Commitments and Contingencies

9 Months Ended

Sep. 25, 2011

Commitments and Contingencies

Commitments and Contingencies

Note 14. Commitments and Contingencies

(a)           Legal Matters

For additional information regarding the Company’s legal proceedings, see Item 3, “Legal Proceedings” in the Form 10-K. As of September 25, 2011, there have been no material developments in the Company’s legal historical proceedings since December 26, 2010 except as described below.

Integral, which the Company acquired on July 27, 2011, was previously the subject of a Securities and Exchange Commission (“SEC”) investigation and inquiry by the NASDAQ Stock Market LLC (“NASDAQ”).  On July 30, 2009, the SEC and Integral each announced that a final administrative settlement had been reached concluding the SEC’s investigation. Shortly after the settlement with the SEC, the NASDAQ inquiry was closed with no further action required by Integral.

In conjunction with its announcement of the administrative settlement, the SEC also disclosed that it was instituting separate civil actions against three former officers of Integral. Integral has indemnification obligations to these individuals, as well as other former directors and officers of Integral who may incur indemnifiable costs in connection with these actions, pursuant to the terms of separate indemnification agreements entered into with each of them effective as of December 4, 2002. As a result of the acquisition of Integral, the Company has assumed these indemnification obligations. The indemnification agreements each provide that, subject to certain terms and conditions, that the Company shall indemnify the individual to the fullest extent permissible by Maryland law against judgments, penalties, fines, settlements and reasonable expenses actually incurred in the event that the individual is made a party to a legal proceeding by reason of his or her present or prior service as an officer or employee of Integral, and shall also advance reasonable litigation expenses actually incurred subject to, among other conditions, receipt of a written undertaking to repay any costs or expenses advanced if it shall ultimately be determined that the individual has not met the standard of conduct required for indemnification under Maryland law. Integral has advanced legal fees and costs incurred by these individuals in connection with the SEC investigation up to the deductible limit under Integral’s applicable directors and officers liability insurance policy and subsequent fees and costs have been paid directly by the insurance carrier. The Company will be obligated to advance any amounts in excess of the insurance policy limits once the fees and expenses exceed the remaining insurance policy limits.

From time to time, the Company may become involved in various claims, lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. The Company is currently not aware of any such legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on the Company’s business, financial condition, operating results or cash flows.

(b)           Warranty

Certain of the Company’s products, product finishes, and services are covered by a warranty to be free from defects in material and workmanship for periods ranging from one to ten years. Optional extended warranty contracts can also be purchased with the revenue deferred and amortized over the extended warranty period. The Company accrues a warranty liability for estimated costs to provide products, parts or services to repair or replace products in satisfaction of warranty obligations. Warranty revenues related to extended warranty contracts are amortized to income, over the life of the contract, using the straight-line method. Costs under extended warranty contracts are expensed as incurred.

The Company’s estimate of costs to service its warranty obligations is based upon historical experience and expectations of future conditions. To the extent that the Company experiences any changes in warranty claim activity or costs associated with servicing those claims, its warranty liability is adjusted accordingly.

Accrued product warranty and deferred warranty revenue activity is as follows (in millions):

	Nine months ended
	September 26, 2010			September 25, 2011
Balance, at beginning of the period	$	(0.2	)	$	(1.3	)
Costs accrued and revenues deferred	(0.5		)	(1.1		)
Warranty liabilities assumed from acquisitions	(0.6		)	(1.6		)
Settlements made (in cash or kind) and revenues recognized	0.6			0.9
Balance, at end of period	(0.7		)	(3.1		)
Less: Current portion	(0.7		)	(2.3		)
Noncurrent accrued product warranty and deferred warranty revenue	—			(0.8		)
Total warranty	$	(0.7	)	$	(3.1	)