Commitments and Contingencies

Leases

The Company leases office and warehouse space under non-cancelable operating leases that expire through 2023. The Company also leases certain equipment under a capital lease that expires in 2020. Lease expense and future minimum lease payments under operating leases and capital leases are as follows:



	Fiscal Year Ended June 30,
	2018		2017		2016
	(in thousands)
Lease expense	$	9,824	$	8,703	$	7,394



	Operating Lease Payments		Capital Lease Payments		Total Payments
	(in thousands)
Fiscal Year Ended June 30,
2019	$	8,196	$	675	$	8,871
2020	6,160		675		6,835
2021	5,316		—		5,316
2022	4,185		—		4,185
2023	3,404		—		3,404
Thereafter	10,817		—		10,817
Total future minimum lease payments	38,078		1,350		39,428
Less: amounts representing interest on capital lease	—		30		30
Total future minimum principal lease payments	$	38,078	$	1,320	$	39,398

On July 6, 2016, the Company entered into an amended agreement to continue to lease approximately 741,000 square feet for distribution, warehousing and storage purposes in a building located in Southaven, Mississippi. The term of the lease is 135 months with 2 consecutive 5-year extension options.

On December 7, 2017 the Company entered into a new lease agreement and amended an existing lease agreement for certain information technology infrastructure located in the Greenville, South Carolina facility expiring in 2020. The Company determined each lease qualified as a capital lease and recorded a capital lease obligation equal to the present value of the minimum lease payments of $1.9 million in accordance.

The components of the Company's capital lease as of June 30, 2018 are as follows:



								Capital Lease Obligations
	Property & Equipment		Accumulated Depreciation			Net Book Value		Short-Term		Long-Term		Total
	(in thousands)
IT Infrastructure	$	1,583	$	(259	)	$	1,324	$	653	$	667	$	1,320

Commitments and Contingencies

A majority of the Company’s net revenues in fiscal years 2018, 2017 and 2016 were received from the sale of products purchased from the Company’s ten largest suppliers. The Company has entered into written agreements with substantially all of its major suppliers. While the Company’s agreements with most of its suppliers contain standard provisions for periodic renewals, these agreements generally permit termination by either party without cause upon 30 to 120 days' notice.

The Company or its subsidiaries are, from time to time, parties to lawsuits arising out of operations. Although there can be no assurance, based upon information known to the Company, the Company believes that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on the Company’s financial condition or results of operations.

During fiscal year ended June 30, 2018, the Company recognized $2.9 million in proceeds from a legal tax settlement, net of attorney fees, in Brazil. Of the total settlement, $2.5 million is included in selling, general and administrative expenses and $0.4 million is included in interest income on the Consolidated Income Statements. During the fiscal year ended June 30, 2017, the Company recognized $12.8 million in proceeds from a legal settlement, net of attorney fees, included in other income (expense), net on the Consolidated Income Statements.

Capital Projects

The Company expects total capital expenditures to range from $10.0 million to $15.0 million during fiscal year 2019 primarily for rental equipment investments and facility improvements.

Pre-Acquisition Contingencies

During the Company's due diligence for the CDC acquisition, several pre-acquisition contingencies were identified regarding various Brazilian federal and state tax exposures. In connection with these contingencies, the Company recorded indemnification receivables that are reported gross of the pre-acquisition contingency liabilities as the funds were escrowed as part of the acquisition. The Company settled the single remaining pre-acquisition contingency of approximately $2.3 million for CDC during the quarter ended March 31, 2018 and paid the remaining escrow balance to the former shareholders of CDC.

The table below summarizes the balances and line item presentation of CDC's pre-acquisition contingencies and corresponding indemnification receivables in the Company's consolidated balance sheet:



	June 30, 2018		June 30, 2017
	(in thousands)
Assets
Prepaid expenses and other assets (current)	$	—	$	2,212
Other assets (noncurrent)	$	—	$	—
Liabilities
Other current liabilities	$	—	$	2,212
Other long-term liabilities	$	—	$	—

During the Company's due diligence for the Network1 acquisition, several pre-acquisition contingencies were identified regarding various Brazilian federal and state tax exposures. The Company recorded indemnification receivables that are reported gross of the pre-acquisition contingency liabilities as the funds were escrowed as part of the acquisition. The sellers deposited $12.3 million and $8.7 million into the escrow account for the years ended June 30, 2018 and 2017. The amount available after the impact of foreign currency translation, as of June 30, 2018 and 2017, for future pre-acquisition contingency settlements or to be released to the sellers was $24.1 million and $13.0 million, respectively.

The table below summarizes the balances and line item presentation of Network1's pre-acquisition contingencies and corresponding indemnification receivables in the Company's consolidated balance sheet:



	June 30, 2018		June 30, 2017
	(in thousands)
Assets
Prepaid expenses and other assets (current)	$	1,385	$	1,294
Other assets (noncurrent)	$	5,700	$	8,235
Liabilities
Other current liabilities	$	1,385	$	1,294
Other long-term liabilities	$	5,700	$	8,235

The net decline in the value of pre-acquisition contingencies for Network1 is primarily due to the expiration of the statute of limitations for identified pre-acquisition contingencies. The amount of reasonably possible undiscounted pre-acquisition contingencies as of June 30, 2018 is estimated to range from $6.7 million to $23.0 million at this time, of which all exposures are indemnifiable under the share purchase agreement.