Product Warranties

9 Months Ended

Jun. 29, 2013

8. Product Warranties

The Company offers a one-year warranty on all Keurig® Single Cup Brewers it sells. The Company provides for the estimated cost of product warranties, primarily using historical information and repair or replacement costs, at the time product revenue is recognized. Brewer failures may arise in the later part of the warranty period, and actual warranty costs may exceed the reserve. As the Company has grown, it has added significantly to its product testing, quality control infrastructure and overall quality processes. Nevertheless, as the Company continues to innovate, and its products become more complex, both in design and componentry, product performance may modulate, causing warranty rates to possibly fluctuate going forward. As a result, future warranty claims rates may be higher or lower than the Company is currently experiencing and for which the Company is currently providing in its warranty reserve. At this time, management believes that the warranty rates used and related reserves are appropriate.

The changes in the carrying amount of product warranties for the thirteen and thirty-nine weeks ended June 29, 2013 and June 23, 2012 are as follows (in thousands):

	Thirteen weeks ended						Thirty-nine weeks ended
	June 29, 2013			June 23, 2012			June 29, 2013			June 23, 2012
Balance, beginning of period	$	14,456		$	25,740		$	20,218		$	14,728
Provision charged to income	(606		)	2,605			6,580			38,425
Usage	(3,652		)	(8,962		)	(16,600		)	(33,770		)
Balance, end of period	$	10,198		$	19,383		$	10,198		$	19,383

There were no recoveries for the thirteen weeks ended June 29, 2013. For the thirteen weeks ended June 23, 2012, the Company recorded recoveries of $0.2 million. For the thirty-nine weeks ended June 29, 2013 and June 23, 2012, the Company recorded recoveries of $0.6 million and $8.3 million, respectively.

The recoveries are under an agreement with a supplier and are recorded as a reduction of warranty expense. The recoveries are not reflected in the provision charged to income in the table above.