COMMITMENTS AND CONTINGENCIES

We are obligated under non-terminable operating leases for manufacturing facilities, finished good distribution, office space and equipment. Total rental expense on these operating leases and on our manufacturing and office building for the years ended December 31, 2017, 2016 and 2015, approximated $13.6 million, $11.4 million and $10.7 million, respectively.

The future minimum lease payments for operating leases as of December 31, 2017, consisted of the following (in thousands):



Years Ending	Operating
December 31	Leases

2018	$	12,293
2019	11,237
2020	9,307
2021	7,527
2022	6,468
Thereafter	57,211

Total minimum lease payments	$	104,043

Sale-Leaseback. During the year ended December 31, 2015, we entered into sale and leaseback transactions to finance certain production equipment for $2.0 million. We did not enter into any new sale and leaseback transactions during the years ended December 31, 2017 and 2016. The lease agreements from the sale and leaseback transactions are accounted for as operating leases. Under the terms of the lease agreements, we have agreed to operate and maintain the equipment. The lease term of the agreements is seven years.

Irish Government Development Agency Grants. As of December 31, 2017, we had entered into several grant agreements with the Irish Government Development Agency. Grants related to the acquisition of property and equipment purchased in Ireland are amortized as a reduction to depreciation expense over lives corresponding to the depreciable lives of such property and equipment. The balance of deferred credits related to such grants as of December 31, 2017 and 2016, was approximately $2.4 million and $2.5 million, respectively. During the years ended December 31, 2017, 2016 and 2015, approximately $147,000, $170,000 and $171,000, respectively, of the deferred credit was amortized as a reduction of operating expenses.

We have committed to repay the Irish government for grants received if we cease production in Ireland prior to the expiration of the grant liability period. The grant liability period is usually between five and eight years from the last claim made on a grant. As of December 31, 2017, the total amount of grants that could be subject to refund was approximately $3.0 million, and the remaining grant liability period was one year. Our management does not currently believe we will have to repay any of these grant monies, as we have no current intention of ceasing operations in Ireland.

Royalties. As of December 31, 2017, we had entered into several agreements to license or acquire rights to certain intellectual property which require us to make royalty payments during the term of the agreements generally based on a percentage of sales. Total royalty expense during the years ended December 31, 2017, 2016 and 2015, approximated $4.4 million, $3.2 million and $2.7 million, respectively. See Note 2 for discussion of future royalty commitments related to acquisitions.

Litigation. In the ordinary course of business, we are involved in various claims and litigation matters. These claims and litigation matters may include actions involving product liability, intellectual property, contract disputes, and employment or other matters that are significant to our business. Based upon our review of currently available information, we do not believe that any such actions are likely to be, individually or in the aggregate, materially adverse to our business, financial condition, results of operations or liquidity.

In October 2016, we received a subpoena from the U.S. Department of Justice seeking information on certain of our marketing and promotional practices. We are in the process of responding to the subpoena, which we anticipate will continue during 2018. We have incurred, and anticipate that we will continue to incur, substantial costs in connection with the matter. The investigation is ongoing and at this stage we are unable to predict its scope, duration or outcome. Investigations such as this may result in the imposition of, among other things, significant damages, injunctions, fines or civil or criminal claims or penalties against our company or individuals.

In the event of unexpected further developments, it is possible that the ultimate resolution of any of the foregoing matters, or other similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity. Legal costs for these matters, such as outside counsel fees and expenses, are charged to expense in the period incurred.