Commitments and Contingencies

Lease Obligations

Rental expense under operating leases for the three months ended September 30, 2017 and October 1, 2016 were $2.2 million and $1.6 million, respectively, and for the nine months ended September 30, 2017 and October 1, 2016 were $6.1 million and $4.4 million, respectively. Future minimum rental payments under operating leases were as follows as of September 30, 2017:



	Operating Leases
	(In thousands)
Remainder of 2017	$	1,287
2018	5,279
2019	5,146
2020	5,120
2021	5,259
Thereafter	39,275
Total minimum lease payments	$	61,366

During the three months ended September 30, 2017, the Company amended its lease for its corporate headquarters and extended the lease term until 2030.

Outstanding Purchase Orders

At September 30, 2017, the Company had outstanding purchase orders aggregating approximately $181.2 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 the Company determines that it has financial exposure associated with any of these commitments, the Company records 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 September 30, 2017 and December 31, 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						Nine Months Ended
	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
	(In thousands)
Balance at beginning of period	$	10,505		$	6,622		$	8,464		$	6,907
Liability assumed (1)	—			—			2,186			—
Provision	2,433			2,823			6,051			5,619
Warranty usage (2)	(2,659		)	(1,598		)	(6,422		)	(4,679		)
Balance at end of period	$	10,279		$	7,847		$	10,279		$	7,847


(1)	Warranty assumed as part of the acquisition of the iRobot-related distribution business of Sales On Demand Corporation (see Note 9).


(2)	Warranty usage includes costs incurred for warranty obligations and, for the nine month period ended October 1, 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.