Note 5. Commitments and Contingent Liabilities

9 Months Ended

Mar. 31, 2016

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingencies Disclosure

Commitments and Contingent Liabilities

Standby letters of credit are issued to third-party suppliers, lessors, and insurance institutions and can only be drawn upon in the event of the Company’s failure to pay its obligations to a beneficiary. As of March 31, 2016, we had a maximum financial exposure from unused standby letters of credit totaling $0.4 million. We are not aware of circumstances that would require us to perform under any of these arrangements. We believe that the resolution of any claims related to these standby letters of credit that might arise in the future, either individually or in the aggregate, would not materially affect our Condensed Consolidated Financial Statements. Accordingly, no liability has been recorded as of March 31, 2016 with respect to the standby letters of credit. The Company also may enter into commercial letters of credit to facilitate payments to vendors and from customers.

The Company’s China operation, in limited circumstances, receives banker’s acceptance drafts from customers as settlement for their trade accounts receivable. We in turn may transfer the acceptance drafts to a supplier of ours in settlement of current accounts payable. These drafts contain certain recourse provisions afforded to the transferee under laws of The People’s Republic of China. If a transferee were to exercise its available recourse rights, our China operation would be required to satisfy the obligation with the transferee and the draft would revert back to our China operation. At March 31, 2016, the drafts transferred and outstanding totaled $2.5 million. No transferee has exercised their recourse rights against us. For additional information on banker’s acceptance drafts, see Note 1 – Business Description and Summary of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements.

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 for the nine months ended March 31, 2016 and 2015 were as follows:

	Nine Months Ended
	March 31
(Amounts in Thousands)	2016			2015
Product warranty liability at the beginning of the period	$	621		$	911
Additions to warranty accrual (including changes in estimates)	167			735
Settlements made (in cash or in kind)	(113		)	(756		)
Product warranty liability at the end of the period	$	675		$	890