Commitments and Contingent Liabilities

Operating lease commitments

As of March 2, 2019, the Company was obligated under non-cancelable operating leases for buildings and equipment. Certain leases provide for increased rental payments based upon increases in real estate taxes or operating costs. Future minimum rental payments under non-cancelable operating leases are:



(In thousands)	2020		2021		2022		2023		2024		Thereafter		Total
Total minimum payments	$	14,888	$	11,787	$	9,669	$	8,772	$	6,735	$	16,806	$	68,657

Total rental expense, including operating leases and short-term equipment rentals, was $25.1 million, $21.8 million and $16.9 million in fiscal 2019, 2018 and 2017, respectively. We lease the property that holds Sotawall's principal facilities from a company owned by an officer of Sotawall. Total rent paid for this facility was approximately $3.2 million in fiscal 2019, and the future minimum lease commitment is $12.7 million.

At March 2, 2019, we had one sale-leaseback agreement for equipment that provides an option to purchase the equipment at projected future fair market value upon expiration of the lease in 2021. The lease is classified as an operating lease in accordance with applicable financial accounting standards. The Company has a deferred gain of $0.8 million under the sale and leaseback transaction, which is included in the balance sheet as other current and non-current liabilities. The average annual lease payment over the remaining life of the lease is $1.0 million.

Bond commitments

In the ordinary course of business, predominantly in the Architectural Services and Architectural Framing Systems segments, we are required to provide surety or performance bonds that commit payments to our customers for any non-performance. At March 2, 2019, $313.2 million of our backlog was bonded by these types of bonds with a face value of $570.6 million. These bonds do not have stated expiration dates, as we are released from the bonds upon completion of the contract. We have not been required to make any payments under these bonds with respect to our existing businesses.

Warranty and project-related contingencies

We reserve estimated exposures on known claims, as well as on a portion of anticipated claims, for product warranty and rework costs based on historical product liability claims as a ratio of sales. Claim costs are deducted from the accrual when paid. Factors that could have an impact on the warranty accrual in any given period include the following: changes in manufacturing quality, changes in product mix and any significant changes in sales volume. A warranty rollforward follows:



(In thousands)	2019			2018
Balance at beginning of period	$	22,517		$	21,933
Additional accruals	5,552			4,643
Acquired reserves	—			5,663
Claims paid	(11,332		)	(9,722		)
Balance at end of period	$	16,737		$	22,517

Additionally, we are subject to project management and installation-related contingencies as a result of our fixed-price material supply and installation service contracts, primarily in our Architectural Services segment and certain of our Architectural Framing Systems businesses, including those taken on with our acquisition of EFCO. We actively manage the risk of these exposures through contract negotiations, proactive project management and insurance coverages. The liability for these types of project-related contingencies was $42.1 million and $26.4 million as of March 2, 2019 and March 3, 2018, respectively.

Letters of credit

At March 2, 2019, we had $25.1 million of ongoing letters of credit, all of which have been issued under our revolving credit facility, as discussed in Note 8.

Purchase obligations

Purchase obligations for raw material commitments and capital expenditures totaled $132.2 million as of March 2, 2019.

Environmental liability

In fiscal 2008, we acquired one manufacturing facility which has certain historical environmental conditions. Remediation of these conditions is ongoing without significant disruption to our operations. The liability for these remediation activities was $1.2 million and $1.3 million at March 2, 2019 and March 3, 2018, respectively.

New Markets Tax Credit (NMTC) transactions

We have entered into four separate NMTC programs to support our operational expansion, including two transactions completed in the current fiscal year. Proceeds received from investors on these transactions are included within other non-current liabilities on our consolidated balance sheets. The NMTC arrangements are subject to 100 percent tax credit recapture for a period of seven years from the date of each respective transaction. Therefore, upon the termination of each arrangement, these proceeds will be recognized in earnings in exchange for the transfer of tax credits. The direct and incremental costs incurred in structuring these arrangements have been deferred and are included in other non-current assets on our consolidated balance sheets. These costs will be recognized in conjunction with the recognition of the related proceeds on each arrangement. During the construction phase, we are required to hold cash dedicated to fund each capital project which is classified as restricted cash on our consolidated balance sheets. Variable-interest entities, which have been included within our consolidated financial statements, have been created as a result of the structure of these transactions, as investors in the programs do not have a material interest in their underlying economics.

The table below provides a summary of our outstanding NMTC transactions (in millions):



Inception date	Termination date	Proceeds received		Deferred costs		Net benefit
November 2013	October 2020	$	10.7	$	3.0	$	7.7
June 2016	May 2023	6.0		0.9		5.1
August 2018	July 2025	6.6		0.9		5.7
September 2018	August 2025	3.2		0.8		2.4
Total		$	26.5	$	5.6	$	20.9

Litigation

In November 2018, a purported class action lawsuit was filed claiming the Company and certain named executive officers made materially false and/or misleading statements and failed to disclose material adverse facts about the Company's business and operations during the period June 28, 2018 to September 17, 2018. In December 2018, a derivative lawsuit was filed, based on substantially similar allegations, against certain of our executive officers and directors claiming breach of fiduciary duty, waste of corporate assets and unjust enrichment. We intend to vigorously defend against both of these matters. Due to the preliminary nature of these matters, we are unable to estimate any potential loss at this time.

In addition to the foregoing, the Company is a party to various legal proceedings incidental to its normal operating activities. In particular, like others in the construction supply and services industry, the Company’s construction supply and services businesses are routinely involved in various disputes and claims arising out of construction projects, sometimes involving significant monetary damages or product replacement. The Company is subject to litigation arising out of general liability, employment practices, workers' compensation and automobile claims. Although it is very difficult to accurately predict the outcome of such proceedings, facts currently available indicate that no such claims will result in losses that would have a material adverse effect on the results of operations, cash flows or financial condition of the Company.