Significant Contracts

3 Months Ended

Dec. 31, 2016

Contractors [Abstract]

Significant Contracts

Significant Contracts

The Company has a Surplus Contract with the Defense Logistics Agency Disposition Services (DLA). Under this contract the Company is the remarketer of substantially all Department of Defense (DoD) non-rolling stock surplus turned into the DLA, and available for sale within the United States, Puerto Rico, and Guam. The Surplus Contract requires the Company to purchase substantially all usable surplus property offered to the Company by the DoD at a fixed percentage of the DoD's original acquisition value (OAV). This fixed percentage is 4.35%; prior to the date the current Surplus Contract became effective, this fixed percentage was 1.8%. The Company retains 100% of the profits from the resale of the property and bears all of the costs for the merchandising and sale of the property. Included in Accrued expenses and other current liabilities in the Consolidated Balance Sheet is a liability to the DoD of $15.2 million and $16.1 million for inventory as of December 31, 2016 and September 30, 2016, respectively. The Surplus Contract permits either party to terminate the contract for convenience. The initial two-year base period ended in December 2016. On December 6, 2016, the DLA notified the Company that it was exercising the first 1-year extension option. The Surplus contract now extends through December 14, 2017. There are threeone-year options to extend, exercisable by the DLA.

Revenue from the Surplus Contract accounted for 29.9% and 31.0% of the Company's consolidated revenue for the quarters ended December 31, 2016 and 2015, respectively.

The Company has a Scrap Contract with the DLA under which the Company is the remarketer of substantially all DoD non-electronic scrap turned into the DLA available for sale within the United States, Puerto Rico, and Guam.

The DLA initiated an Invitation to Bid for the next Scrap Contract. Bids were solicited in February 2016, and the contract was awarded to the Company in April 2016. The contract is a three-year contract with 2one-year options. The Company will pay a revenue-sharing payment to the DLA under this contract equal to 64.5% of the gross resale proceeds of the scrap property, and the Company will bear all of the costs for the sorting, merchandising and sale of the property. The contract contains a provision permitting the DLA to terminate the contract for convenience upon written notice to the Company from the DLA. The Company commenced operations under this contract in the quarter ended December 31, 2016.

The original Scrap Contract was structured as a profit-sharing arrangement, whereby the profit sharing percentage to the DLA was 65.0%. As a result of moving from a profit-sharing arrangement to a revenue-sharing arrangement, the Company re-named the balance sheet line item from Profit-sharing distributions payable to Distributions payable as of December 31, 2016.

Revenue from the Scrap Contract accounted for approximately 10.0% and 13.0% of the Company's consolidated revenue for the quarters ended December 31, 2016 and 2015, respectively.

Additionally, the Company has a contract with a commercial client under which it acquires and sells commercial merchandise. Revenue generated from the arrangement represented approximately 12.9% and 9.2% of revenue during the quarter ended December 31, 2016 and 2015, respectively.