11.	COMMITMENTS AND CONTINGENCIES

a. Purchase Commitments

As of

October 1, 2017,

we have made commitments to purchase approximately

$640

of production machinery and equipment.

b. Product Warranties

We estimate future costs associated with expected product failure rates, material usage and service costs in the development of our warranty obligations. Warranty reserves are based on historical experience of warranty claims and generally will be estimated as a percentage of sales over the warranty period. In the event the actual results of these items differ from the estimates, an adjustment to the warranty obligation would be recorded. Changes in our product warranty liability during the

first

nine

months of

2017

and

2016

were as follows:

	Nine-Month P eriod s E nded
	October 1 , 2017			September 25 , 2016
Accrued Warranty Obligations – Beginning	$	172		$	192
Accruals for Warranties Issued		66			30
Settlements Made		(58	)		(43	)
Accrued Warranty Obligations – Ending	$	180		$	179

c. Contingencies and Legal Matters

We are subject to legal proceedings and claims that arise from time to time in the normal course of business. We believe that the fin

al disposition of such matters will

not

have a material adverse effect on our financial position, results of operations or cash flows.

Dreamliner Litigation

July 2013,

an unoccupied Boeing

787

Dreamliner aircraft operated by Ethiopian Airlines was damaged by a fire while parked at London Heathrow Airport. We participated in and provided technical assistance in support of an investigation of this incident conducted by U.K. and U.S. regulatory authorities as well as by the manufacturer of the aircraft, as we are

one

of many downstream suppliers to that manufacturer.

A final report was issued by the Air Accidents Investigative Branch – UK Civil Aviation regulatory authority, with findings indicating that the fire was primarily caused by circumstances related to the plane’s emergency locator transmitter (“ELT”) manufactured and installed by another company.

A component of the ELT is a battery pack which incorporates Ultralife

’s industry-standard lithium manganese dioxide non-rechargeable D-cell. Ultralife has had this cell in production since

2001,

with millions of units produced and this cell is widely-used for global defense and commercial applications. This battery product has gone through rigorous safety and qualification testing, including United Nations Transport of Dangerous Goods, Manual of Tests and Criteria, and is authorized for use in aerospace applications under Technical Standard Order

C142.

May 4, 2015,

we were notified of a lawsuit in which we were named, along with other suppliers to the aircraft manufacturer, concerning that

2013

fire. The suit was filed by Ethiopian Airlines Enterprise in the Commercial Court, Queen

’s Bench Division of the High Court of Justice, London. The suit seeks as damages

$42,000

plus other unspecified amounts, including those for loss of use and diminution in value of the aircraft. We maintain liability and products liability insurance through reputable providers, and in accordance with our corporate practices, immediately advised and referred this matter to our insurers. We are working with those insurers and their counsel to respond to and actively defend against this action, which is ongoing.

At this time, we believe that there is

not

a reasonable possibility that this incident will result in a material financial exposure to the Company.