COMMITMENTS AND CONTINGENCIES

12 Months Ended

Jun. 29, 2013

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Leases: The Company had equipment financed through capital leases with a net book value of $1.7 million, $1.9 million, and $2.2 million during fiscal years 2013, 2012, and 2011, respectively. The related depreciation expense was $0.3 million for fiscal years 2013 and 2012, and $0.1 million for fiscal year 2011. 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 29, 2013, are summarized as follows (in thousands):

Fiscal Years Ending	Operating Leases		Capital Leases
2014	$	1,874	$	588
2015	1,898		—
2016	1,420		—
2017	881		—
2018	735		—
Thereafter	1,718		—
Total minimum lease payments	$	8,526	$	588	*

* Includes $12 of interest.

Subsequent to fiscal year 2013, the Company completed the acquisition of Sabre Manufacturing resulting in an additional 66,000 square feet of leased manufacturing space with the lease expiring on August 30, 2016. The operating lease obligation is included in the table above.

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 29, 2013, the outstanding principal balance was $197,379 under the capital lease agreement and the net book value of the equipment was $483,788.

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 29, 2013, the outstanding principal balances were $308,336 and $70,051 under the capital lease agreements. The net book value at June 29, 2013 for the equipment under the capital lease agreements was $969,522 and $171,468, respectively.

Rental expense under operating leases was approximately $1.5 million, $1.5 million, and $2.4 million during fiscal years 2013, 2012, and 2011, 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 2013, 2012, and 2011 were as follows (in thousands):

Balances, July 3, 2010	$	25
Additions	158
Warranty costs incurred	(173		)
Balances, July 2, 2011	10
Additions	65
Warranty costs incurred	(52		)
Balances, June 30, 2012	23
Additions	26
Warranty costs incurred	(40		)
Balances, June 29, 2013	$	9

Warranty expense for fiscal years 2013, 2012 and 2011 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.