18. Commitments and Contingencies

Commitments

The Company’s operations are conducted in leased facilities. The Company finances the purchase of certain IT equipment and perpetual software licenses under capital lease arrangements. As of April 30, 2019, the Company has no future commitments related to capital lease arrangements as final payments were made during fiscal year 2019. Following is a summary of non‑cancelable operating commitments:


	April 30, 2019
	(In thousands)
		Operating leases
2020	$	5,298
2021		3,527
2022		2,723
2023		1,554
2024		953
Thereafter		—
	$	14,055

Rental expense under operating leases was approximately $4,609,000, $4,011,000 and $3,849,000 for the years ended April 30, 2019, 2018 and 2017, respectively.

Contingencies

The Company is subject to legal proceedings and claims which arise out of the ordinary course of its business. Although adverse decisions or settlements may occur, the Company, in consultation with legal counsel, believes that the final disposition of such matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

At April 30, 2019 and 2018, the Company had outstanding letters of credit totaling $7,079,000 and $6,389,000, respectively.

Contract Cost Audits

Payments to the Company on government cost reimbursable contracts are based on provisional, or estimated indirect rates, which are subject to an annual audit by the Defense Contract Audit Agency (“DCAA”). The cost audits result in the negotiation and determination of the final indirect cost rates that the Company may use for the period(s) audited. The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company.

For example, during the course of its audits, the DCAA may question the Company’s incurred costs, and if the DCAA believes the Company has accounted for such costs in a manner inconsistent with the requirements under Federal Acquisition Regulations, the DCAA auditor may recommend to the Company’s administrative contracting officer to disallow such costs. Historically, the Company has not experienced material disallowed costs as a result of government audits. However, the Company can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future.

The Company’s revenue recognition policy calls for revenue recognized on all cost reimbursable government contracts to be recorded at actual rates unless collectability is not reasonably assured. During the fiscal year ended April 30, 2017, the Company settled rates for its incurred cost claims with the DCAA for fiscal years 2011 through 2014 without payment of any consideration. During the fiscal year ended April 30, 2019, the Company settled rates for its incurred cost claims with the DCAA for fiscal years 2016 and 2017 without payment of any consideration. At April 30, 2019 and 2018, the Company had $93,000 and $77,000 reserved for open incurred cost claim audits, respectively.

The Company is also currently undergoing an escheat examination by the state of Delaware. The amount of any potential loss is currently not estimable, and therefore, no reserve has been recorded.