Note 5. Commitments and Contingent Liabilities

12 Months Ended

Jun. 30, 2015

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingencies Disclosure

Commitments and Contingent Liabilities

Leases:

Operating leases for land on which certain office and manufacturing facilities reside expire from fiscal year 2030 to 2056 and contain provisions under which minimum annual lease payments are $0.1 million, for each of the five years ending June 30, 2020 and aggregate $0.8 million from fiscal year 2021 to the expiration of the leases in fiscal year 2056. We are obligated under certain real estate leases to maintain the properties and pay real estate taxes. Certain leases include renewal options and escalation clauses. Total rental expense amounted to, in millions, $0.3, $0.5, and $0.4 in fiscal years 2015, 2014, and 2013, respectively.

As of June 30, 2015 and 2014, the Company had no capital leases.

Guarantees:

As of June 30, 2015, we had no guarantees issued which were contingent on the future performance of another entity. Prior to the spin-off, Kimball Electronics and certain of its subsidiaries guaranteed former Parent’s obligation under former Parent’s credit facility. As of June 30, 2014, former Parent had no borrowings under its credit facility, and as a result, the potential obligation under this guarantee was not deemed to be material and no liability was recorded. No other guarantees existed as of June 30, 2014, which were contingent on the future performance of another entity.

The Company, and former Parent prior to the spin-off, issued standby letters of credit to third-party suppliers, lessors, and insurance and financial institutions and can only be drawn upon in the event of Kimball Electronics’ failure to pay its obligations to the beneficiary. We had a maximum financial exposure from unused standby letters of credit totaling $0.3 million as of June 30, 2015 and $0.1 million as of June 30, 2014. We are not aware of circumstances that would require us to perform under any of these arrangements and believe that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect our consolidated financial statements. Accordingly, no liability has been recorded as of June 30, 2015 and 2014 with respect to the standby letters of credit. We also may enter into commercial letters of credit to facilitate payments to vendors and from customers.

Product Warranties:

We maintain a provision for limited warranty repair or replacement of products manufactured and sold, which has been established in specific manufacturing contract agreements. We estimate product warranty liability at the time of sale based on historical repair or replacement cost trends in conjunction with the length of the warranty offered. Management refines the warranty liability periodically based on changes in historical cost trends and in certain cases where specific warranty issues become known.

Changes in the product warranty accrual during fiscal years 2015, 2014, and 2013 were as follows:



(Amounts in Thousands)	2015			2014			2013
Product Warranty Liability at the beginning of the year	$	911		$	507		$	329
Additions to warranty accrual (including changes in estimates)	625			721			279
Settlements made (in cash or in kind)	(915		)	(317		)	(101		)
Product Warranty Liability at the end of the year	$	621		$	911		$	507