NOTE 3. WARRANTY

Most of our manufactured products are sold with warranties. Warranty periods, which vary by product components, generally range from 1 to 10 years; however, the warranty period for a limited number of specifically identified components in certain applications is a lifetime. The majority of the products sold have warranties on components which range from 1 to 3 years. The reserve for warranties is based on management’s assessment of the cost per service call and the number of service calls expected to be incurred to satisfy warranty obligations on the current net sales.

During the three months ended June 30, 2018, we recorded warranty expense at a rate of approximately 1.7% of sales, which decreased from the rate in the second quarter of 2017 of 2.2% of sales. During the six months ended June 30, 2018, we recorded warranty expense at a rate of approximately 1.7% of sales, which decreased from the rate in the first half of 2017 of 2.2% of sales. We believe the decrease in warranty expense as a percentage of sales was the result of our workforce becoming more seasoned through experience and training, as well as a change in our warranty profile on PGT-branded door glass components produced by Cardinal as part of the Supply Agreement, described in Note 7, on which they provide the warranty coverage.

The following table summarizes: current period charges, adjustments to previous estimates, if necessary, as well as settlements, which represent actual costs incurred during the period for the three months ended June 30, 2018, and July 1, 2017. The reserve is determined through specific identification and assessing Company history. Expected future obligations are discounted to a current value using a risk-free rate for obligations with similar maturities.


	Beginning		Charged								End of
Accrued Warranty	of Period		to Expense		Adjustments			Settlements			Period
(in thousands)
Three months ended June 30, 2018	$	5,323	$	2,851	$	(98	)	$	(2,708	)	$	5,368
Three months ended July 1, 2017	$	5,614	$	3,045	$	(153	)	$	(2,827	)	$	5,679
Six months ended June 30, 2018	$	5,386	$	5,217	$	(208	)	$	(5,027	)	$	5,368
Six months ended July 1, 2017	$	5,569	$	6,088	$	(64	)	$	(5,914	)	$	5,679