Note 4 — Balance Sheet Details

Marketable Securities

Marketable securities consist of fixed time deposits with short-term maturities. Marketable securities are classified and accounted for as available-for-sale. These investments are recorded at fair value in the accompanying Condensed Consolidated Balance Sheets and the change in fair value is recorded, net of taxes, as a component of other comprehensive income (loss). There have been no significant realized or unrealized gains or losses on these marketable securities to date. Marketable securities have been classified as current assets in the accompanying Condensed Consolidated Balance Sheets based upon the nature of the securities and availability for use in current operations.

Accounts Receivable

The components of accounts receivable are as follows (in thousands):

	June 30,			September 30,
	2015			2014

Trade and other receivables	$	16,119		$	30,593
Long-term contracts:
Billed	92,436			121,871
Unbilled	294,442			258,074
Allowance for doubtful accounts	(167		)	(489		)

Total accounts receivable	402,830			410,049
Less estimated amounts not currently due	(13,460		)	(15,870		)

Current accounts receivable	$	389,370		$	394,179

The amount classified as not currently due is an estimate of the amount of long-term contract accounts receivable that will not be collected within one year from June 30, 2015 under transportation systems contracts in the U.S. and Australia based upon the payment terms in the contracts. The non-current balance at September 30, 2014 represented non-current amounts due from customers under transportation systems contracts in the same locations.

Inventories

Inventories consist of the following (in thousands):

	June 30,			September 30,
	2015			2014

Work in process and inventoried costs under long-term contracts	$	83,061		$	58,440
Materials and purchased parts	2,367			125
Customer advances	(19,169		)	(19,790		)

Net inventories	$	66,259		$	38,775

Pursuant to contract provisions, agencies of the U.S. government and certain other customers have title to, or security interest in, inventories related to such contracts as a result of advances, performance-based payments, and progress payments. Contract advances, performance-based payments and progress payments received are recorded as an offset against the related inventory balances for contracts that are accounted for on a percentage-of-completion basis using units-of-delivery as the basis to measure progress toward completing the contract. This determination is performed on a contract by contract basis. Any amount of payments received in excess of the cumulative amount of accounts receivable and inventoried costs for a contract is classified as customer advances, which is classified as a liability on the balance sheet.

At June 30, 2015, work in process and inventoried costs under long-term contracts includes approximately $1.8 million in costs incurred outside the scope of work or in advance of a contract award compared to $2.3 million at September 30, 2014. We believe it is probable that we will recover the costs inventoried at June 30, 2015, plus a profit margin, under contract change orders or awards within the next year.

Long-term Capitalized Costs

Long-term capitalized contract costs consist of costs incurred on a contract to develop and manufacture a transportation fare system for a customer for which revenue recognition did not begin until the customer began operating the system in the fourth fiscal quarter of 2013. These capitalized costs are being recognized as cost of sales based upon the ratio of revenue recorded during the period compared to the revenue expected to be recognized over the term of the contract, which is through January 2024. Long-term capitalized costs that were recognized as cost of sales totaled $2.3 million and $6.0 million for the quarter and nine-month periods ended June 30, 2015, respectively, and $5.1 million and $6.1 million for the quarter and nine-month periods ended June 30, 2014, respectively. The balance of long-term capitalized costs at June 30, 2015 is expected to be recognized as cost of sales in approximately equal quarterly amounts in future months through the term of the contract.

Capitalized Software

We capitalize certain costs associated with the development or purchase of internal-use software. The amounts capitalized are included in property, plant and equipment in our Condensed Consolidated Balance Sheets and are amortized on a straight-line basis over the estimated useful life of the software, which ranges from three to seven years. No amortization expense is recorded until the software is ready for its intended use. As a part of our ongoing effort to upgrade our current information systems, early in fiscal 2015 we began the process of designing and implementing new enterprise resource planning (ERP) software and other software applications to manage our operations. Capitalized software costs totaled $1.3 million and $12.1 million for the quarter and nine-month periods ended June 30, 2015, respectively. The vast majority of the capitalized software costs at June 30, 2015 are related to the development of our ERP system, which is classified as construction in process as it has not yet been placed in service. At September 30, 2014 the carrying value of capitalized software was immaterial.

In addition to software costs that were capitalized in fiscal 2015, during the three and nine months ended June 30, 2015, we recognized expense related to the development of our ERP system of $4.7 million and $6.6 million, respectively, for costs that did not meet the requirements for capitalization. ERP expense is classified within selling, general and administrative expenses in the Condensed Consolidated Statements of Income.

Deferred Compensation Plan

We have a non-qualified deferred compensation plan offered to a select group of highly compensated employees. The plan provides participants with the opportunity to defer a portion of their compensation in a given plan year. The liabilities associated with the non-qualified deferred compensation plan are included in other long-term liabilities in our Condensed Consolidated Balance Sheets and totaled $9.7 million and $9.5 million at June 30, 2015 and September 30, 2014, respectively.

In the first quarter of fiscal 2015, we began making contributions to a rabbi trust to provide a source of funds for satisfying a portion of these deferred compensation liabilities. The total carrying value of the assets set aside to fund deferred compensation liabilities as of June 30, 2015 was $3.0 million. These assets are classified as other non-current assets and consist of life insurance contracts with a carrying value of $2.0 million and marketable securities with a carrying value of $1.0 million. The carrying value of the life insurance contracts is based on the cash surrender value of the policies. The marketable securities in the rabbi trust are carried at fair value, which is based upon quoted market prices for identical securities. Changes in the carrying value of the deferred compensation liability, and changes in the carrying value of the assets held in the rabbi trust are reflected in our Condensed Consolidated Statements of Income.