COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

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 and nine months ended July 2, 2016 and June 27, 2015:



	Three months ended						Nine months ended
(in thousands)	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015
Reserve for product warranty, beginning of period	$	1,871		$	1,849		$	1,856		$	1,542
Addition from business combination	—			—			—			547
Provision for product warranty	2,882			828			4,240			2,065
Product warranty costs paid	(649		)	(705		)	(1,992		)	(2,182		)
Reserve for product warranty, end of period	$	4,104		$	1,972		$	4,104		$	1,972

Other Commitments and Contingencies

The following table reflects obligations not reflected on the Consolidated Balance Sheet as of July 2, 2016:



			Payments due by fiscal year
(in thousands)	Total		2016		2017		2018		2019		thereafter
Inventory purchase obligation (1)	$	108,103	$	108,103	$	—	$	—	$	—	$	—
Operating lease obligations (2)	27,318		1,243		4,652		3,635		3,050		14,738
Total	$	135,421	$	109,346	$	4,652	$	3,635	$	3,050	$	14,738


(1)	The Company orders inventory components in the normal course of its business. A portion of these orders are non-cancelable 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. The Building was completed on December 1, 2013 and Pte signed an agreement with the Landlord to lease from the Landlord approximately 198,000 square feet, representing approximately 70% of the Building. Following the completion of construction, we performed a sale-leaseback analysis pursuant to ASC 840-40 and determined that because of our continuing involvement, ASC 840-40 precluded us from derecognizing the asset and associated financing obligation. As such, we reclassified the asset from construction in progress to Property, Plant and Equipment and began to depreciate the building over its estimated useful life of 25 years. We concluded that the term of the financing obligation is 10 years. This is equal to the non-cancellable term of our lease agreement with the Landlord. As of July 2, 2016, we recorded a financing obligation related to the Building of $17.1 million (see Note 10 above). The financing obligation is not reflected in the table above.

Concentrations

The following table reflects significant customer concentrations as a percentage of net revenue for the nine months ended July 2, 2016 and June 27, 2015.



	As of
	July 2, 2016		June 27, 2015
Haoseng Industrial Company Limited (1)	14.1	%	*

(1) Distributor of the Company's products.

* Represented less than 10% of total net revenue

The following table reflects significant customer concentrations as a percentage of total accounts receivable as of July 2, 2016 and June 27, 2015:

(1) Distributor of the Company's products.

* Represented less than 10% of total accounts receivable

July 2, 2016

June 27, 2015

Haoseng Industrial Company Limited (1)

Siliconware Precision Industries Co. Limited