-			(4,638	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, trade		(9,259	)		5,330
Income taxes		526			861
Inventories		(6,017	)		(14,651	)
Other assets		1,101			(324	)
Accounts payable		(3,284	)		3,025
Deferred revenue		129			269
Accrued expenses and other liabilities		(11,712	)		(10,186	)
Cash provided by operating activities		2,792			10,541

INVESTING ACTIVITIES:
Purchases of property and equipment		(7,519	)		(5,339	)
Receipt from acquisition of business related to finalizing certain working capital adjustments		-			1,116
Other investments		(5,300	)		-
Acquisitions of businesses, net of cash acquired		(6,396	)		(5,151	)
Cash used in investing activities		(19,215	)		(9,374	)

FINANCING ACTIVITIES:
Repayments of long-term debt		(4,993	)		(5,008	)
Proceeds from Revolving Facility		49,500			-
Repayments of Revolving Facility		(36,500	)		-
Cash provided by (used in) financing activities		8,007			(5,008	)

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		(3,714	)		481
DECREASE IN CASH AND CASH EQUIVALENTS		(12,130	)		(3,360	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		23,621			29,388
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	11,491			26,028

SUPPLEMENTAL INFORMATION:
Income taxes paid, net of refunds	$	2,621			3,030
Interest paid		70,657			71,179
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Movement from inventory to property and equipment of instruments placed on rental agreements	$	5,728			7,788

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

IMMUCOR, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of Business

Immucor, Inc. (“Immucor”) and its subsidiaries (collectively, the “Company”) develops, manufactures and sells transfusion and transplantation diagnostics products used by hospitals, donor centers and reference laboratories around the world. Our 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 transplantations. The Company operates manufacturing facilities in North America with both direct affiliate offices and third-party distribution arrangements worldwide.

Basis of Presentation

The accompanying consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information, and the Securities and Exchange Commission’s (“SEC”) instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The Company’s interim results are not necessarily indicative of the Company’s expected full year results. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited, consolidated financial statements and related notes for the year ended May 31, 2014, included in the Company’s Annual Report on Form 10-K filed with the SEC on August 26, 2014.

Basis of Consolidation

The consolidated financial statements include the accounts of Immucor and all its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. There are no other entities controlled by the Company, either directly or indirectly.

Impact of Recently Issued Accounting Standards

Accounting Changes Adopted by the Company in Fiscal 2015

In November 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-17, Business Combinations: Pushdown Accounting (“ASU 2014-17”). ASU (“Update”) 2014-17 provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. If pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period as a change in accounting principle in accordance with ASC Topic 250, Accounting Changes and Error Corrections. If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable. ASU 2014-17 also requires an acquired entity that elects the option to apply pushdown accounting in its separate financial statements to disclose information in the current reporting period that enables users of financial statements to evaluate the effect of pushdown accounting. The Company has adopted the amendments in ASU 2014-17, effective November 18, 2014, as the amendments in the Update are effective upon issuance. The adoption of ASU 2014-12 did not have a material impact on the Company’s consolidated financial statements.

Accounting Changes Not Yet Adopted

In February 2015, the FASB issued ASC Update No. 2015-02, Amendments to the Consolidation Analysis. Update 2015-02 amended the process that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. Update 2015-02 is effective for the Company in the first quarter of fiscal 2017. Early application is permitted. The Company is evaluating the effect of adoption of ASU 2014-12 on its consolidated financial statements.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items (“ASU 2015-01”). The objective of this Update is to simplify the income statement presentation requirements by eliminating the concept of extraordinary items from U.S. GAAP. Eliminating the extraordinary classification simplifies income statement presentation by removing the concept of extraordinary items from consideration altogether. ASU 2015-01 will be effective for the Company in the first quarter of fiscal 2017. A reporting entity may apply the guidance prospectively. A reporting entity also may apply the guidance retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of ASU 2015-01 is not expected to have a material impact on the Company’s consolidated financial statement.

In June 2014, the FASB issued an ASU on stock-based compensation, ASU 2014-12, Compensation – Stock Compensation, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force) (“ASU 2014-12”). The guidance applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. For all entities, the amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, which corresponds to the Company’s first quarter of fiscal 2017. Earlier adoption is permitted. The Company is evaluating the effect of adoption of ASU 2014-12 on its consolidated financial statements.

In May 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 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. This standard is currently effective for the first interim period within annual reporting periods beginning after December 15, 2017, which corresponds to the Company’s first quarter of fiscal 2019. No early adoption is permitted under the current standard, and it is to be applied either retrospectively or as a cumulative-effect adjustment as of the date of adoption. In April 2015, the FASB has proposed a one-year deferral of the effective date of this standard along with an option to permit public entities to elect to adopt the amendments to this standard as of the original effective date. The Company is evaluating the effect of the adoption of ASU 2014-09 on its consolidated financial statements.

2.	BUSINESS COMBINATIONS

Business combinations completed in fiscal 2015:

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, Femtoarrays^TM. Among other uses, Sentilus has been developing Femtoarrays^TM 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 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 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 Immucor’s product offering for post-transplant testing and complements the 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, 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 was originally valued at $5.8 million and the long-term deferred tax liability was originally valued at $9.1 million. 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 the LIFECODES distribution businesses in both the United Kingdom (“UK”) and Italy on January 31, 2014. These acquisitions enable Immucor to streamline the distribution of its LIFECODES products in Europe. The Company acquired 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 acquisitions. The 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.

3.	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 the collaboration, the Company paid $0.7 million for a warrant with an exclusive option to acquire 100% of the common stock of Sirona and also loaned $4.6 million bearing interest at a market rate to Sirona for development funding. The collaborative arrangement includes the potential for future interest bearing loans from the Company of up to $6.7 million over the following two year period, subject to the achievement of certain development milestones and other terms of the arrangement. Sirona is considered to be a variable interest entity (“VIE”). However, because Sirona retains sole responsibility for and control of the operations of the business and for achieving product commercialization, the Company is not required to consolidate the results of Sirona. The maximum loss exposure associated with the VIE is $12.0 million, which includes the outstanding loan to Sirona of $4.6 million and the amount paid for the warrant of $0.7 million, and any future loans made by Immucor. The outstanding loan and the warrant asset are both included in Other assets on the Company’s consolidated balance sheet as of February 28, 2015.

4.	RELATED PARTY TRANSACTIONS

In connection with the acquisition of Immucor in fiscal 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 being provided to the Company, the Sponsor receives an aggregate annual monitoring fee of approximately $3.0 million. In the three months and nine months ended February 28, 2015, approximately $0.9 million, and $2.9 million was recorded for the monitoring fees, additional services provided by the Sponsor, and out-of-pocket expenses, respectively. In the three months and nine months ended February 28, 2014, $1.0 million, and $2.9 million, was recorded for these same types of fees and expenses, respectively. These expenses are included in general and administrative expenses in the consolidated statements of operations. As of February 28, 2015 and May 31, 2014, the Company owed $0.8 million and $0.9 million, respectively, to the Sponsor for these fees and expenses.

5.	INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out basis) or market (net realizable value). Inventories as of February 28, 2015, and May 31, 2014 include the following (in thousands):

	As of
	February 28, 2015		May 31, 2014

Raw materials and supplies	$	13,876		12,110
Work in process		8,330		9,146
Finished goods		24,854		27,895
	$	47,060		49,151

6.	PROPERTY AND EQUIPMENT, net

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

	As of
	February 28, 2015			May 31, 2014

Land	$	251			290
Buildings and improvements		2,509			2,966
Leasehold improvements		25,791			24,693
Capital work-in-progress		5,446			3,927
Furniture and fixtures		3,830			3,656
Machinery, equipment and instruments		91,546			88,057
		129,373			123,589
Less accumulated depreciation		(56,130	)		(47,278	)
Property and equipment, net	$	73,243			76,311

Depreciation expense was $4.1 million and $12.9 million in the three months and nine months ended February 28, 2015, and was $4.5 million and $13.2 million in the three months and nine months ended February 28, 2014. Depreciation expense is primarily included in cost of sales in the consolidated statements of operations.

7.	GOODWILL

The consolidated financial statements include the goodwill resulting from the acquisition of Immucor in the first quarter of fiscal 2012, and the acquisition of various businesses completed through the third quarter of fiscal 2015. The following table presents the changes in the carrying amount of goodwill during the nine months ended February 28, 2015 and the fiscal year ended May 31, 2014 (in thousands):

	February 28, 2015			May 31, 2014

Balance at beginning of period	$	851,563			1,003,463
Additions:
Acquisition of businesses		432			6,912
Foreign currency translation adjustment		(9,146	)		1,188
Impairment loss		-			(160,000	)
Balance at end of period	$	842,849			851,563

During the third quarter of fiscal 2015, acquired goodwill was reduced by $0.2 million. This change in acquired goodwill resulted from the Company finalizing the amount of the tax attributes related to the acquisition of the Organ-i business on May 31, 2014.

There were no accumulated impairment losses for the Company’s goodwill prior to the period ending May 31, 2014. For the periods ending May 31, 2014 and February 28, 2015, the Company had $160.0 million of accumulated impairment losses on goodwill.

8.	OTHER INTANGIBLE ASSETS, net

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

			As of
			February 28, 2015							May 31, 2014
	Weighted Average Life (years)		Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net

Other intangible assets subject to amortization:
Customer relationships		20	$	463,141		(80,356	)		382,785		470,679		(63,989	)		406,690
Existing technology / trade names		11		314,850		(92,480	)		222,370		314,350		(71,246	)		243,104
Corporate trade name		15		40,000		(9,421	)		30,579		40,000		(7,421	)		32,579
Below market leasehold interests		7		1,200		(535	)		665		1,200		(449	)		751
Other intangibles		4		429		(130	)		299		399		(53	)		346
Total amortizable assets				819,620		(182,922	)		636,698		826,628		(143,158	)		683,470

Other intangible assets not subject to amortization:
In-process research and development				27,700		-			27,700		9,400		-			9,400
Total non-amortizable assets				27,700		-			27,700		9,400		-			9,400

Other intangible assets, net			$	847,320		(182,922	)		664,398		836,028		(143,158	)		692,870

The weighted average life for below market leasehold interests changed from 6 to 8 years as of August 31, 2013 as a result of the renewal of certain lease agreements which extended the lease terms of existing leases. The costs associated with the new leases were treated as operating expenses as incurred.

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.

In fiscal 2014, it was determined that an IPR&D project related to our transplant and molecular diagnostics business was no longer economically feasible. This project was therefore abandoned and fully written-off in fiscal 2014. As a result, a loss of $0.2 million was recorded in fiscal 2014 and included in impairment loss on the Company’s consolidated statement of operations.

Amortization expense related to these intangible assets for the three months and nine months ended February 28, 2015 was $13.6 million and $40.9 million, and for the three months and nine months ended February 28, 2014 was $13.2 million and $39.6 million, respectively. Expected amortization expense for the remainder of fiscal 2015 and for each of the five succeeding years is as follows (in thousands):

Year Ending May 31:
2015	$	13,663
2016		54,638
2017		54,481
2018		54,367
2019		50,443
2020		49,335

9.	DEFERRED FINANCING COSTS, net

Changes in deferred financing costs during the nine months ended February 28, 2015 and the fiscal year ended May 31, 2014 are as follows (in thousands):

	February 28, 2015			May 31, 2014

Balance at beginning of period	$	33,116			39,449
Amortization		(4,998	)		(6,333	)
Balance at end of period	$	28,118			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.

10.

LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

	As of
	February 28, 2015			May 31, 2014

Term Loan Facility, net of $7,901 and $9,435 debt discounts, respectively	$	642,168			645,609
Notes, net of $3,444 and $3,862 debt discounts, respectively		396,556			396,138
Revolving Facility		13,000			-
Capital lease agreements		9			27
		1,051,733			1,041,774
Less current portion, net of discounts		(17,500	)		(4,591	)
Long-term debt, net of current portion	$	1,034,233			1,037,183

Senior Secured Credit Facilities, Security Agreement and Guaranty

The Company is party to a credit agreement and related security and other agreements as subsequently amended, with a bank syndicate of lenders, and Citibank N.A. as the Administrative Agent. The credit agreement, as amended, provides for (1) a $663.3 million senior secured term loan facility with Term B-2 Loans (the “Term Loan Facility”) and (2) a $100.0 million senior secured revolving loan facility (the “Revolving Facility,” and together with the Term Loan Facility, the “Senior Credit Facilities”). In addition to borrowings upon prior notice, 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 may agree (subject to a sublimit for such non-U.S. currencies). The Term Loan Facility matures on August 19, 2018 and the Revolving Facility matures on August 19, 2017.

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 February 28, 2015 and May 31, 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 the nine months ended February 28, 2015. During the first nine months of fiscal 2015, the Company borrowed $49.5 million and repaid $36.5 million of these borrowings from our Revolving Facility. The weighted average interest rate on the borrowings from the Revolving Facility during first nine months of fiscal 2015 was approximately 5.2%. At February 28, 2015, there were outstanding borrowings of $13.0 million under the Revolving Facility and no outstanding letters of credit.

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 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 that credit agreement. The additional principal due under the terms of the excess cash flow requirement was zero for fiscal 2014 and was $2.0 million for fiscal 2013. The fiscal 2013 additional principal payment of $2.0 million was paid in September 2013. The terms of the Senior Credit Facilities provide that any principal paid as a result of the excess cash flow requirement, shall be applied to the scheduled installments of principal following the date of prepayment in direct order of maturity.

All obligations under the Senior Credit Facilities are unconditionally guaranteed by the parent company of Immucor, IVD Intermediate Holdings B Inc. (the “Parent”), and certain of Immucor’s existing and future wholly owned domestic subsidiaries (such subsidiaries collectively, the “Subsidiary Guarantors”), and are secured, subject to certain exceptions, by substantially all of the Company’s assets and the assets of the Parent and Subsidiary Guarantors, subject in each case to customary exceptions and exclusions.

Indenture and the Senior Notes Due 2019

The Company has also issued $400.0 million in principal amount of Notes. The Notes bear interest at a rate of 11.125% per annum, and interest is payable semi-annually on February 15 and August 15 of each year. Including the amortization of deferred financing costs and the original issue discount, the effective interest rate on the Notes is 11.6% for the nine months ended February 28, 2015. The Notes mature on August 15, 2019.

Subject to certain exceptions, the Notes are guaranteed on a senior unsecured basis by each of Immucor’s current and future wholly owned domestic restricted subsidiaries (and non-wholly owned subsidiaries if such non-wholly owned subsidiaries guarantee the Company’s or another guarantor’s other capital market debt securities) that is a guarantor of certain debt of the Company or another guarantor, including the Senior Credit Facilities. The Notes are the Company’s senior unsecured obligations and rank equally in right of payment with all of the Company’s existing and future indebtedness that is not expressly subordinated in right of payment thereto. The Notes will be senior in right of payment to any future indebtedness that is expressly subordinated in right of payment thereto and effectively junior to (a) the Company’s existing and future secured indebtedness, including the Senior Credit Facilities described above, to the extent of the value of the collateral securing such indebtedness and (b) all existing and future liabilities of the Company’s non-guarantor subsidiaries.

The Company is not aware of any violations of the covenants pursuant to the terms of the indenture governing the Notes or the credit agreement governing the Senior Credit Facilities.

Future Commitments

The following is a summary of the combined principal maturities of all debt obligations and principal payments to be made under the Company’s capital lease agreements for the remainder of fiscal 2015 and each of the fiscal years presented in the table below (in thousands):

For the Year Ended May 31:
2015	$	14,665
2016		6,633
2017		6,632
2018		6,632
2019		628,516
Thereafter		400,000
	$	1,063,078

Interest Expense

The significant components of interest expense are as follows (in thousands):

	Three Months Ended					Nine Months Ended
	February 28					February 28
	2015			2014		2015		2014

Notes, including OID amortization	$	11,265			11,250		33,792		33,747
Term Loan Facility, including OID amortization		8,646			8,702		26,265		26,427
Amortization of deferred financing costs		1,674			1,577		4,998		4,713
Interest rate swaps		209			246		700		766
Revolving Facility fees and interest		157			125		516		379
Interest accreted on contingent consideration liabilities		(158	)		-		642		140
Interest expense	$	21,793			21,900		66,913		66,172

11.

DERIVATIVE FINANCIAL INSTRUMENTS

As of February 28, 2015, the Company has interest rate swap agreements to hedge $155.0 million of its future interest commitments resulting from the Company’s Term Loan Facility, and to protect the Company from variability in cash flows attributable to changes in LIBOR interest rates. The purpose of entering into these swap agreements is to match the LIBOR floor in the swaps with the terms of the Term Loan Facility. Consistent with the terms of the Company’s Term Loan Facility, these swaps include a LIBOR floor of 1.25%. These swap agreements hedge a portion of contractual floating rate interest commitments through the expiration of the agreement in September of each year through 2016.

Prior to October 1, 2014, the Company had swap agreements that hedged $240.0 million of its floating rate interest commitments at a weighted average fixed LIBOR rate of 1.67%. Effective October 1, 2014 through September 30, 2015, the Company has swap agreements that hedge $155.0 million of the Company’s floating rate interest commitments at a weighted average fixed LIBOR rate of 1.77%. Effective October 1, 2015 through September 30, 2016, the Company has swap agreements to hedge $70.0 million of the Company’s floating rate interest commitments at a fixed LIBOR rate of 1.91%.

The Company has designated these interest rate swap agreements as cash flow hedges. As cash flow hedges, unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The interest rate swap agreements are highly correlated to the changes in interest rates to which the Company is exposed. Unrealized gains and losses on these swaps are designated as effective or ineffective. The effective portion of such gains or losses is recorded as a component of accumulated other comprehensive income or loss, while the ineffective portion of such gains or losses will be recorded as a component of interest expense. Future realized gains and losses in connection with each required interest payment will be reclassified from accumulated other comprehensive income or loss to interest expense.

The changes in fair values of derivatives that have been designated and qualify as cash flow hedges are recorded in accumulated other comprehensive income or loss and are reclassified into interest expense in the same period the hedged item affects earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the fair values or cash flows of the underlying exposures being hedged. The changes in the fair values of derivatives that do not qualify as effective are immediately recognized in earnings.

The gains and losses on derivative contracts that are reclassified from accumulated other comprehensive income or loss to current period earnings are included in the line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings. As of February 28, 2015, approximately $0.7 million of the deferred net loss on derivative instruments accumulated in other comprehensive loss is expected to be reclassified as interest expense during the next twelve months. This expectation is based on the expected timing of the occurrence of the hedged forecasted transactions.

The fair values of the interest rate swap agreements are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves (level 2). A summary of the recorded liabilities included in the consolidated balance sheets is as follows (in thousands):

	As of
	February 28, 2015			May 31, 2014

Interest rate swaps (included in other liabilities)	$	(821	)		(1,357	)

The losses from accumulated other comprehensive loss (“AOCI”) was reclassified to the consolidated statement of operations and appears as follows (in thousands):

	Three Months Ended						Nine Months Ended
	February 28						February 28
Location of (loss) gain reclassified from AOCI into income	2015			2014			2015			2014

(Losses) gains on cash flow hedges:
Interest expense (effective portion)	$	(207	)		(243	)		(693	)		(746	)
Interest income (expense) (ineffective portion)	$	-			(1	)		(2	)		(9	)

12.

FAIR VALUE

The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•

Level 1—Quoted prices in active markets for identical assets or liabilities.

•

Level 2—Observable inputs, other than quoted prices included in Level 1, such as quoted prices for markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

	As of February 28, 2015
	Fair Value Measurements of Assets (Liabilities) Using								Carrying
	(Level 1)		(Level 2)			(Level 3)			Amount
	(in thousands)

Derivative instruments	$	-		(821	)		-			(821	)
Contingent consideration liabilities	$	-		-			(18,342	)		(18,342	)

	As of May 31, 2014
	Fair Value Measurements of Assets (Liabilities) Using								Carrying
	(Level 1)		(Level 2)			(Level 3)			Amount
	(in thousands)

Derivative instruments	$	-		(1,357	)		-			(1,357	)
Contingent consideration liabilities	$	-		-			(11,300	)		(11,300	)

The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable and accrued expenses approximate their fair values because of the short-term maturity of these instruments. Of the $11.5 million and $23.6 million of cash and cash equivalents at February 28, 2015 and May 31, 2014, respectively, approximately 10% and 19% was located in the U.S., respectively.

The Company uses derivative financial instruments, primarily in the form of floating-to-fixed interest rate swap agreements, in order to mitigate the risks associated with interest rate fluctuations on the Company’s floating rate indebtedness. The estimated fair value of the Company’s derivative instruments is based on quoted market prices for similar instruments (a level 2 input) and are reflected at fair value in the consolidated balance sheets. The level 2 inputs used to calculate fair value were interest rates, volatility and credit derivative markets. The Company’s current and long-term derivative financial instrument liabilities are included in Accrued interest and interest rate swap liability and Other long-term liabilities in the Company’s consolidated balance sheets.

The fair value of the Company’s Notes and the Term Loan Facility (collectively referred to as the Company’s debt instruments) is estimated to be $429.3 million and $653.3 million at February 28, 2015, respectively, based on recent trades of similar instruments. The fair value of the Notes and the Term Loan Facility was estimated to be $446.3 million and $656.7 million at May 31, 2014, respectively, based on the fair value of these instruments at that time.

Management believes that these liabilities can be liquidated without restriction.

At February 28, 2015, the Company had $18.3 million in contingent consideration liabilities for earn-out provisions resulting from acquisitions completed since May 30, 2014. The fair value of these contingent consideration liabilities was determined by applying a form of the income approach (a level 3 input), based upon 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 included in the calculations 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. As of February 28, 2015, $0.1 million of the contingent consideration liabilities was included in Accrued expenses and other current liabilities and $18.2 million was included in Other long-term liabilities on the Company’s consolidated balance sheet. As of May 31, 2014, the contingent consideration liabilities were included in Other long-term liabilities on the Company’s consolidated balance sheet.

As of the beginning of fiscal 2014, the Company had a contingent consideration liability of $4.5 million for an earn-out provision resulting from the LIFECODES acquisition, which was unchanged for the third quarter of fiscal 2014 and was written down by $4.6 million in the first nine months of fiscal 2014. The adjustment to the estimated fair value amount was reflected as a gain in the acquisition-related items on the Company’s consolidated statements of operations.

The changes in the contingent consideration liabilities are summarized in the following table (in thousands):

	Nine Months Ended			Twelve Months Ended
	February 28, 2015			May 31, 2014
Balance at the beginning of the period	$	(11,300	)		(4,504	)
Additions due to acquisitions		(6,456	)		(11,300	)
Change in fair value		-			4,638
Payments		56			-
Accretion of fair value		(642	)		(134	)
Balance at the end of the period	$	(18,342	)		(11,300	)

13.

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The changes in accumulated other comprehensive (loss) income are as follows (in thousands):

	Pretax			Tax		After Tax
Nine Months Ended February 28, 2015
Foreign exchange translation adjustment	$	(26,246	)		1,431		(27,677	)
Changes in fair value of cash flow hedges		553			242		311
	$	(25,693	)		1,673		(27,366	)

Nine Months Ended February 28, 2014
Foreign exchange translation adjustment	$	5,023	-	5,023
Changes in fair value of cash flow hedges		362	108	254
	$	5,385	108	5,277

The components of accumulated other comprehensive loss as of February 28, 2015 and May 31, 2014 are as follows (in thousands):

	As of
	February 28, 2015			May 31, 2014

Cumulative foreign currency translation adjustment	$	(40,104	)		(12,427	)
Change in fair value of cash flow hedges, net of tax		(529	)		(840	)
Accumulated other comprehensive loss	$	(40,633	)		(13,267	)

14.

SHARE-BASED COMPENSATION

The Company has granted nonvested restricted stock, stock options, and stock appreciation rights to key employees, directors and consultants under several stock award plans. The Company granted stock awards with an aggregate fair value of approximately $0.1 and $0.7 million during the three months and nine months ended February 28, 2015 and $0.2 million and $0.7 million during the three months and nine months ended February 28, 2014, respectively. As of February 28, 2015, a total of 39,023 shares were available for future grants.

Restricted stock units typically vest over a two year period (50% per year) and do not expire. Upon vesting, restricted stock units are settled in shares of IVD Holdings Inc.’s common stock. Stock option awards are granted with service-based vesting conditions, and performance-based or market-based vesting conditions. The service-based vesting options contain tiered vesting terms over the service period. The performance-based and market-based options vest in tranches based upon either the achievement of the performance conditions, if they are considered probable, or if they are not considered probable, on the achievement of the market-based condition, which are measured over a three or four year period. The stock appreciation rights vest only on the occurrence of a liquidity event. These awards have a ten year term.

During fiscal 2014 and in the first quarter of fiscal 2015, stock option awards were measured based upon the achievement of the market condition since the Company believed that the achievement of the performance conditions were not probable. Effective on September 2, 2014, the Company amended its 2011 Equity Incentive Plan to (1) modify the financial targets for all unvested performance-based option grants, and (2) specify that the unvested options will vest on each of August 19, 2015 and August 19, 2016 if the financial targets are achieved or exceeded for the immediately preceding fiscal years, or will vest on the later date if the financial targets are not achieved for fiscal 2015 but are achieved for the combined fiscal 2015 and 2016 periods. As a result of this plan amendment, the Company believes that the achievement of the performance conditions is now probable and therefore the stock-based compensation cost was remeasured as of September 2, 2014 for all unvested performance-based option grants.

The Company recognized expense of $0.3 million and $1.8 million in the three months and nine months ended February 28, 2015 and $0.4 million and $1.2 million in the three months and nine months ended February 28, 2014, respectively, before income tax benefits, for all of the Company’s stock plans. As of February 28, 2015, there was $2.1 million of total unrecognized compensation cost related the Company’s stock plans that will be recognized over approximately 2.0 years.

As of February 28, 2015 there was no expense or liability recognized related to the stock appreciation rights granted as management has determined that a liquidity event is not considered probable. The fair value of the liability relating to cash-settled stock appreciation rights was approximately $0.9 million as of February 28, 2015.

15.

INCOME TAXES

The effective tax rate for the nine months ended February 28, 2015 and 2014 was -73.0% and 42.4%, respectively. The difference between the U.S. federal statutory rate and the effective tax rate for the nine month period ended February 28, 2015 was primarily due to the impact of discrete items recorded during the third quarter of fiscal 2015. These discrete items resulted from the Company’s change in estimate related to its treatment of foreign tax credits (“FTCs”) and the change in the valuation allowance for its FTC carryovers. Excluding these discrete items recorded during the nine months ended February 28, 2015, the effective tax rate would have been 27.3%. The difference between the U.S. federal statutory rate and the effective tax rate for the nine months ended February 28, 2014 was primarily due to the following: (1) the fact that the gain on the acquisition-related item was not taxable, (2) a portion of the Company’s income is subject to tax in various tax jurisdictions with rates that differ from the U.S. statutory rate, (3) the impact of recording U.S. income taxes associated with current and future distributions of foreign earnings, and (4) changes in discrete tax items recognized during the period based on enacted tax laws and expirations of the statute of limitations for the benefits associated with uncertain tax positions.

The effective tax rate for the nine month period ended February 28, 2015 was significantly impacted by the Company’s decision during the third quarter of fiscal 2015 to change its estimate with regard to the treatment of its foreign tax credits. This decision is expected to generate a significant reduction in cash 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, the Company elected the deduction method for FTCs for the Successor fiscal 2012, fiscal 2013, fiscal 2014 and fiscal 2015 periods. The Company filed its fiscal 2014 U.S. income tax returns reflecting this change. In addition, the Company will amend its Successor fiscal 2012 and fiscal 2013 income tax returns to reflect this change. The Company will not amend the Predecessor income tax return for the period ended August 19, 2011. As a result of this change in estimate, the Company recognized a discrete charge of additional income tax expense of $23.7 million during the third quarter of fiscal 2015. In addition, the Company recorded a valuation allowance of $7.6 million during the period related to uncertainties in the Company’s ability to utilize the FTC carryovers prior to their expiration. As a result of this change in estimate, as of February 28, 2015, the Company has an adjusted NOL carry forward of $44.9 million and FTC carry forwards, after the valuation allowance, of $0.

The Company does not consider itself to be permanently reinvested with respect to its accumulated and un-repatriated earnings as well as future earnings of each foreign subsidiary. Accordingly, the Company has provided for deferred taxes on future earnings of its foreign subsidiaries. The Company continues to consider its investment in each foreign subsidiary in excess of its accumulated and un-repatriated earnings to be permanently reinvested and thus has not recorded a deferred tax liability on that amount.

16.

SEGMENT AND GEOGRAPHIC INFORMATION

The Company determines operating segments in accordance with its 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.

The Company manufactures and markets a complete line of diagnostics products and automated systems used primarily by hospitals, donor centers and reference laboratories in a number of tests performed to detect and identify certain properties of human blood and human tissue to enable the most compatible match available between patient and donor. These tests are performed for the purpose of blood transfusion, pre-transplant human leukocyte antigen (“HLA”) typing and screening processes as well as post-transplant patient monitoring to aid in the identification of graft rejection.

The Company operates in various geographies. These geographic markets are comprised of the United States, Europe, Canada, Japan and other international markets. These other international markets are considered Emerging Markets for our business. These products are marketed globally, both directly to the end user and through established distributors.

Accounting policies for segments are the same as those described in the summary of significant accounting policies.

The following is a summary of the Company’s segment data (in thousands):

	Three Months Ended				Nine Months Ended
	February 28				February 28
	2015		2014		2015		2014
Net sales by product group:
Transfusion	$	79,929		77,381		247,950		245,930
Transplant & Molecular		15,676		13,598		46,373		41,296
Total	$	95,605		90,979		294,323		287,226

Following is a summary of enterprise-wide information (in thousands):

	Three Months Ended				Nine Months Ended
	February 28				February 28
	2015		2014		2015		2014
Net sales to customers by geography are as follows:
United States	$	60,205		55,240		179,679		177,722
Europe (A)		18,313		19,964		59,882		57,188
Canada		4,598		4,429		14,200		14,044
Other		12,489		11,346		40,562		38,272
Total	$	95,605		90,979		294,323		287,226

Net sales are attributed to individual countries based on the customer’s country of origin at the time of the sale and where the Company has an operating entity.

	As of
	February 28, 2015		May 31, 2014
Long-lived assets (excluding goodwill and intangibles) by geography:
United States	$	52,856		54,066
Europe (B)		14,003		15,725
Canada		4,074		4,517
Other (C)		2,310		2,003
Total	$	73,243		76,311

	As of
	February 28, 2015		May 31, 2014
Concentration of net assets by geography:
United States	$	245,731		299,948
Europe		102,885		123,095
Canada		28,535		32,802
Other (C)		11,903		12,771
Total	$	389,054		468,616

(A) – Net sales to any individual country within Europe were not material to the Company’s consolidated net sales.

(B) - Long-lived assets located in any individual country within Europe were not material to the Company's consolidated long-lived assets.

Sales to an individual customer did not exceed more than 10% of our net sales during the three months and nine months ended February 28, 2015, or February 28, 2014.

17.

CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF GUARANTOR SUBSIDIARIES

The Company has certain outstanding indebtedness that is guaranteed by its U.S. subsidiaries. However, the indebtedness is not guaranteed by the Company’s foreign subsidiaries. The guarantor subsidiaries are all wholly owned and the guarantees are made on a joint and several basis and are full and unconditional. Separate consolidated financial statements of the guarantor subsidiaries have not been presented because management believes that such information would not be material to investors. However, condensed consolidating financial information is presented. The condensed consolidating financial information of the Company is as follows:

Balance Sheets

IMMUCOR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

February 28, 2015

(in thousands)

(Unaudited)

	Immucor, Inc.		Guarantors			Non-Guarantors		Eliminations			Total

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	1,666		(523	)		10,348		-			11,491
Accounts receivable, net		33,375		5,853			33,248		-			72,476
Intercompany receivable		68,639		20,899			8,215		(97,753	)		-
Inventories		21,644		15,518			12,018		(2,120	)		47,060
Deferred income tax assets, current portion		4,160		2,807			356		818			8,141
Prepaid expenses and other current assets		4,475		797			5,340		-			10,612
Total current assets		133,959		45,351			69,525		(99,055	)		149,780

PROPERTY AND EQUIPMENT, net		38,250		14,606			20,387		-			73,243
INVESTMENT IN SUBSIDIARIES		225,597		5,020			3,019		(233,636	)		-
GOODWILL		744,149		47,640			51,060		-			842,849
OTHER INTANGIBLE ASSETS, net		569,118		60,242			35,038		-			664,398
DEFERRED FINANCING COSTS, net		28,118		-			-		-			28,118
OTHER ASSETS		11,240		257			356		-			11,853
Total assets	$	1,750,431		173,116			179,385		(332,691	)		1,770,241

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	5,814		2,630			3,492		-			11,936
Intercompany payable		2,059		86,991			8,703		(97,753	)		-
Accrued interest and interest rate swap liability		8,106		-			-		-			8,106
Accrued expenses and other current liabilities		10,836		5,166			7,249		-			23,251
Income taxes payable		30,894		(29,967	)		3,853		-			4,780
Deferred revenue, current portion		1,278		11			1,497		-			2,786
Current portion of long term debt, net of debt discounts		17,493		7			-		-			17,500
Total current liabilities		76,480		64,838			24,794		(97,753	)		68,359

LONG TERM DEBT, NET OF DEBT DISCOUNTS		1,034,231		2			-		-			1,034,233
DEFERRED REVENUE		-		-			65		-			65
DEFERRED INCOME TAX LIABILITIES		234,581		4,875			9,942		-			249,398
OTHER LONG-TERM LIABILITIES		16,085		11,787			1,260		-			29,132
Total liabilities		1,361,377		81,502			36,061		(97,753	)		1,381,187
SHAREHOLDERS' EQUITY:
Total shareholders' equity		389,054		91,614			143,324		(234,938	)		389,054
Total liabilities and shareholders' equity	$	1,750,431		173,116			179,385		(332,691	)		1,770,241

IMMUCOR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

May 31, 2014

(in thousands)

	Immucor, Inc.		Guarantors			Non-Guarantors		Eliminations			Total

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	4,863		(409	)		19,167		-			23,621
Accounts receivable, net		29,558		5,137			34,934		-			69,629
Intercompany receivable		57,167		15,058			6,548		(78,773	)		-
Inventories		20,733		17,358			13,184		(2,124	)		49,151
Deferred income tax assets, current portion		4,160		2,807			464		820			8,251
Prepaid expenses and other current assets		6,228		470			5,884		-			12,582
Total current assets		122,709		40,421			80,181		(80,077	)		163,234

PROPERTY AND EQUIPMENT, net		37,963		16,103			22,245		-			76,311
INVESTMENT IN SUBSIDIARIES		259,567		5,021			3,114		(267,702	)		-
GOODWILL		743,512		47,877			60,174		-			851,563
OTHER INTANGIBLE ASSETS, net		586,243		63,474			43,153		-			692,870
DEFERRED FINANCING COSTS, net		33,116		-			-		-			33,116
OTHER ASSETS		6,721		260			339		-			7,320
Total assets	$	1,789,831		173,156			209,206		(347,779	)		1,824,414

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	6,805		5,945			2,915		-			15,665
Intercompany payable		99		69,999			8,675		(78,773	)		-
Accrued interest and interest swap liability		19,605		-			-		-			19,605
Accrued expenses and other current liabilities		8,681		4,950			10,085		-			23,716
Income taxes payable		30,785		(29,698	)		3,840		-			4,927
Deferred revenue, current portion		1,269		12			1,532		-			2,813
Current portion of long-term debt, net of debt discounts		4,580		11			-		-			4,591
Total current liabilities		71,824		51,219			27,047		(78,773	)		71,317

LONG-TERM DEBT, net of debt discounts		1,037,168		15			-		-			1,037,183
DEFERRED REVENUE		14		-			72		-			86
DEFERRED INCOME TAX LIABILITIES		201,184		10,157			12,038		-			223,379
OTHER LONG-TERM LIABILITIES		11,025		11,425			1,383		-			23,833
Total liabilities		1,321,215		72,816			40,540		(78,773	)		1,355,798
SHAREHOLDERS' EQUITY:
Total shareholders' equity		468,616		100,340			168,666		(269,006	)		468,616
Total liabilities and shareholders' equity	$	1,789,831		173,156			209,206		(347,779	)		1,824,414

Statements of Operations for the Quarter

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended February 28, 2015

(in thousands)

(Unaudited)

	Immucor, Inc.			Guarantors			Non-Guarantors			Eliminations			Total

NET SALES	$	63,013			14,119			37,015			(18,542	)		95,605
COST OF SALES (exclusive of amortization shown separately below)		18,743			9,410			24,360			(18,542	)		33,971
GROSS MARGIN		44,270			4,709			12,655			-			61,634

OPERATING EXPENSES:
Research and development		3,087			4,019			174			-			7,280
Selling and marketing		5,973			2,431			5,109			-			13,513
Distribution		2,772			450			1,764			-			4,986
General and administrative		6,056			963			2,343			-			9,362
Amortization expense		11,973			1,079			563			-			13,615
Total operating expenses		29,861			8,942			9,953			-			48,756

INCOME (LOSS) FROM OPERATIONS		14,409			(4,233	)		2,702			-			12,878

NON-OPERATING (EXPENSE) INCOME:
Interest income		23			-			44			(25	)		42
Interest expense		(21,664	)		(136	)		(18	)		25			(21,793	)
Other, net		173			(349	)		353			-			177
Total non-operating (expense) income		(21,468	)		(485	)		379			-			(21,574	)

(LOSS) INCOME BEFORE INCOME TAXES		(7,059	)		(4,718	)		3,081			-			(8,696	)
PROVISION (BENEFIT) FOR INCOME TAXES		31,448			(1,560	)		856			-			30,744
NET (LOSS) INCOME BEFORE EARNINGS OF CONSOLIDATED SUBSIDIARIES		(38,507	)		(3,158	)		2,225			-			(39,440	)
Net (loss) income of consolidated subsidiaries		(933	)		-			-			933			-
NET (LOSS) INCOME	$	(39,440	)		(3,158	)		2,225			933			(39,440	)

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended February 28, 2014

(in thousands)

(Unaudited)

	Immucor, Inc.			Guarantors			Non-Guarantors			Eliminations			Total

NET SALES	$	57,604			12,252			35,988			(14,865	)		90,979
COST OF SALES (exclusive of amortization shown separately below)		19,737			6,402			21,085			(14,865	)		32,359
GROSS MARGIN		37,867			5,850			14,903			-			58,620

OPERATING EXPENSES:
Research and development		3,212			3,397			129			-			6,738
Selling and marketing		5,673			2,311			6,311			-			14,295
Distribution		2,921			345			1,802			-			5,068
General and administrative		6,943			1,647			1,720			-			10,310
Amortization expense		11,971			658			596			-			13,225
Impairment loss		-			150			-			-			150
Total operating expenses		30,720			8,508			10,558			-			49,786

INCOME (LOSS) FROM OPERATIONS		7,147			(2,658	)		4,345			-			8,834

NON-OPERATING (EXPENSE) INCOME:
Interest income		-			6			21			(11	)		16
Interest expense		(21,900	)		-			(11	)		11			(21,900	)
Other, net		(186	)		24			54			-			(108	)
Total non-operating (expense) income		(22,086	)		30			64			-			(21,992	)

(LOSS) INCOME BEFORE INCOME TAXES		(14,939	)		(2,628	)		4,409			-			(13,158	)
(BENEFIT) PROVISION FOR INCOME TAXES		(6,255	)		(952	)		1,404			-			(5,803	)
NET (LOSS) INCOME BEFORE EARNINGS OF CONSOLIDATED SUBSIDIARIES		(8,684	)		(1,676	)		3,005			-			(7,355	)
Net income (loss) of consolidated subsidiaries		1,329			-			-			(1,329	)		-
NET (LOSS) INCOME	$	(7,355	)		(1,676	)		3,005			(1,329	)		(7,355	)

Statements of Operations for the Nine Month periods

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENTS OF OPERATIONS

Nine Months Ended February 28, 2015

(in thousands)

(Unaudited)

	Immucor, Inc.			Guarantors			Non-Guarantors			Eliminations			Total

NET SALES	$	190,662			42,175			116,637			(55,151	)		294,323
COST OF SALES (exclusive of amortization shown separately below)		59,702			27,403			74,617			(55,151	)		106,571
GROSS MARGIN		130,960			14,772			42,020			-			187,752

OPERATING EXPENSES:
Research and development		8,484			12,385			605			-			21,474
Selling and marketing		18,807			7,624			17,511			-			43,942
Distribution		8,167			1,239			5,936			-			15,342
General and administrative		20,345			3,231			7,367			-			30,943
Amortization expense		35,915			3,232			1,801			-			40,948
Total operating expenses		91,718			27,711			33,220			-			152,649

INCOME (LOSS) FROM OPERATIONS		39,242			(12,939	)		8,800			-			35,103

NON-OPERATING (EXPENSE) INCOME:
Interest income		41			-			167			(77	)		131
Interest expense		(66,553	)		(383	)		(54	)		77			(66,913	)
Other, net		587			(436	)		314			-			465
Total non-operating (expense) income		(65,925	)		(819	)		427			-			(66,317	)

(LOSS) INCOME BEFORE INCOME TAXES		(26,683	)		(13,758	)		9,227			-			(31,214	)
PROVISION (BENEFIT) FOR INCOME TAXES		25,044			(5,035	)		2,774			-			22,783
NET (LOSS) INCOME BEFORE EARNINGS OF CONSOLIDATED SUBSIDIARIES		(51,727	)		(8,723	)		6,453			-			(53,997	)
Net (loss) income of consolidated subsidiaries		(2,270	)		-			-			2,270			-
NET (LOSS) INCOME	$	(53,997	)		(8,723	)		6,453			2,270			(53,997	)

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENTS OF OPERATIONS

Nine Months Ended February 28, 2014

(in thousands)

(Unaudited)

	Immucor, Inc.			Guarantors			Non-Guarantors			Eliminations			Total

NET SALES	$	186,977			40,006			108,941			(48,698	)		287,226
COST OF SALES (exclusive of amortization shown separately below)		62,061			22,696			67,033			(48,698	)		103,092
GROSS MARGIN		124,916			17,310			41,908			-			184,134

OPERATING EXPENSES:
Research and development		10,314			11,654			210			-			22,178
Selling and marketing		18,387			6,847			18,523			-			43,757
Distribution		8,323			1,099			5,202			-			14,624
General and administrative		17,767			5,547			6,220			-			29,534
Amortization expense		35,912			1,992			1,743			-			39,647
Acquisition-related items		(4,638	)		-			-			-			(4,638	)
Impairment loss		30			150			-			-			180
Total operating expenses		86,095			27,289			31,898			-			145,282

INCOME (LOSS) FROM OPERATIONS		38,821			(9,979	)		10,010			-			38,852

NON-OPERATING (EXPENSE) INCOME:
Interest income		1			8			55			(36	)		28
Interest expense		(66,182	)		-			(26	)		36			(66,172	)
Other, net		(621	)		97			223			-			(301	)
Total non-operating (expense) income		(66,802	)		105			252			-			(66,445	)

(LOSS) INCOME BEFORE INCOME TAXES		(27,981	)		(9,874	)		10,262			-			(27,593	)
(BENEFIT) PROVISION FOR INCOME TAXES		(11,523	)		(3,406	)		3,238			-			(11,691	)
NET (LOSS) INCOME BEFORE EARNINGS OF CONSOLIDATED SUBSIDIARIES		(16,458	)		(6,468	)		7,024			-			(15,902	)
Net income (loss) of consolidated subsidiaries		556			-			-			(556	)		-
NET (LOSS) INCOME	$	(15,902	)		(6,468	)		7,024			(556	)		(15,902	)

Statements of Cash Flows for the Nine Month periods

IMMUCOR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING CASH FLOW INFORMATION

Nine Months Ended February 28, 2015

(in thousands)

(Unaudited)

	Immucor, Inc.			Guarantors			Non-Guarantors			Eliminations			Total

Net cash provided by (used in) operating activities	$	304			1,486			1,447			(445	)		2,792
Net cash used in investing activities		(10,188	)		(1,582	)		(7,445	)		-			(19,215	)
Net cash provided by (used in) financing activities		8,025			(18	)		(324	)		324			8,007
Effect of exchange rate changes on cash and cash equivalents		(1,338	)		-			(2,497	)		121			(3,714	)
Decrease in cash and cash equivalents		(3,197	)		(114	)		(8,819	)		-			(12,130	)
Cash and cash equivalents at beginning of period		4,863			(409	)		19,167			-			23,621
Cash and cash equivalents at end of period	$	1,666			(523	)		10,348			-			11,491

IMMUCOR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING CASH FLOW INFORMATION

Nine Months Ended February 28, 2014

(in thousands)

(Unaudited)

	Immucor, Inc.			Guarantors			Non-Guarantors			Eliminations			Total

Net cash provided by (used in) operating activities	$	63			(2,351	)		13,732			(903	)		10,541
Net cash provided by (used in) investing activities		3,096			(1,954	)		(10,545	)		29			(9,374	)
Net cash ( used in) provided by financing activities		(4,975	)		(34	)		(784	)		785			(5,008	)
Effect of exchange rate changes on cash and cash equivalents		(501	)		-			893			89			481
Change in cash and cash equivalents		(2,317	)		(4,339	)		3,296			-			(3,360	)
Cash and cash equivalents at beginning of period		6,971			4,107			18,310			-			29,388
Cash and cash equivalents at end of period	$	4,654			(232	)		21,606			-			26,028

18.

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time the Company is a party to certain legal proceedings in the ordinary course of business. Currently the Company and its subsidiary BioArray Solutions Ltd. (“BioArray”) are defendants in an action brought against them 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. The Company believes the claims are without merit and that it has meritorious defenses. The Company believes that liability is unlikely and that the amount of any liability is not now reasonably estimable, but that any potential liability would not be material to the Company’s operations or to its financial condition.

Purchase Commitments

Purchase commitments made in the normal course of business were $42.7 million as of February 28, 2015. These purchases were primarily for inventory items. The following is a schedule of approximate future payments for purchase commitments as of February 28, 2015 (in thousands):

2015	$	6,323
2016		8,228
2017		13,311
2018		3,883
2019		4,083

In the third quarter of fiscal 2015, the Company reevaluated its purchase commitments and modified the timing of estimated future purchases of certain inventory items resulting in a reduction in the approximate future payments for purchase commitments expected in fiscal 2015 and an increase in the approximate future payments for purchase commitments expected in fiscal 2016 and 2017 from what was previously reported. In total, the amounts have not changed materially.

Other Commitments

On October 3, 2014, the Company entered into a collaborative arrangement with Sirona for the commercialization of Sirona’s HLA typing sample preparation and bioinformatics offering for next generation sequencing. As part of the Sirona collaboration, the Company has an exclusive option to acquire 100% of the common stock of Sirona, and the Company has a potential obligation to provide additional funding in the form of interest bearing loans of up to $6.7 million over the following two year period, subject to the achievement of certain development milestones and other terms of the arrangement. Refer to Note 3 of the Company’s consolidated financial statements for additional information.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We operate in the transfusion and transplantation in vitro diagnostics markets. Our products perform typing and screening of blood, organs or stem cells to enable the most compatible match available between patient and donor. 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 various geographies. These geographic markets are comprised of the United States, Europe, Canada, Japan and other international markets. These other international markets are considered Emerging Markets for our business. These products are marketed globally, both directly to the end user and through established distributors.

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.

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 Fiscal 2015

The following is a summary of significant factors affecting our business in the third quarter and first nine months of fiscal 2015:

Acquisitions and Investments –

●

Sentilus Acquisition – On October 1, 2014, the Company paid $6.0 million to acquire Sentilus, Inc. (“Sentilus”). Sentilus was a privately-held company focused on developing a novel, inkjet-printed antibody microarray-based technology, Femtoarrays^TM. Sentilus has been developing Femtoarrays^TM 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 molecular transfusion diagnostics business.

Discrete Income Tax Expense Item -

●

During the third quarter of fiscal 2015, the Company decided to change its estimate with regard to the treatment of its foreign tax credits (“FTCs”). This decision is expected to generate a significant reduction in cash 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 estimate, the Company recognized a discrete charge of additional income tax expense of $23.7 million during the third quarter of fiscal 2015. In addition, the Company recorded a valuation allowance of $7.6 million during the period related to uncertainties in the Company’s ability to utilize its FTC carryovers prior to their expiration.

Fluctuations in Foreign Currency Exchange Rates –

●

Certain of the foreign markets in which we operate have experienced significant fluctuations in foreign currency exchange rates in the third quarter of 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 following table sets forth items from the consolidated statements of operations as reported and as a percentage of net sales for each period (in thousands of dollars, except percentages).

	Three Months Ended
	February 28						Change
	2015			2014			Amount			%

Net sales	$	95,605			90,979		$	4,626			5.1
Cost of sales (*)		33,971			32,359			1,612			5.0
Gross margin		61,634			58,620			3,014			5.1

Operating expenses:
Research and development		7,280			6,738			542			8.0
Selling and marketing		13,513			14,295			(782	)		(5.5	)
Distribution		4,986			5,068			(82	)		(1.6	)
General and administrative		9,362			10,310			(948	)		(9.2	)
Amortization expense		13,615			13,225			390			2.9
Impairment loss		-			150			(150	)		**
Total operating expenses		48,756			49,786			(1,030	)		(2.1	)

Income from operations		12,878			8,834			4,044			45.8

Non-operating (expense) income:
Interest income		42			16			26			162.5
Interest expense		(21,793	)		(21,900	)		107			(0.5	)
Other, net		177			(108	)		285			**
Total non-operating net expense		(21,574	)		(21,992	)		418			(1.9	)

Loss before income taxes		(8,696	)		(13,158	)		4,462			(33.9	)
Expense (benefit) for income taxes		30,744			(5,803	)		36,547			**
Net loss	$	(39,440	)		(7,355	)	$	(32,085	)		436.2

(*) Cost of sales is exclusive of amortization expense which is shown separately within operating expenses.

(**) Calculation is not meaningful.

	Nine Months Ended
	February 28						Change
	2015			2014			Amount			%

Net sales	$	294,323			287,226		$	7,097			2.5
Cost of sales (*)		106,571			103,092			3,479			3.4
Gross margin		187,752			184,134			3,618			2.0

Operating expenses:
Research and development		21,474			22,178			(704	)		(3.2	)
Selling and marketing		43,942			43,757			185			0.4
Distribution		15,342			14,624			718			4.9
General and administrative		30,943			29,534			1,409			4.8
Amortization expense		40,948			39,647			1,301			3.3
Acquisition-related items		-			(4,638	)		4,638			**
Impairment loss		-			180			(180	)		**
Total operating expenses		152,649			145,282			7,367			5.1

Income from operations		35,103			38,852			(3,749	)		(9.6	)

Non-operating (expense) income:
Interest income		131			28			103			367.9
Interest expense		(66,913	)		(66,172	)		(741	)		1.1
Other, net		465			(301	)		766			**
Total non-operating net expense		(66,317	)		(66,445	)		128			(0.2	)

Loss before income taxes		(31,214	)		(27,593	)		(3,621	)		13.1
Expense (benefit) for income taxes		22,783			(11,691	)		34,474			**
Net loss	$	(53,997	)		(15,902	)	$	(38,095	)		239.6

(*) Cost of sales is exclusive of amortization expense which is shown separately within operating expenses.

(**) Calculation is not meaningful.

Three Months Ended February 28, 2015 and February 28, 2014:

Net sales were $95.6 million for the three months ended February 28, 2015 as compared with $91.0 million for the three months ended February 28, 2014, an increase of $4.6 million, or 5.1%. This increase in net sales is described in the discussion of net sales by product group below. Net sales by product group are presented in the following table (in thousands of dollars, except percentages):

	Three Months Ended
	February 28				Change
	2015		2014		Amount		%
Net sales by product group:

Transfusion	$	79,929		77,381	$	2,548		3.3
Transplant & Molecular		15,676		13,598		2,078		15.3
Total	$	95,605		90,979	$	4,626		5.1

Transfusion: Net sales of our transfusion products for the three months ended February 28, 2015 were $79.9 million as compared with $77.4 million for the three months ended February 28, 2014, an increase of $2.5 million, or 3.3%. This increase in net sales was mainly due to higher sales of our Capture reagents in the U.S. market and a higher number of ship cycles partially offset by an unfavorable effect of changes in foreign currency exchange rates on our international operations in the third quarter of fiscal 2015 as compared with the same period of fiscal 2014. After adjusting for the impact of ship cycles and foreign currency exchange rate fluctuations, net sales in the third quarter of fiscal 2015 increased by 4.7% when compared with the third quarter of fiscal 2014.

Transplant & Molecular: Net sales of our transplant and molecular products were $15.7 million for the three months ended February 28, 2015 as compared with $13.6 million for the three months ended February 28, 2014, an increase of $2.1 million, or 15.3%. The increase in net sales was primarily due to higher net sales in Europe and the Emerging Markets during the three months ended February 28, 2015 partially offset by an unfavorable effect of changes in foreign currency exchange rates on our international operations. The increase in net sales in Europe and the Emerging Markets during the third quarter of fiscal 2015 was primarily driven by continued efforts to expand our market reach and strong customer acceptance of our Transplant and Molecular products in those markets. Net sales were also higher in the third quarter of fiscal 2015 due to an increase in sales of our new Molecular product, the PreciseType^TM HEA test.

Gross margin increased by $3.0 million for the three months ended February 28, 2015 as compared with the three months ended February 28, 2014, or 5.1%, mainly due to the higher net sales generated in the three months ended February 28, 2015. Gross margin as a percentage of consolidated net sales was relatively unchanged for the three months ended February 28, 2015 as compared with the three months ended February 28, 2014.

Research and development expenses were $7.2 million for the three months ended February 28, 2015 as compared with $6.7 million for the three months ended February 28, 2014. The increase of $0.5 million, or 8%, was primarily due to the development of new technologies in transplant diagnostics.

Selling and marketing expenses were $13.5 million for the three months ended February 28, 2015 and $14.3 million for the three months ended February 28, 2014, a decrease of $0.8 million, or 5.5%, for the three months ended February 28, 2015. The decrease in selling and marketing expenses was mainly due to cost containment efforts initiated by management and a more favorable effect of changes in foreign currency exchange rates on international expenses in the third quarter of fiscal 2015. These decreases in expenses were partially offset by an increase in expenses resulting from higher net sales in the third quarter of fiscal 2015 as compared with the same period of the previous year.

Distribution expenses were relatively unchanged for the three months ended February 28, 2015 as compared to the three months ended February 28, 2014. Distribution expenses were $5.0 million for the three months ended February 28, 2015 and $5.1 million for the three months ended February 28, 2014, a decrease of $0.1 million, or 1.6%.

General and administrative expenses were $9.4 million for the three months ended February 28, 2015 and $10.3 million for the three months ended February 28, 2014, a decrease of $0.9 million, or 9.2%. The decrease in general and administrative expenses was mainly due to cost containment efforts initiated by management that were realized in the third quarter of fiscal 2015, and a more favorable effect of changes in foreign currency exchange rates on international expenses in the three months ended February 28, 2015.

Amortization expense was $13.6 million for the three months ended February 28, 2015 as compared with $13.2 million for the three months ended February 28, 2014, an increase of $0.4 million, or 2.9%. The increase was primarily due to additional costs related to acquisitions completed since May 30, 2014.

Non-operating net expense was $21.6 million for the three months ended February 28, 2015 as compared with $22.0 million for the three months ended February 28, 2014, a decrease of $0.4 million, or 1.9%. The decrease in non-operating net expense was mainly due to a decrease in interest expense and a favorable change in exchange gains and losses in the third quarter of fiscal 2015. The decrease in interest expense was primarily due to an adjustment recorded in the third quarter of fiscal 2015 to adjust interest accreted on the contingent consideration liabilities through that period. 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.

The effective tax rate for the three months ended February 28, 2015 and 2014 was -353.5% and 44.1%, respectively. The effective tax rate for the fiscal 2015 period was higher than the effective tax rate for the corresponding period in fiscal 2014 primarily due to the impact of discrete items recorded during the third quarter of fiscal 2015. These discrete items primarily consisted of $23.7 million due to the Company’s change in estimate related to its treatment of foreign tax credits (“FTCs”) and a $7.6 million change in the valuation allowance for its FTC carryovers. Excluding these discrete items recorded during the three months ended February 28, 2015, the effective tax rate would have been 6.6%.

Nine Months Ended February 28, 2015 and February 28, 2014:

Net sales were $294.3 million for the nine months ended February 28, 2015 as compared with $287.2 million for the nine months ended February 28, 2014, an increase of $7.1 million, or 2.5%. This increase in net sales is described in the discussion of net sales by product group below. Net sales by product group are presented in the following table (in thousands of dollars, except percentages):

	Nine Months Ended
	February 28				Change
	2015		2014		Amount		%
Net sales by product group:

Transfusion	$	247,950		245,930	$	2,020		0.8
Transplant & Molecular		46,373		41,296		5,077		12.3
Total	$	294,323		287,226	$	7,097		2.5

Transfusion: Net sales of our transfusion products for the nine months ended February 28, 2015 were $247.9 million as compared with $245.9 million for the nine months ended February 28, 2014, an increase of $2.0 million, or 0.8%. This increase in net sales was mainly due to higher net sales generated from our Capture reagents in all of our geographic markets, the residual benefit of an increase in our installed base of instruments, and a higher number of ship cycles partially offset by an unfavorable effect of changes in foreign currency exchange rates on our international operations in the first nine months of fiscal 2015 as compared with the same period in fiscal 2014. After adjusting for the impact of ship cycles and foreign currency exchange rate fluctuations, net sales in the first nine months of fiscal 2015 increased by 2.5% when compared with the first nine months of fiscal 2014.

Transplant & Molecular: Net sales of our transplant and molecular products for the nine months ended February 28, 2015 were $46.4 million as compared with $41.3 million for the nine months ended February 28, 2014, an increase of $5.1 million, or 12.3%. The increase in net sales was primarily due to higher net sales in Europe and the Emerging Markets during the nine months ended February 28, 2015 partially offset by an unfavorable effect of changes in foreign currency exchange rates on our international operations, and decreases in net sales in the U.S. market. The increase in net sales in Europe and the Emerging Markets in the first nine months of fiscal 2015 was primarily driven by continued efforts to expand our market reach and strong customer acceptance of our Transplant and Molecular products in those markets. The decrease in net sales in the U.S. market was mainly due to lower sales of our Molecular products in the first nine months of fiscal 2015, which management believes is a temporary situation, as our customers convert their existing systems to incorporate our new blood typing assay, the PreciseType^TM HEA test, which was approved for commercial use by the FDA in May 2014.

Gross margin increased by $3.6 million for the nine months ended February 28, 2015 as compared with the nine months ended February 28, 2014, or 2.0%, mainly due to the higher net sales generated in the nine months ended February 28, 2015. Gross margin as a percentage of consolidated net sales was approximately 0.3% lower for the nine months ended February 28, 2015 as compared with the nine months ended February 28, 2014. The lower gross margin percentage was primarily due to a less favorable product mix in the nine month ended February 28, 2015 partially offset by the amortization of the fair value of inventory of $2.7 million related to the acquisition of LIFECODES that was included in fiscal 2014 that was not included in fiscal 2015.

Research and development expenses were $21.5 million for the nine months ended February 28, 2015 as compared with $22.2 million for the nine months ended February 28, 2014. The decrease of $0.7 million, or 3.2%, was primarily due to the completion of certain significant development projects in fiscal 2014, including the development work related to the PreciseType^TM HEA test that was completed in the fourth quarter of fiscal 2014. These decreases in research and development expenses were partially offset by additional expenses associated with development activities from recently acquired businesses, and the development of new technologies in transplant diagnostics.

Selling and marketing expenses were relatively unchanged for the first nine months of fiscal 2015 as compared with the first nine months of fiscal 2014. The selling and marketing expenses were $43.9 million for the nine months ended February 28, 2015 and $43.7 million for the nine months ended February 28, 2014, an increase of $0.2 million, or 0.4%. The increase in selling and marketing expenses from the higher net sales in the first nine months of fiscal 2015 were partially offset by 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 the first nine months of fiscal 2015.

Distribution expenses were $15.3 million for the nine months ended February 28, 2015 and $14.6 million for the nine months ended February 28, 2014, an increase of $0.7 million, or 4.9%. The increase in distribution expenses in the first nine months of fiscal 2015 were primarily due to higher distribution costs 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 strategic initiative to consolidate and outsource the distribution process in Europe. The strategic initiative caused a one-time increase in costs, but is expected to reduce distribution costs on a long-term basis.

General and administrative expenses were $30.9 million for the nine months ended February 28, 2015 as compared with $29.5 million for the nine months ended February 28, 2014. The increase in general and administrative expenses of $1.4 million, or 4.8%, were mainly due to a one-time credit that was recorded in the first nine months of fiscal 2014, and higher acquisition transaction costs, and an increase in stock-based compensation cost recorded in the first nine months of fiscal 2015. The one-time credit reduced bad debt expense by $1.9 million resulting from a change in estimate of our allowance for doubtful accounts to better reflect our actual bad debt experience. These increases in general and administrative expenses were partially offset by a more favorable effect of changes in foreign currency exchange rates on international expenses in the first nine months of fiscal 2015.

Amortization expense was $40.9 million for the nine months ended February 28, 2015 as compared with $39.6 million for the nine months ended February 28, 2014, an increase of $1.3 million, or 3.3%. The increase was primarily due to additional costs related to acquisitions completed since May 30, 2014.

Acquisition-related items were zero for the nine months ended February 28, 2015 as compared with a gain of $4.6 million for the nine months ended February 28, 2014. The gain reported in the nine months ended February 28, 2014 resulted from a decrease in the contingent consideration liability related to the acquisition of our LIFECODES business. Based upon information available in the first nine months of fiscal 2014, management determined that the likelihood of achieving the financial performance target was lower than originally estimated and decreased the fair value of the related contingent consideration liability.

Non-operating net expense was $66.3 million for the nine months ended February 28, 2015 as compared with $66.4 million for the nine months ended February 28, 2014, a decrease of $0.1 million, or 0.2%. The decrease 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 the first nine months of fiscal 2015. The increase in interest expense was primarily due to higher interest accreted on the contingent consideration liabilities in the nine months ended February 28, 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.

The effective tax rate for the nine months ended February 28, 2015 and 2014 was -73.0% and 42.4%, respectively. The effective tax rate for the fiscal 2015 period was higher than the effective tax rate for the corresponding period in fiscal 2014 primarily due to the impact of discrete items recorded during the third quarter of fiscal 2015. These discrete items primarily consisted of $23.7 million due to the Company’s change in estimate related to its treatment of FTCs and a $7.6 million change in the valuation allowance for its FTC carryovers. Excluding these discrete items recorded during the nine months ended February 28, 2015, the effective tax rate would have been 27.3%.

Fluctuations in Foreign Currency Exchange Rates

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 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 do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;

•	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.

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 three months and nine months ended February 28, 2015 and February 28, 2014 is calculated as follows (in thousands):

	Three Months Ended						Nine Months Ended
	February 28						February 28
	2015			2014			2015			2014

Net loss	$	(39,440	)		(7,355	)		(53,997	)		(15,902	)
Interest expense (income), net		21,751			21,884			66,782			66,144
Income tax expense (benefit)		30,744			(5,803	)		22,783			(11,691	)
Depreciation and amortization		17,713			17,743			53,843			52,858

EBITDA		30,768			26,469			89,411			91,409

Adjustments to EBITDA:
Stock-based compensation (i)		334			357			1,800			1,175
Acquisition expenses, net (ii)		373			655			2,164			(3,288	)
Sponsor fee (iii)		903			986			2,934			2,919
Non-cash impact of purchase accounting (iv)		110			136			331			3,075
Certain non-recurring expenses and other (v)		2,198			3,881			8,619			9,828
Adjusted EBITDA	$	34,686			32,484			105,259			105,118

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 the first nine months of fiscal 2014 also included a non-cash gain of $4.6 million resulting from the decrease in the contingent consideration liability related to the LIFECODES acquisition.

iii.

Represents management fees and other charges associated with a management services agreement with the Sponsor.

iv.

Represents non-cash expenses related to acquired businesses. In the first nine months of fiscal 2014, the non-cash expenses included inventory valuation adjustments as a result of the LIFECODES acquisition.

Represents non-recurring or non-cash items not included in captions above including personnel and business optimization costs.

Under the Revolving Facility, the senior secured leverage ratio is the sole financial covenant. We believe the future directional trend of this ratio will provide valuable insight to understanding our operational performance and financial position with respect to our debt obligations. The senior 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 EBITDA used in this leverage ratio is calculated in a similar manner to that 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 period, including the LIFECODES acquisition and related initiatives, and the deferred revenue adjustment described above. As of February 28, 2015, we were in compliance with our senior secured net leverage ratio covenant.

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 financial flexibility in meeting our operating, investing and financing requirements.

In the first nine months of fiscal 2015, our cash and cash equivalents decreased by $12.1 million to $11.5 million as of February 28, 2015. The decrease was primarily due to $19.2 million of cash used for investments in new businesses, the Sirona collaboration, and additional property and equipment. These decreases in cash and cash equivalents were partially offset by positive cash flow contributed by our operating activities of $2.8 million and $8.0 million of net cash received from financing activities; we borrowed $13.0 million on our Revolving Facility and repaid long-term debt of $5.0 million in the first nine months of fiscal 2015. The cash balance at February 28, 2015 includes cash of $10.3 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.

In the first nine months of fiscal 2014, our cash and cash equivalents decreased by $3.4 million to $26.0 million as of February 28, 2014. The decrease was primary due to cash used to purchase $5.3 million of additional property and equipment, to acquire two distribution businesses for $5.2 million, and to repay $5.0 million of long-term debt in the first nine months of fiscal 2014 partially offset by positive cash flow contributed by our operating activities. There were no borrowings from the Revolving Facility during the first nine months of fiscal 2014.

Operating activities

Operating activities provided $2.8 million of cash and cash equivalents in the first nine months of fiscal 2015 as compared with $10.5 of cash provided by operating activities in the first nine months of fiscal 2014. The decrease in cash provided by operating activities was mainly due to an increase in working capital requirements in the first nine months of fiscal 2015, primarily driven by an increase in accounts receivable balances and a decrease in accounts payable balances mainly due to the timing of payments received and paid. These decreases were partially offset by a smaller growth in inventories in the first nine months of fiscal 2015 as compared with the same period of fiscal 2014, reflecting management’s priority to manage inventory levels in fiscal 2015.

Investing activities

We used cash of $19.2 million for investments in new businesses, the Sirona collaboration, and additional property and equipment including the upgrade of certain financial systems and the implementation of a new financial consolidations application in the first nine months of fiscal 2015. During the first nine months of fiscal 2014, we used cash of $5.2 million to acquire two new distribution businesses and received $1.1 million due from the seller of LIFECODES as a result of finalizing certain purchase price adjustments. For other investing activities, we used cash of $5.3 million to purchase property and equipment in the nine months ended February 28, 2014.

Financing activities

In the first nine months of fiscal 2015, we received net cash from financing activities of $8.0 million. We received $49.5 million in net proceeds from borrowings on our Revolving Facility which were partially offset by net repayments on our Revolving Facility of $36.5 million, and repayments of $5.0 million of our long-term debt during the nine months of fiscal 2015. As of February 28, 2015, there was $13.0 million outstanding under our Revolving Facility. In the first nine months of fiscal 2014, we used cash from financing activities of $5.0 million for repayments of our long-term debt and had no amounts outstanding under our Revolving Facility during the nine months ended February 28, 2014.

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 $32.8 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 February 28, 2015, we had principal obligations of $1,063.1 million outstanding under our Term Loan Facility and the Notes. Our net total available borrowings under our Revolving Facility was $87.0 million as of February 28, 2015.

We expect that recurring capital expenditures during fiscal 2015 will range from $10.0 million to $15.0 million. These expenditures will be used to purchase equipment that increases or enhances capacity and productivity, and to upgrade certain financial systems. 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 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.

As part of the Sirona collaboration, we have an exclusive option to acquire 100% of the common stock of Sirona, and we have a potential obligation to provide additional funding in the form of interest bearing loans of up to $6.7 million over the following two year period, subject to the achievement of certain development milestones and other terms of the arrangement. Refer to Note 3 of our consolidated financial statements for additional information.

Commitments and Contractual Obligations

As of February 28, 2015, our material cash commitments and contractual obligations have not changed significantly from those disclosed in our Annual Report for the year ended May 31, 2014 except for an increase in earn-out liabilities of $7.0 million related to acquisitions completed in the first half of fiscal 2015, and a potential obligation to provide additional future funding in a form of a loan of up to $6.7 million over the following two year period related to the Sirona Collaboration arrangement.

Off-Balance Sheet Arrangements

We have no off-balance sheet financial arrangements as of February 28, 2015.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with U.S. GAAP, which often require the judgment of management in the selection and application of certain accounting principles and methods. We discuss our critical accounting policies in the Management’s Discussion and Analysis section of the Company’s Annual Report on Form 10-K. There have been no other significant changes in our critical accounting policies since May 31, 2014.

Risk Factors and Forward-Looking Statements

This document 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 factors or current conditions or that are not purely historical. Words such as “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 materially from those expressed as forward-looking statements include but are not limited to:

•

our substantial indebtedness;

•

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 instruments into their blood banking operations;

•

increased competition;

•

product development 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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

All forward-looking statements attributable to us or persons acting on our behalf 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 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.

Additional information concerning these and other factors which could cause differences between forward-looking statements and future actual results is discussed under the heading “Risk Factors” in ITEM 1A of this report, and in the Company’s Annual Report on Form 10-K for the year ended May 31, 2014.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

As of February 28, 2015, there have been no material changes regarding the Company’s market risk position from those disclosed in Item 7A., “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended May 31, 2014.

ITEM 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, an evaluation was carried out under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of February 28, 2015. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of February 28, 2015, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the quarter ended February 28, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. Legal Proceedings

ITEM 1A. Risk Factors

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended May 31, 2014. In addition to the other information included in this report, carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our business. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may have a material adverse effect on our business, financial condition and/or operating results.

ITEM 6. Exhibits

31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).

31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).

32.1	Certification of Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document *

101.SCH

XBRL Taxonomy Extension Schema *

101.CAL

XBRL Taxonomy Extension Calculation *

101.DEF

XBRL Taxonomy Extension Definition *

101.LAB	XBRL Taxonomy Extension Label *
101.PRE	XBRL Taxonomy Extension Presentation *

* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		IMMUCOR, INC.
			(Registrant)

Date:	April 10, 2015		By:	/s/ William A. Hawkins
			William A. Hawkins, Chief Executive Officer
			(Principal Executive Officer)

Date:	April 10, 2015		By:	/s/ Dominique Petitgenet
			Dominique Petitgenet, Chief Financial Officer
			(Principal Financial and Accounting Officer)

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