10. COMMITMENTS AND CONTINGENCIES

From time to time, the Company is subject to certain legal proceedings and other contingencies, the outcomes of which are subject to significant uncertainty. The Company accrues for estimated losses if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. The Company uses judgment and evaluates, with the assistance of legal counsel, whether a loss contingency arising from litigation should be disclosed or recorded. The outcome of legal proceedings and other contingencies is inherently uncertain and often difficult to estimate. Accordingly, if the outcome of legal proceedings and other contingencies is different than is anticipated by the Company, the Company would record the difference between any previously recorded amount and the full amount at which the matter was resolved, in earnings in the period resolved, which could negatively impact the Company’s results of operations and financial position for the period.

We are a defendant in a litigation matter incidental to the business that is related to customer expectations of test system performance for product that was shipped in 2006 by Credence Systems Corporation. We do not believe the plaintiff’s claims have merit and we are vigorously defending our position. An estimate of any potential loss cannot be made, and accordingly we have not accrued any amounts related to this matter.

In the ordinary course of business, the Company agrees from time to time to indemnify certain customers against certain third party claims for property damage, bodily injury, personal injury or intellectual property infringement arising from the operation or use of the Company’s products. Also, from time to time in agreements with suppliers, licensors and other business partners, the Company agrees to indemnify these partners against certain liabilities arising out of the sale or use of the Company’s products. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is theoretically unlimited; however, the Company has general and umbrella insurance policies that enable it to recover a portion of any amounts paid and many of its agreements contain a limit on the maximum amount, as well as limits on the types of damages recoverable. Based on the Company’s experience with such indemnification claims, it believes the estimated fair value of these obligations is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of July 31, 2014 or July 31, 2013.

Subject to certain limitations, Xcerra indemnifies its current and former officers and directors for liability or costs they may incur upon certain events or occurrences encountered in the course of performing their duties to the Company. Although the maximum potential amount of future payments Xcerra could be required to make under these agreements is theoretically unlimited, as there were no known or pending claims, the Company has not accrued a liability for these agreements as of July 31, 2014 or July 31, 2013.

As of July 31, 2014, the Company has approximately $28.7 million of non-cancelable inventory commitments with its suppliers. The Company expects to consume this inventory through normal operating activity.

The Company has operating lease commitments for certain facilities and equipment that expire at various dates through 2021. The Company has an option to extend the term for its Norwood, Massachusetts facility lease for a single extension term of five years provided that the Company notifies its landlord at least 425 days prior to expiration of the current extension term. Minimum lease payment obligations under non-cancelable leases as of July 31, 2014, are as follows:


Fiscal year ending July 31,	Facilities		Equipment		Total Operating Leases
	(in thousands)
2015	$	7,127	$	347	$	7,474
2016		6,521		228		6,749
2017		4,910		49		4,959
2018		2,361		6		2,367
2019		1,774		—		1,774
Thereafter		4,127		—		4,127

Total minimum lease payments	$	26,820	$	630	$	27,450

Total rent expense for the fiscal years ended July 31, 2014, 2013, and 2012 was $7.1 million, $4.1 million, and $4.2 million, respectively.