Guarantees

Product Warranties

Upon delivery of products, the Company provides for the estimated cost to repair or replace products or the related components that may be returned under hardware warranties. In general, hardware warranty periods range from one to five years. Hardware warranties provide the purchaser with protection in the event that the product does not perform to product specifications. During the warranty period, the purchaser’s sole and exclusive remedy in the event of such defect or failure to perform is limited to the correction of the defect or failure by repair, refurbishment or replacement, at the Company’s sole option and expense. The Company estimates its hardware warranty obligations based on the Company’s historical and industry experience of product failure rates, use of materials to repair or replace defective products, and service delivery costs incurred in correcting product failures. In addition, from time to time, specific hardware warranty accruals may be made if unforeseen technical problems arise with specific products. Management periodically assesses the adequacy of the Company’s recorded warranty liabilities and adjusts the amounts as necessary.

Activity related to product warranty was as follows (in thousands):



	December 27, 2014			December 28, 2013
Beginning balance	$	22,908		$	16,482
Charges to operations	22,697			21,193
Utilization	(10,860		)	(9,404		)
Change in estimate⁽¹⁾	(7,705		)	(5,363		)
Balance at the end of the period	$	27,040		$	22,908

⁽¹⁾

The Company records hardware warranty liabilities based on the latest quality and cost information available as of that date. The changes in estimate shown here are due to changes in overall actual failure rates and the resulting impact of these changes on the Company’s estimate of expected future returns, as well as changes in the estimated cost and the mix of new versus used units related to replacement of failed units.

Letters of Credit

The Company had $5.0 million of standby letters of credit outstanding as of December 27, 2014. These consisted of $3.0 million related to a customer proposal guarantee, $1.3 million related to a value added tax license and $0.7 million related to property leases. The Company had $3.5 million of standby letters of credit outstanding as of December 28, 2013. These consisted of $1.4 million related to a customer proposal guarantee, $1.4 million related to a value added tax license and $0.7 million related to property leases.