COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

Agreement to Develop and Lease

On May 7, 2012, Pte entered into the ADL and a Lease Agreement with DBS Trustee Limited as trustee of the Landlord. Pursuant to the ADL, the Landlord agreed to develop a building at 23A Serangoon North Avenue 5, #01-01 K&S Corporate Headquarters, Singapore 554369 and Pte agreed to lease from the Landlord approximately 198,000 square feet representing approximately 70% of the Building. The Building was completed on December 1, 2013.

Warranty Expense

The Company's equipment is generally shipped with a one-year warranty against manufacturing defects. The Company establishes reserves for estimated warranty expense when revenue for the related equipment is recognized. The reserve for estimated warranty expense is based upon historical experience and management's estimate of future warranty costs.

The following table reflects the reserve for product warranty activity for the three months ended December 28, 2013 and December 29, 2012:



	Three months ended
(in thousands)	December 28, 2013			December 29, 2012
Reserve for product warranty, beginning of period	$	1,194		$	2,412
Provision for product warranty	148			65
Product warranty costs paid	(455		)	(793		)
Reserve for product warranty, end of period	$	887		$	1,684

Other Commitments and Contingencies

The following table reflects obligations not reflected on the Consolidated Balance Sheet as of December 28, 2013:



			Payments due by fiscal year
(in thousands)	Total		2014		2015		2016		2017		thereafter
Inventory purchase obligation (1)	$	56,832	$	56,832	$	—	$	—	$	—	$	—
Operating lease obligations (2)	29,733		2,283		3,345		3,116		2,787		18,202
Total	$	86,565	$	59,115	$	3,345	$	3,116	$	2,787	$	18,202


(1)	The Company orders inventory components in the normal course of its business. A portion of these orders are non-cancellable and a portion may have varying penalties and charges in the event of cancellation.


(2)	The Company has minimum rental commitments under various leases (excluding taxes, insurance, maintenance and repairs, which are also paid by the Company) primarily for various facility and equipment leases, which expire periodically through 2018 (not including lease extension options, if applicable).

Pursuant to ASC No. 840, Leases, for lessee's involvement in asset construction, the Company was considered the owner of the Building during the construction phase of the ADL. As of December 28, 2013, the Company has recorded a financing obligation of $19.8 million related to the Building. This financing obligation is not reflected in the above table.

Under the Lease Agreement signed on December 1, 2013, the term for the rental of the Initial Premises is 10 years, (the “Initial Term”). Pte has the option to renew for two additional ten-year terms. The combined annual rent and service charge for the Initial Term will range between approximately $4.0 to $5.0 million Singapore dollars. Subject to renting a minimum amount of space, Pte will have a right of first refusal for all space that becomes available in the Building, and the Landlord has agreed to make available a certain amount of additional space for rental at Pte's option which may be exercised at certain points during the second half of the Initial Term. Subject to renting a minimum amount of space for a certain period, Pte will have partial surrender rights. In addition, Pte will have termination rights after renting the Initial Premises for a certain period of time.

Concentrations

The following table reflects significant customer concentrations as a percentage of net revenue for the three months ended December 28, 2013 and December 29, 2012:



	Three months ended
	December 28, 2013	December 29, 2012
Powertech Technology Inc.	13.2%	*
Advanced Semiconductor Engineering	*	12.7%
STATS ChipPAC Ltd	*	11.1%

* Represents less than 10% of net revenue

The following table reflects significant customer concentrations as a percentage of total accounts receivable as of December 28, 2013 and December 29, 2012:



	As of
	December 28, 2013		December 29, 2012
Siliconware Precision Industries Co. Limited	27.4	%	*
Haoseng Industrial Co., Ltd	10.8	%	23.6	%
STATS ChipPAC Ltd	*		13.0	%

* Represents less than 10% of total accounts receivable