Commitments and Contingencies

Operating Leases

The Company leases certain facilities and certain equipment under various operating agreements expiring through October 2025. 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 Company’s Consolidated Statements of Income (in thousands):



	Fiscal Year Ended
	October 31, 2015			November 1, 2014			October 26, 2013
Rent expense	$	22,929		$	21,928		$	26,199
Sublease income	(7,673		)	(7,264		)	(6,834		)
Net rent expense	$	15,256		$	14,664		$	19,365

Future minimum lease payments under all non-cancellable operating leases as of October 31, 2015, excluding the contractual sublease income of $9.7 million, are as follows (in thousands):



Fiscal Year	Operating Leases
2016	$	20,974
2017	12,125
2018	8,465
2019	6,717
2020	6,313
Thereafter	17,712
Total minimum lease payments	$	72,306

Capital Leases

Future minimum lease payments under all non-cancellable capital leases as of October 31, 2015, are as follows (in thousands):



Fiscal Year	Capital Leases
2016 - Total minimum lease payments	$	304
Amount representing interest	(6		)
Present value of net minimum lease payments	$	298

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 October 31, 2015, and November 1, 2014 (in thousands):



	Accrued Warranty
	Fiscal Year Ended
	October 31, 2015			November 1, 2014
Beginning balance	$	7,486		$	8,632
Liabilities accrued for warranties issued during the period	4,076			4,683
Warranty claims paid and used during the period	(4,164		)	(4,978		)
Changes in liability for pre-existing warranties during the period	201			(851		)
Ending balance	$	7,599		$	7,486

In addition, the Company has 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 products, both alone and in certain circumstances when in combination with other products and services, for infringement of 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 October 31, 2015, there have been no known 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 its CMs under which Brocade provides product forecasts and places purchase orders in advance of the scheduled delivery of products to Brocade’s customers. The required lead time for placing orders with the 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, usable by, or sold to other customers of the CMs. In addition, Brocade has an arrangement with one of its CMs regarding factory capacity that can be used by the Company. Under this arrangement, the Company receives a credit for exceeding the planned utilization of factory capacity and, conversely, is required to pay additional fees for not utilizing the planned capacity.

As of October 31, 2015, the Company’s aggregate commitment to its CMs for inventory components used in the manufacture of Brocade products was $176.2 million, which the Company expects to utilize during future normal ongoing operations, net of a purchase commitments reserve of $1.2 million, which is reported within “Other accrued liabilities” on the Company’s Consolidated Balance Sheet as of October 31, 2015. The Company’s purchase commitments reserve reflects the Company’s estimate of purchase commitments it does not expect to utilize in normal ongoing operations.

Income Taxes

The Company is subject to several ongoing income tax audits and has received notices of proposed adjustments or assessments from certain tax authorities. 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 accrued by the Company.