Commitments and contingencies

12 Months Ended

Dec. 28, 2012

Commitments and contingencies [Abstract]

Commitments and contingencies

(10)           Commitments and contingencies

We conduct a portion of our operations on leased premises, and also lease certain equipment under operating leases.  Total rental expense for the years ended December 28, 2012, December 30, 2011 and December 31, 2010 were $5.1 million, $6.3 million and $6.9 million, respectively.  The aggregate minimum rental commitments under non-cancelable leases in effect at December 28, 2012 were as follows (in thousands):

Year Ending
2013		3,294
2014		2,326
2015		1,786
2016		1,234
2017		733
Thereafter		1,164
	$	10,537

Our manufacturing operations are subject to a variety of local, state, federal and international environmental laws and regulations governing air emissions, wastewater discharges, the storage, use, handling, disposal and remediation of hazardous substances and, also, employee health and safety. It is our policy to meet or exceed the environmental standards set by these laws. Through planning and continual process improvements, we strive to protect and preserve the environment by preventing pollution and reducing the consumption of natural resources and materials. However, in the normal course of business, environmental issues may arise. We may incur increased costs associated with environmental compliance and cleanup projects necessitated by the identification of new environmental issues or new environmental laws and regulations.

We accrue costs associated with environmental and legal matters when they become probable and reasonably estimable. Accruals are established based on the estimated undiscounted cash flows to settle the obligations and are not reduced by any potential recoveries from insurance or other indemnification claims. We believe that any ultimate liability with respect to these actions in excess of amounts provided will not materially affect our operations or consolidated financial position, liquidity or operating results.

We are a party to various legal proceedings, claims and assessments that arise in the ordinary course of business, and may continue to incur significant costs in defending or settling legal matters.  The total amount and timing of the expected future payments related to these matters cannot be estimated due to the uncertainty of the duration of the legal proceedings and the ultimate scope of other claims.  However, an unfavorable outcome in a single matter or in multiple legal matters during the same reporting period could have a material adverse effect on our consolidated financial position, results from operations and cash flows.

We are a defendant in a lawsuit filed in March 2007 by Halo Electronics, Inc. in the United States District Court, District of Nevada.  The case is captioned Halo Electronics, Inc. v. Pulse Electronics, Inc. and Pulse Electronics Corp., Case No. 2:07-cv-00331-PMP-PAL. The plaintiff, Halo, claims that we infringe certain U.S. patents related to an electronic surface mount package, and is seeking injunctive relief and damages.  On November 26, 2012, the jury returned a verdict ruling in favor of Halo Electronics, Inc. and found that Pulse willfully infringed on three different patents, specifically U.S. Patent Nos. 5,656,985; 6,297,720; and 6,344,785.  The court judgment has ordered Pulse to pay Halo approximately $2.0 million for past damages and interest.  In addition to the award of past damages, the court has awarded a future remedy whereby we pay Halo a royalty on all domestic future sales under licenses to use these patents.

In light of the Court's summary judgment order and its ruling that we are liable with respect to direct infringement, during the fiscal year 2012 we recorded an increase to our legal reserve of approximately $1.8 million compared to $0.2 million in the prior year.  We intend to continue presenting a vigorous defense against the remaining claims in the case, to maintain our counterclaim that Pulse owes no liability whatsoever to Halo due to the invalidity of the Halo patents, to contest the amount of damages asserted by Halo and its expert, and to consider our rights of appeal with respect to any adverse rulings, including but not limited to infringement.  During the years ended December 28, 2012 and December 30, 2011, we incurred approximately $1.2 million and $0.8 million of legal expenses, respectively, related to this matter.

The Company is also subject to ongoing tax examinations and governmental assessments in various foreign and domestic jurisdictions. In January 2013, we received a court ruling from the federal tax court in Turkey relating to prior year assessments on non-income tax related assessments relating to our former operations. The ruling was based on our inability to present certain notarized documents required under Turkish tax law. The initial judgment ordered the Company to pay approximately $3.7 million for fines, penalties, and interest on this matter. Accordingly, the Company recorded an increase to our legal reserve of $3.7 million.