COMMITMENTS AND CONTINGENCIES

Litigation

The Company is subject to litigation arising from time to time in the ordinary course of its business. The Company does not expect that the ultimate resolution of any pending legal actions will have a material effect on its consolidated results of operations, financial position, or cash flows. However, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which the Company currently believes to be immaterial, will not become material in the future.

In April 2013, the Company commenced an action against AVX Corporation and AVX Filters Corporation (collectively “AVX”) alleging that AVX had infringed on the Company’s patents by manufacturing and selling filtered feedthrough assemblies used in implantable pacemakers and cardioverter defibrillators that incorporate the Company’s patented technology. On January 26, 2016, a jury in the U.S. District Court for the District of Delaware returned a verdict finding that AVX infringed two Integer patents and awarded Integer $37.5 million in damages. On August 10, 2017, a second jury found that AVX infringed an additional Integer patent. The Company has recorded no gains in connection with this litigation as no cash has been received.

Product Warranties

The Company generally warrants that its products will meet customer specifications and will be free from defects in materials and workmanship. The Company does not expect future product warranty claims will have a material effect on its condensed consolidated results of operations, financial position, or cash flows. However, there can be no assurance that any future customer complaints or negative regulatory actions regarding the Company’s products, which the Company currently believes to be immaterial, does not become material in the future. The change in product warranty liability was comprised of the following (in thousands):



December 30, 2016	$	3,911
Additions to warranty reserve, net of reversals	2,316
Warranty claims settled	(2,102		)
September 29, 2017	$	4,125

(11.) COMMITMENTS AND CONTINGENCIES (Continued)

Foreign Currency Contracts

The Company periodically enters into foreign currency forward contracts to hedge its exposure to foreign currency exchange rate fluctuations in its international operations. The Company has designated these foreign currency forward contracts as cash flow hedges; and accordingly, the effective portions of the unrealized gains and losses on these contracts is reported in Accumulated Other Comprehensive Income (Loss) in the Condensed Consolidated Balance Sheets and is reclassified to earnings in the same periods during which the hedged transactions affect earnings. The estimated Accumulated Other Comprehensive Income related to the Company’s foreign currency contracts that is expected to be reclassified into earnings within the next twelve months is a $1.0 million gain.

In connection with the Lake Region Medical acquisition, the Company terminated its outstanding forward contracts resulting in a $2.4 million payment to the foreign currency contract counterparty during 2015. As of the date the contracts were terminated, the Company had $1.6 million recorded in Accumulated Other Comprehensive Income related to these contracts. This amount was fully amortized to Cost of Sales during 2016 as the inventory, which the contracts were hedging the cash flows to produce, was sold.

The impact to the Company’s results of operations from its forward contract hedges is as follows (in thousands):



	Three Months Ended					Nine Months Ended
	September 29, 2017			September 30, 2016		September 29, 2017		September 30, 2016
Increase in sales	$	594		$	—	$	733	$	—
Increase (decrease) in cost of sales	(512		)	929		371		2,316
Ineffective portion of change in fair value	—			—		—		—

Information regarding outstanding foreign currency contracts designated as cash flow hedges as of September 29, 2017 is as follows (dollars in thousands):



Aggregate Notional Amount		Start Date	End Date	$/Foreign Currency		Fair Value		Balance Sheet Location
$	6,163	Jan 2017	Dec 2017	0.0514	Peso	$	366	Prepaid expenses and other current assets
$	6,448	Feb 2017	Dec 2017	1.0747	Euro	$	660	Prepaid expenses and other current assets