Commitments and Contingencies

Lease Obligations

Rental expense under operating leases for the three months ended July 2, 2016 and June 27, 2015 were $1.5 million and $1.2 million, respectively, and for the six months ended July 2, 2016 and June 27, 2015 were $2.9 million and $2.4 million, respectively. Future minimum rental payments under operating leases were as follows as of July 2, 2016:



	Operating Leases
	(In thousands)
Remainder of 2016	$	2,071
2017	4,577
2018	4,459
2019	4,216
2020	2,126
Thereafter	3,228
Total minimum lease payments	$	20,677

Outstanding Purchase Orders

At July 2, 2016, the Company had outstanding purchase orders aggregating approximately $103 million. These purchase orders, the majority of which are with contract manufacturers for the purchase of inventory in the normal course of business, are for manufacturing and non-manufacturing related goods and services, and are generally cancelable without penalty. In circumstances where we determine that we have financial exposure associated with any of these commitments, we record a liability in the period in which that exposure is identified.

Guarantees and Indemnification Obligations

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses incurred by the indemnified party, generally the Company’s customers, in connection with any patent, copyright, trade secret or other proprietary right infringement claim by any third party. The term of these indemnification agreements is generally perpetual after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of July 2, 2016 and January 2, 2016, respectively.

Warranty

The Company provides warranties on most products and has established a reserve for warranties based on estimated warranty costs. The reserve is included as part of accrued expenses (Note 5) in the accompanying balance sheets.

Activity related to the warranty accrual was as follows:



	Three Months Ended						Six Months Ended
	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015
	(In thousands)
Balance at beginning of period	$	6,253		$	7,574		$	6,907		$	7,769
Provision	1,918			900			2,795			2,150
Warranty usage (1)	(1,549		)	(1,393		)	(3,080		)	(2,838		)
Balance at end of period	$	6,622		$	7,081		$	6,622		$	7,081


(1)	Warranty usage includes costs incurred for warranty obligations and, for the three- and six-month periods ended July 2, 2016, the release of warranty liabilities associated with the divestiture of the defense and security business unit.

Sales Taxes

The Company collects and remits sales tax in jurisdictions in which it has a physical presence or it believes nexus exists, which therefore obligates the Company to collect and remit sales tax. The Company continually evaluates whether it has established nexus in new jurisdictions with respect to sales tax. The Company has recorded a liability for potential exposure in states where there is uncertainty about the point in time at which the Company established a sufficient business connection to create nexus. The Company continues to analyze possible sales tax exposure, but does not currently believe that any individual claim or aggregate claims that might arise will ultimately have a material effect on its consolidated results of operations, financial position or cash flows.