Note 4 — Balance Sheet Details

Accounts Receivable

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


	December 31,		September 30,
	2017		2017

Trade and other receivables	$	12,182	$	12,378
Long-term contracts:
Billed		172,661		195,492
Unbilled		235,583		238,773
Allowance for doubtful accounts		(429)		(436)
Total accounts receivable		419,997		446,207
Less estimated amounts not currently due		(17,328)		(17,457)
Current accounts receivable	$	402,669	$	428,750

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 December 31, 2017 under transportation systems contracts in the U.S. and Australia, and under a CGD Systems contract in Italy based upon the payment terms in the contracts. The non-current balance at September 30, 2017 represented non-current amounts due from these same customers.

Inventories

Inventories consist of the following (in thousands):


	December 31,		September 30,
	2017		2017

Finished products	$	2,942	$	4,369
Work in process and inventoried costs under long-term contracts		101,134		84,131
Materials and purchased parts		9,322		10,163
Customer advances		(12,003)		(10,948)
Net inventories	$	101,395	$	87,715

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 December 31, 2017, work in process and inventoried costs under long-term contracts includes approximately $2.4 million in costs incurred outside the scope of work or in advance of a contract award compared to $4.3 million at September 30, 2017. We believe it is probable that we will recover the costs inventoried at December 31, 2017, plus a profit margin, under contract change orders or awards within the next year.

Long-term Capitalized Costs

Long-term capitalized contract costs include costs incurred on certain transportation customer contracts to develop and manufacture systems for customers for which revenue recognition does not begin until the customers begin operating the systems. These capitalized costs are being recognized in cost of sales based upon the ratio of revenue recorded during a period compared to the revenue expected to be recognized over the term of the contracts. Long-term capitalized costs that were recognized as cost of sales totaled $2.3 million and $2.4 million for the quarters ended December 31, 2017 and December 31, 2016, respectively.

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 efforts to upgrade our current information systems, early in fiscal 2015 we purchased new enterprise resource planning (ERP) software and began the process of designing and configuring this software and other software applications to manage our operations. Various components of our ERP system became ready for their intended use and were placed into service on April 1, 2016, October 1, 2016, and October 1, 2017. As each component became ready for its intended use, the component’s costs were transferred into completed software and we began amortizing these costs over their seven-year estimated useful life.

We continue to capitalize costs associated with the development of other ERP components that are not yet ready for their intended use. We capitalized costs related to ERP components in development totaling $2.5 million and $2.0 million for the quarters ended December 31, 2017 and 2016, respectively.

In addition to software costs that were capitalized, we recognized $6.3 million of expenses during the three months ended December 31, 2017 and during the three months ended December 31, 2016 related to the development and implementation of our ERP system for costs that did not meet the requirements for capitalization. Amounts that were expensed in connection with the development and implementation of these systems are classified within selling, general and administrative expenses in the Condensed Consolidated Statements of Income (Loss).

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 $12.5 million and $11.4 million at December 31, 2017 and September 30, 2017, respectively.

In 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 values of assets set aside to fund deferred compensation liabilities as of December 31, 2017 and September 30, 2017 were $5.7 million and $5.3 million, respectively, which were comprised entirely of life insurance contracts. The carrying value of the life insurance contracts is based on the cash surrender value of the policies. 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 (Loss).