Note K -- Commitments and Contingencies

Legal Matters

The Company is involved in suits and claims in the normal course of business, including without limitation product liability and general liability claims, and claims pending before the Equal Employment Opportunity Commission. On at least a quarterly basis, the Company consults with its legal counsel to ascertain the reasonable likelihood that such claims may result in a loss. As required by ASC Topic 450, “Contingencies” (ASC 450), the Company categorizes the various suits and claims into three categories according to their likelihood for resulting in potential loss: those that are probable, those that are reasonably possible and those that are deemed to be remote. Where losses are deemed to be probable and estimable, accruals are made. Where losses are deemed to be reasonably possible, a range of loss estimates is determined and considered for disclosure. In determining these loss range estimates, the Company considers known values of similar claims and consultation with independent counsel.

The Company believes that the aggregate range of loss stemming from the various suits and asserted and unasserted claims which were deemed to be either probable or reasonably possible was not material as of April 30, 2014.

Product Warranty

The Company estimates outstanding warranty costs based on the historical relationship between warranty claims and revenues. The warranty accrual is reviewed monthly to verify that it properly reflects the remaining obligation based on the anticipated expenditures over the balance of the obligation period. Adjustments are made when actual warranty claim experience differs from estimates. Warranty claims are generally made within two months of the original shipment date.

The following is a reconciliation of the Company’s warranty liability:


		APRIL 30
(in thousands)		2014		2013

PRODUCT WARRANTY RESERVE
Beginning balance	$	1,795	$	1,885
Accrual for warranties		11,988		9,839
Settlements		(11,873)		(9,929)

Ending balance at fiscal year end	$	1,910	$	1,795

Lease Agreements

The Company leases certain office buildings, manufacturing buildings, service centers and equipment. Total rental expenses under operating leases amounted to approximately $8,005,000, $7,378,000 and $7,206,000, in fiscal years 2014, 2013 and 2012, respectively. Minimum rental commitments as of April 30, 2014, under noncancelable leases with terms in excess of one year are as follows:


FISCAL YEAR	OPERATING (in thousands)		CAPITAL (in thousands)
2015	$	3,257		1,377
2016		2,878		1,366
2017		1,489		1,246
2018		584		871
2019		395		666
2020 (and thereafter)		254		3,477
	$	8,857	$	9,003
Less amounts representing interest (2%)				(884)

Total obligations under capital leases			$	8,119

Related Parties

During fiscal 1985, prior to becoming a publicly held corporation, the Company entered into an agreement with a partnership which includes certain former executive officers and current significant shareholders of the Company, including one current member of the Board of Directors of the Company, to lease the Company’s headquarters building which was constructed and is owned by the partnership. The Company has subsequently renewed this lease in accordance with Company policy and procedures which includes approval by the Board of Directors. As of April 30, 2014, the Company is in the fourth year of the latest five-year renewal period, which expires in 2016. Under this agreement, rental expense was $470,000, $461,000 and $460,000, in fiscal years 2014, 2013 and 2012, respectively. Rent during the remaining term of approximately $927,000 (included in the preceding table) is subject to annual increases of 2% through the remaining term of the lease.