We are defendants in certain legal actions. In the opinion of management, the outcome of these actions, which is not clearly determinable at the present time, would not significantly affect our consolidated financial position or future results of operations. We also believe that environmental issues will not have a material effect on our capital expenditures, consolidated financial position or future results of operations.

In February 2019, our former Structural Composites Industries, LLC subsidiary (“SCI”) agreed to participate in a tank replacement program for specific design sizes of its composite hydrogen fuel tanks, which are integrated into a customer’s hydrogen fuel cells used to fuel material handling equipment, primarily rider pallet jacks in warehouses. In connection with this matter, we recorded a $13,000,000 charge to cost of goods sold during the third quarter of fiscal 2019 to reflect our estimated costs of the replacement program. During the third quarter of fiscal 2020, a favorable adjustment of $2,265,000 was recorded related to lower than expected freight costs. As of May 31, 2021, the Company has a reserve of $4,878,000 for estimated remaining direct costs related to the replacement program, which are expected to be paid in the next twelve months. The actual costs incurred by the Company related to this matter may vary from the initial estimate.

A progression of the liabilities recorded in connection with this matter during fiscal 2021 is summarized in the following table:

(in thousands)

Beginning

Balance

Expense

Payments

Adjustments

Ending

Balance

Tank replacement costs

4,964

(86

)

4,878

We believe these liabilities are sufficient to absorb our remaining direct costs related to the replacement program, which are expected to be paid in the next twelve months.