Commitments and contingencies

The following table presents noncancelable payments due by the Company as of September 29, 2018, and

excludes amounts already recorded on the consolidated balance sheet:



			Fiscal years ended
(In thousands)	Total		2019		2020		2021		2022		2023		Beyond
Operating leases	$	85,546	$	16,830	$	14,120	$	12,391	$	11,654	$	11,870	$	18,681
Inventory	70,900		70,900		—		—		—		—		—
Other noncancelable agreements	8,696		3,279		3,574		1,843		—		—		—
Total contractual obligations	$	165,142	$	91,009	$	17,694	$	14,234	$	11,654	$	11,870	$	18,681

Operating leases

The Company entered into various non-cancelable operating lease agreements substantially for offices and facilities as well for auto leases. Company’s main offices are leased in California, Massachusetts and the Netherlands with additional sales and operations offices around the world. These facilities operate under leases with initial terms ranging from one to ten years and expire at various dates through 2025.

Rent expense during the years ended September 29, 2018, September 30, 2017 and October 1, 2016 was $14.5 million, and $13.5 million and $14.5 million, respectively.

Inventory

The Company enters into various inventory-related purchase agreements with suppliers. Under these agreements, 100% of orders are cancelable by giving sufficient notice prior to the expected shipment date.

Legal proceedings

From time to time, the Company is involved in legal proceedings in the ordinary course of business, including claims relating to employee relations, business practices and patent infringement. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company’s operations or its financial position, liquidity or results of operations.

On October 21, 2014, the Company commenced a patent infringement action in the United States District Court, District of Delaware against D&M Holdings Inc. d/b/a The D+M Group, D&M Holdings U.S. Inc. and Denon Electronics (USA), LLC (collectively, "Denon"). On May 18, 2018, the Company entered into a patent covenant agreement with Denon, effective May 17, 2018, with a term lasting through May 22, 2022. Under the agreement, Denon will make royalty payments covering both historical sales and sales throughout the term, at an effective royalty rate materially consistent with the December 14, 2017 jury verdict. Pursuant to the agreement, all claims asserted in the Company’s patent infringement claim against Denon and in Denon’s countersuit against the Company were dismissed with prejudice and the parties released claims of any past infringement of the patents asserted in the litigation between the Company and Denon and any patents related thereto.

On March 10, 2017, Implicit, LLC ("Implicit") filed a patent infringement action in the United States District Court, District of Delaware against the Company. Implicit is asserting that the Company infringed on two patents in this case. The Company denies the allegations. There is no assurance of a favorable outcome and the Company’s business could be adversely affected as a result of a finding that the Company patents-in-suit are invalid and/or unenforceable. A range of loss, if any, associated with this matter is not probable or reasonably estimable as of September 29, 2018 and September 30, 2017.

The Company is involved in certain other litigation matters not listed above but does not consider the matters to be material either individually or in the aggregate at this time. The Company’s view of the matters not listed may change in the future as the litigation and events related thereto unfold.

Product warranties

As of September 29, 2018, the Company recorded $2.4 million of warranty liability in other current liabilities on the consolidated balance sheets. Changes in the Company’s warranty liability were as follows:



(In thousands)	2018			2017			2016
Warranty liability at beginning of year	$	2,437		$	2,491		$	2,722
Provision for warranties issued during the year	10,678			5,867			5,412
Settlements of warranty claims during the year	(10,665		)	(5,921		)	(5,643		)
Warranty liability at end of year	$	2,450		$	2,437		$	2,491

Guarantees and indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. It is not possible to make a reasonable estimate of the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. To date, the Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by the Delaware General Corporation Law. The Company also currently has directors’ and officers’ insurance. No amount has been accrued in the financial statements with respect to these indemnification guarantees.