Property, Plant and Equipment

12 Months Ended

Sep. 30, 2020

Property, Plant and Equipment

Property, Plant and Equipment

NOTE 7—PROPERTY, PLANT AND EQUIPMENT

Significant components of property, plant and equipment are as follows (in thousands):

	September 30,
	2020		2019
Land and land improvements	$	7,423	$	7,348
Buildings and improvements		49,716		48,191
Machinery and other equipment		132,962		107,297
Software		121,890		108,526
Leasehold improvements		22,295		17,064
Construction and internal-use software development in progress		21,409		16,814
Accumulated depreciation and amortization		(189,394)		(160,271)
	$	166,301	$	144,969

In fiscal 2019, we entered into agreements related to the construction and leasing of two buildings on our existing corporate campus in San Diego, California. Under these agreements, a financial institution will own the buildings, and we will lease the property for a term of five years upon their completion.

In the third quarter of fiscal 2019 we sold the land and buildings comprising our separate CTS campus in San Diego and entered into a lease with the buyer until the new buildings on our corporate campus are ready for occupancy in fiscal 2021. In the third quarter of fiscal 2019 we also sold land and buildings in Orlando, Florida and we are entering a lease for new space in Orlando to accommodate our employees and operations in Orlando. In connection with the sale of these real estate campuses we received total net proceeds of $44.9 million and recognized net gains on the sales totaling $32.5 million.

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.

Costs incurred in the development of internal-use software and software applications, including external direct costs of materials and services and applicable compensation costs of employees devoted to specific software development, are capitalized as computer software costs. Costs incurred outside of the application development stage, or that are types of costs that do not meet the capitalization requirements, are expensed as incurred. Amounts capitalized are included in property, plant and equipment and are amortized on a straight-line basis over the estimated useful life of the software, which ranges from three to seven years.

Through September 30, 2020 we have incurred costs of $140.0 million related to the purchase and development of our ERP system, including $1.1 million, $3.1 million, and $22.5 million of costs incurred during fiscal years 2020, 2019 and 2018, respectively. We have capitalized $1.1 million, $1.6 million, and $7.5 million of qualifying software development costs as internal-use software development in progress during fiscal years 2020, 2019, and 2018, respectively. In fiscal 2019 and 2018, we recognized expense of $1.5 million and $15.0 million, respectively, for costs that did not qualify for capitalization. Amounts that were expensed in connection with the development of these systems are classified within selling, general and administrative expenses in the Consolidated Statements of Operations.

Various components of our ERP system became ready for their intended use and were placed into service at various times from fiscal 2016 through fiscal 2020. 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 using the straight-line method. We continue to capitalize costs associated with the development of other ERP components that are not yet ready for their intended use.

Our provisions for depreciation of plant and equipment and amortization of leasehold improvements and software amounted to $29.2 million, $22.6 million and $19.5 million in 2020, 2019 and 2018, respectively. Generally, we use straight-line methods for depreciable real property over estimated useful lives ranging from 15 to 39 years or for leasehold improvements, the term of the underlying lease if shorter than the estimated useful lives. We typically use accelerated methods (declining balance) for machinery and equipment and software other than our ERP system over estimated useful lives ranging from 5 to 10 years.