Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at July 31, 2019 and 2018:



	2019		2018
Accrued wages and benefits	$	23,295,000	23,936,000
Accrued contract costs	15,007,000		10,016,000
Accrued warranty obligations	15,968,000		11,738,000
Accrued legal costs	2,835,000		6,179,000
Accrued commissions and royalties	5,114,000		4,654,000
Other	16,365,000		8,511,000
Accrued expenses and other current liabilities	$	78,584,000	65,034,000

On August 1, 2018, in connection with our adoption of ASC 606, $2,079,000 of accrued expenses and other current liabilities were reclassified to contract liabilities on our Consolidated Balance Sheet. Of this total amount, $1,679,000 and $400,000, respectively, was reclassified from the "accrued warranty obligations" and "other" categories presented in the above table to contract liabilities, as they represented deferred revenue related to service-type warranty performance obligations. See Note (1)(d) - "Revenue Recognition" for further discussion of our adoption of ASC 606. Accrued expenses and other current liabilities as of July 31, 2019 includes the amounts from our acquisitions of Solacom and the GD NG-911 business, as discussed in Note (2) "Acquisitions."

Accrued wages and benefits as of July 31, 2019 and 2018 include $1,787,000 and $2,963,000, respectively, 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."

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 legal costs as of July 31, 2018 included $3,372,000 related to estimated costs associated with a certain TeleCommunication Systems, Inc. ("TCS") intellectual property matter. During the fiscal year ended July 31, 2019, this matter was resolved in our favor. As a result, we reduced such accrued legal costs and recorded a $3,204,000 benefit in the Consolidated Statement of Operations. See Note (13)(b) - "Commitments and Contingencies - Legal Proceedings and Other Matters" for additional information.

Other accrued expenses as of July 31, 2019 include $568,000 for the current portion of facility exit costs related to the closure of a manufacturing facility, as discussed in more detail in Note (7) - "Cost Reduction Actions."

Accrued warranty obligations as of July 31, 2019 relate to estimated liabilities for assurance type 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, 2019 and 2018 were as follows:



	2019			2018
Balance at beginning of year	$	11,738,000		17,617,000
Reclass to contract liabilities as of August 1, 2018	(1,679,000		)	—
Provision for warranty obligations	3,902,000			5,055,000
Additions (in connection with acquisitions)	6,431,000			—
Charges incurred	(6,151,000		)	(8,244,000	)
Warranty settlement and reclass (see below)	1,727,000			(2,690,000	)
Balance at end of year	$	15,968,000		11,738,000

Our current accrued warranty obligations at July 31, 2019 and 2018 include $3,999,000 and $4,650,000, 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, 2019, the total present value of these monthly credits is $2,029,000, of which $1,727,000 is included in our current accrued warranty obligations and $302,000 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.

In connection with our acquisition of Solacom and the GD NG-911 business, during the fiscal year ended July 31, 2019, we assumed warranty obligations related to certain contracts acquired. See Note (2) - "Acquisitions" for further information pertaining to these acquisitions.