20. Commitments and Contingencies

Operating Leases Commitments

The Company leases manufacturing and office facilities and certain equipment under non-cancelable operating leases with lease expiration dates through 2025. Rent expense under the operating leases, excluding costs recorded as a component of restructuring charges, was $4.4 million, $4.9 million and $6.5 million, respectively, for the fiscal years ended September 30, 2017, 2016 and 2015.

The Company leases approximately 85,000 square feet of space in Indianapolis, Indiana to accommodate its sample storage, sales and support functions. The initial lease term expired in July 2017. The new lease for such space commenced on August 1, 2017 and expires on September 30, 2023. Additionally, the Company executed another new lease agreement for an additional 13,000 square feet of space within the aforementioned facility which commences on March 1, 2019 and expires on September 30, 2023. The new leases may be extended at the Company’s option for three additional terms of five years each, subject to the terms and conditions of the lease.

In addition to the Indianapolis facility, the Company leases approximately 45,000 square feet of space in each of its Fremont, California and Manchester, UK to accommodate its manufacturing, research and development, and sales and support functions. During the fiscal year ended September 30, 2017, the Company extended the lease term for its Fremont, California facility until August 31, 2025 which may be further extended at the Company’s option for two additional terms of five years each, subject to the terms and conditions of the lease. The initial term for the Manchester, UK facility expires in December 2019 and may be extended at the Company’s option for five years subject to the terms and conditions of the lease.

Future minimum lease commitments on non-cancelable operating leases and scheduled sublease payments as of September 30, 2017 are as follows (in thousands)


			Scheduled
	Gross		Sublease		Net
Year Ended September 30,	Payments		Payments		Payments
2018	$	3,739	$	54	$	3,685
2019		3,182		9		3,173
2020		1,791		—		1,791
2021		1,535		—		1,535
2022		1,549		—		1,549
Thereafter		9,066		—		9,066
	$	20,862	$	63	$	20,799

The Company utilizes a third party to manage its manufacturing operations in Mexico. As a part of this arrangement, the Company makes and guarantees the monthly payments for a lease of its Mexico facility which expires in February 2019. The remaining payments under the lease were approximately $1.0 million at September 30, 2017.

Letters of Credit

At September 30, 2017 and 2016, the Company had $3.5 million and $2.0 million, respectively, of letters of credit outstanding related primarily to customer advances and other performance obligations. These arrangements guarantee the refund of advance payments received from the Company’s customers in the event that the product is not delivered or warranty obligations are not fulfilled in accordance with the contract terms. These obligations could be called by the beneficiaries at any time before the expiration date of the particular letter of credit if the Company fails to meet certain contractual requirements. None of these obligations were called during fiscal years ended September 30, 2017 and 2016, and the Company currently does not anticipate any of these obligations to be called in the near future.

Purchase Commitments

The Company has non-cancelable contracts and purchase orders for inventory of $122.0 million and $101.4 million, respectively, at September 30, 2017 and 2016.

Contingencies

During the fiscal year ended September 30, 2016, the Company discovered that it inadvertently failed to register on Form S‑8 with the Securities and Exchange Commission certain shares of common stock previously authorized for issuance by the Company’s Board of Directors and stockholders under the Company’s 1995 Employee Stock Purchase Plan, as amended (the “ESPP”). As a result, certain purchasers of common stock under the ESPP had the right to rescind their purchases for an amount equal to the purchase price paid for the shares, plus interest from the date of purchase. The rescission rights were limited to the shares purchased in the last twelve months, which is the applicable federal statute of limitations, and still held by the original purchasers. These shares have been treated as issued and outstanding for financial reporting purposes.

In fiscal year 2016, the Company sold shares of its common stock under the ESPP in two separate transactions. On January 29, 2016, the Company sold 118,548 shares to ESPP participants at a price of $8.00 per share and on July 29, 2016, the Company sold 117,179 shares to ESPP participants at a price of $8.02 per share, for an aggregate purchase price of approximately $1.9 million. No commissions or other fees were paid in connection with the issuance of those shares. On February 8, 2017, the Company filed a Form S-8 registration statement with the SEC to cover the 1,000,000 shares of common stock that had been authorized for issuance by our Board of Directors and approved by the stockholders but not otherwise registered on a Form S-8. All the shares subject to rescission rights expired by statute of limitations on July 31, 2017.

The Company is subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course of business. The Company cannot predict the ultimate outcome of such legal proceedings or in certain instances provide reasonable ranges of potential losses. However, as of the date of this report, the Company believes that none of these claims will have a material adverse effect on its consolidated financial position or results of operations. In the event of unexpected subsequent developments and given the inherent unpredictability of these legal proceedings, there can be no assurance that the Company’s assessment of any claim will reflect the ultimate outcome, and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s consolidated financial position or results of operations in particular quarterly or annual periods.