Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at July 31, 2018 and 2017:



	2018		2017
Accrued wages and benefits	$	23,936,000	19,622,000
Accrued legal costs	6,179,000		8,402,000
Accrued warranty obligations	11,738,000		17,617,000
Accrued contract costs	10,016,000		8,644,000
Accrued commissions and royalties	4,654,000		3,600,000
Other	8,511,000		10,725,000
Accrued expenses and other current liabilities	$	65,034,000	68,610,000

Accrued wages and benefits as of July 31, 2018 include $2,963,000 of accrued remittance of employees' statutory tax withholdings related to the net settlement of fully-vested share units, as discussed in more detail in Note (11) - "Stock-Based Compensation." There was no comparable amount as of July 31, 2017.

Accrued legal costs as of July 31, 2018 and 2017 include $3,372,000 and $4,120,000, respectively, related to estimated costs associated with certain TCS intellectual property matters. The accrued potential settlement costs do not reflect the final amounts we may actually pay. Ongoing legal costs associated with defending legacy TCS intellectual property matters and the ultimate resolution could vary and have a material adverse effect on our future consolidated results of operations, financial position or cash flows. TCS intellectual property matters are discussed in more detail in Note (14)(b) - "Commitments and Contingencies - Legal Proceedings and Other Matters."

Accrued contract costs represent direct and indirect costs on contracts as well as estimates of amounts owed for invoices not yet received from vendors or reflected in accounts payable.

Accrued warranty obligations relate to estimated liabilities for warranty coverage that we provide to our customers. We generally provide warranty coverage for some of our products for a period of at least one year from the date of delivery. We record a liability for estimated warranty expense based on historical claims, product failure rates, a consideration of contractual obligations, future costs to resolve software issues and other factors. Some of our product warranties are provided under long-term contracts, the costs of which are incorporated into our estimates of total contract costs.

Changes in our accrued warranty obligations during the fiscal years ended July 31, 2018 and 2017 were as follows:



	2018			2017
Balance at beginning of year	$	17,617,000		15,362,000
Provision for warranty obligations	5,055,000			5,394,000
Adjustment to TCS pre-acquisition contingent liability	—			4,200,000
Charges incurred	(8,244,000		)	(7,339,000	)
Warranty settlement and reclass (see below)	(2,690,000		)	—
Balance at end of year	$	11,738,000		17,617,000

Our current accrued warranty obligations at July 31, 2018 and 2017 include $4,650,000 and $9,909,000, respectively, of warranty obligations for a small product line that we refer to as the TCS 911 call handling software solution. This solution was licensed to customers prior to our acquisition of TCS. During the fiscal year ended July 31, 2018, we entered into a full and final warranty settlement with AT&T, the largest customer/distributor of this product line, pursuant to which we issued thirty-six credits to AT&T of $153,000 which AT&T can apply on a monthly basis to purchases of solutions from us, beginning October 2017 through September 2020. As of July 31, 2018, the total present value of these monthly credits is $3,616,000, of which $1,586,000 is included in our current accrued warranty obligations and $2,030,000 is reflected in other liabilities (non-current) on our Consolidated Balance Sheet. In connection with this favorable settlement, during the fiscal year ended July 31, 2018, we recorded a benefit to cost of sales of $660,000.