Note 18. Commitments and Contingencies
The Company records provisions when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. Claims and litigation are reviewed quarterly and provisions are taken or adjusted to reflect the status of a particular matter. The Company believes the estimated liability in its Consolidated Financial Statements for claims or litigation is adequate and appropriate for the probable and estimable outcomes. Liabilities recorded were not material to the Company’s financial position, results of operations or liquidity. The Company believes it is remote that the settlement of any of the currently identified claims or litigation will be materially in excess of what is accrued.
The Company is party to agreements that include deferred payment provisions representing potential milestone payments for former owners of acquired businesses. The provisions are made up of two general types of arrangements, contingent compensation and contingent consideration. A contingent compensation arrangement is contingent on the former owner’s future employment with the Company and the related amounts are recognized over the required employment period. A contingent consideration agreement is contingent on the achievement of certain revenue and manufacturing milestones, regardless of the former owners’ employment status. Contingent consideration was recorded as purchase consideration at the time of the initial acquisition based on the fair value of the estimated liability.
The Company primarily determines the contingent consideration liability based on the forecasted probability of achieving certain milestones.
The arrangement liabilities, recorded on the Consolidated Balance Sheets, were as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Arrangement Liability | | Maximum Payout (1) | | |
| | Balance Sheet Location | | July 31,
2025 | | July 31,
2024 | | July 31,
2025 | | July 31,
2024 | | Expires in |
| Contingent compensation arrangements | | | | | | | | | | | | |
Purilogics (4) | | Accrued employee compensation and related taxes | | $ | — | | | $ | 2.1 | | | $ | — | | | $ | 3.0 | | | — | |
Other | | Accrued employee compensation and related taxes, other long-term liabilities | | $ | 0.2 | | | $ | 0.3 | | | $ | 0.2 | | | $ | 0.8 | | | FY27 |
| Contingent consideration liability | | | | | | | | | | | | |
Purilogics (2) | | Other current liabilities, other long-term liabilities | | $ | 9.8 | | | $ | 19.0 | | | $ | 21.0 | | | $ | 27.0 | | |
FY27 |
Other (3) | | Other current liabilities | | $ | 1.5 | | | $ | 2.8 | | | $ | 1.5 | | | $ | 2.8 | | | FY26 |
(1)The maximum payout values are inclusive of the respective arrangement liability balance.
(2)The decrease in the Purilogics’ contingent consideration liability in fiscal 2025 was primarily driven by a $6.2 million reduction of the fair value during the twelve months ended July 31, 2025 based on the probability of achieving certain milestones. The total contingent consideration paid as of July 31, 2025 was $5.0 million, of which $3.0 million was paid during fiscal 2025 and $2.0 million was paid during fiscal 2024.
(3)A contingent consideration liability of $1.5 million was added in fiscal 2025 due to a non-material acquisition. The total contingent consideration paid as of July 31, 2025 was $2.8 million, which was all paid in fiscal 2025.
(4)Purilogics contingent compensation of $3.0 million was paid in fiscal 2025.
For additional discussion regarding the fair value of the Company’s contingent consideration liability, see Note 16.
Warranty Reserves
The Company estimates warranty expense on certain products at the time of sale using quantitative measures based on historical warranty claim experience and evaluation of specific customer warranty issues. The Company’s accrued warranty reserves were $6.9 million and $10.2 million as of July 31, 2025 and 2024, respectively. During the year ended July 31, 2025, there were no individually or collectively material specific warranty matters accrued for, and there was a $4.1 million specific reserve settled for one customer. During the year ended July 31, 2024, there was a $4.1 million specific warranty reserved for one customer, and there were no other individually or collectively material specific warranty matters accrued for, or significant settlements made.