Commitments and Contingencies

Operating Leases

The Company leases certain facilities and certain equipment under various operating agreements expiring through March 2021. In connection with its facilities lease agreements, the Company has signed unconditional, irrevocable letters of credit totaling $0.1 million as security for the leases.

The following table presents the composition of net rent expense included on the Consolidated Statements of Income (in thousands):



	Fiscal Year Ended
	November 1, 2014			October 26, 2013			October 27, 2012
Rent expense	$	21,928		$	26,199		$	25,867
Less: Sublease income	(7,264		)	(6,834		)	(6,606		)
Net rent expense	$	14,664		$	19,365		$	19,261

Future minimum lease payments under all non-cancellable operating leases as of November 1, 2014, excluding the contractual sublease income of $16.1 million, are as follows (in thousands):



Fiscal Year	Operating Leases
2015	$	20,033
2016	17,133
2017	8,974
2018	5,822
2019	5,775
Thereafter	16,773
Total minimum lease payments	$	74,510

Capital Lease Obligations

Future minimum lease payments under all non-cancellable capital leases as of November 1, 2014, are as follows (in thousands):



Fiscal Year	Capital Leases
2015	$	1,888
2016	295
2017	—
2018	—
Total minimum lease payments	2,183
Less: Amount representing interest	(68		)
Present value of net minimum lease payments	$	2,115

Product Warranties

The Company’s accrued liability for estimated future warranty costs is included in “Other accrued liabilities” in the accompanying Consolidated Balance Sheets. The following table summarizes the activity related to the Company’s accrued liability for estimated future warranty costs during the fiscal years ended November 1, 2014, and October 26, 2013 (in thousands):



	Fiscal Year Ended
	November 1, 2014			October 26, 2013
Beginning balance	$	8,632		$	14,453
Liabilities accrued for warranties issued during the period	4,683			4,969
Warranty claims paid and used during the period	(4,978		)	(8,213		)
Changes in liability for pre-existing warranties during the period	(851		)	(2,577		)
Ending balance	$	7,486		$	8,632

In addition, the Company has standard defense and indemnification clauses contained within its various customer contracts. As such, the Company indemnifies the parties to whom it sells its products with respect to the Company’s product, alone or potentially in combination with others, infringing upon any patents, trademarks, copyrights, or trade secrets, as well as against bodily injury or damage to real or tangible personal property caused by a defective Company product. As of November 1, 2014, Brocade was not aware of any events or circumstances that have resulted in a material customer contract-related indemnification liability to the Company.

Manufacturing and Purchase Commitments

Brocade has manufacturing arrangements with CMs under which Brocade provides product forecasts and places purchase orders at the time of the scheduled delivery of products to Brocade’s customers. The required lead time for placing orders with its CMs depends on the specific product. Brocade issues purchase orders and the CMs then generate invoices based on prices and payment terms mutually agreed upon and set forth in those purchase orders. Although the purchase orders Brocade places with its CMs are cancellable, the terms of the agreements require Brocade to purchase all inventory components not returnable to, usable by, or sold to other customers of the CMs.

As of November 1, 2014, the Company’s aggregate commitment to the CMs for inventory components used in the manufacture of Brocade products was approximately $178.4 million, which the Company expects to utilize during future normal ongoing operations, net of a purchase commitments reserve of $2.5 million. The Company’s purchase commitments reserve reflects the Company’s estimate of purchase commitments it does not expect to use in normal ongoing operations.

Income Taxes

The Company is subject to several ongoing income tax audits. For additional discussion, see Note 15, “Income Taxes,” of the Notes to Consolidated Financial Statements. The Company believes it has adequate reserves for all open tax years.

Legal Proceedings

From time to time, the Company is subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including claims of alleged infringement of patents and/or other intellectual property rights and commercial and employment contract disputes. While the outcome of these matters cannot be predicted with certainty, the Company does not believe that the outcome of any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized.