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COMMITMENTS AND CONTINGENCIES
 12 Months Ended
Jun. 30, 2012
COMMITMENTS AND CONTINGENCIES

8. COMMITMENTS AND CONTINGENCIES

Leases: As of June 30, 2012, the Company had equipment financed through capital leases with a net book value of $1.9 million. The related depreciation expense for fiscal year 2012 was $0.3 million. The Company has operating and capital leases for certain equipment and production facilities, which expire at various dates during the next ten years.

 

Future minimum payments under non-cancelable operating and capital leases with initial or remaining terms of one year or more at June 30, 2012, are summarized as follows (in thousands):

 

Fiscal Years Ending

    Operating
Leases		      Capital
Leases		  

2013

    $ 1,461       $ 782   

2014

      1,478         588   

2015

      1,423         —     

2016

      976         —     

2017

      722         —     

Thereafter

      2,221         —     
  

 

 

     

 

 

  

Total minimum lease payments

    $ 8,281       $ 1,370 * 
  

 

 

     

 

 

  

 

* Includes $65 of interest.

On January 11, 2011, the Company entered into a capital lease agreement. The term of the capital lease agreement extends to January 2014 with monthly payments of $16,760 and a fixed interest rate of 3.86%. At June 30, 2012, the outstanding principal balance was $386,882 under the capital lease agreement and the net book value of the equipment was $590,424.

On April 1, 2011, the Company entered into two capital lease agreements. The term of the capital lease agreements extends to March 2014 with monthly payments of $39,445 and $8,961, with fixed interest rates of 6.21%. At June 30, 2012, the outstanding principal balances were $747,621 and $169,853 under the capital lease agreements. The net book value at June 30, 2012 for the equipment under the capital lease agreements was $1,152,501 and $241,295, respectively.

Subsequent to June 30, 2012, the Company entered into an additional lease of approximately 13,000 square feet at a rate of $8.00 per square foot per year with the lease terminating on February 28, 2016.

Rental expense under operating leases was approximately $1.5 million, $2.4 million, and $3.3 million during fiscal years 2012, 2011, and 2010, respectively.

Warranty Costs: The Company provides warranties on certain product sales, and allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. The Company establishes warranty reserves based on historical warranty costs for each product line combined with liability estimates based on the prior twelve months’ sales activities.

If actual return rates and/or repair and replacement costs differ significantly from estimates, adjustments to recognize additional cost of sales may be required in future periods.

Components of the reserve for warranty costs during fiscal years 2012, 2011, and 2010 were as follows (in thousands):

 

Balance at June 27, 2009

    $ 25   

Additions

      45   

Warranty costs incurred

      (45 ) 
  

 

 

  

Balance at July 3, 2010

      25   

Additions

      158   

Warranty costs incurred

      (173 ) 
  

 

 

  

Balance at July 2, 2011

      10   

Additions

      65   

Warranty costs incurred

      (52 ) 
  

 

 

  

Balance at June 30, 2012

    $ 23   
  

 

 

  

 

Warranty expense for fiscal years 2012, 2011 and 2010 is related to workmanship claims on keyboards and certain EMS products.

Litigation: The Company is party to certain lawsuits or claims in the ordinary course of business. The Company does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the financial position, results of operations or cash flow of the Company.

Indemnification Rights: Under the Company’s bylaws, the Company’s directors and officers have certain rights to indemnification by the Company against certain liabilities that may arise by reason of their status or service as directors or officers. The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and officers and former directors in certain circumstances.