Property and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Property and Equipment

5. Property and Equipment

Property and equipment consisted of the following (in thousands):

	At December 31,
	2016			2015
Computers, software, machinery and equipment	$	71,769		$	72,066
Leasehold improvements		7,848			7,839
Furniture and fixtures		6,898			6,313
Building and improvements		23,786			23,786
Land		12,852			12,852
Software development and other equipment in progress		2,581			1,695
Subtotal		125,734			124,551
Less: Accumulated depreciation and amortization		(69,382	)		(67,777	)
Property and equipment, net	$	56,352		$	56,774

We capitalized interest costs of approximately $40,000 and $0.5 million in 2016 and 2015, respectively, relating to internally developed software costs during development. Capitalized interest costs in 2015 were also related to the construction of our data center in New Albany, Ohio. Depreciation and amortization expense for property and equipment, including fixed assets under capital leases, for the years ended December 31, 2016, 2015 and 2014 totaled $9.9 million, $10.9 million and $10.3 million.

In September 2015, we listed our real property located in Irvine, California for sale. Under a broker agreement, the Irvine Property is available for immediate sale in its present condition. The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and we believe the fair value exceeds the carrying value. We have classified $5.8 million related to the Irvine Property, stated at lower of cost or fair value, as “Asset held for sale” at December 31, 2016 and 2015, and $4.6 million and $4.8 million related to the mortgage on the Irvine Property as “Note payable related to asset held for sale” on our Consolidated Balance Sheets as of December 31, 2016 and 2015, respectively.

Throughout 2016 and 2015, we entered into capital lease schedules with a bank totaling approximately $0.8 million and $1.2 million, respectively. The capital leases are primarily related to the data center we constructed in New Albany, Ohio and various furniture and equipment additions at our El Segundo, California corporate headquarters office. The capital lease schedules entered into in 2016 and 2015 have terms ranging from one to five years. See Note 10 below for information related to capital lease obligations. At December 31, 2016, we had a total of $2.0 million under our capital lease obligations, of which $1.3 million was included as part of “Accrued expenses and other current liabilities” and $0.7 million was included as part of “Other long-term liabilities” on our Consolidated Balance Sheets.

We have been in the process of upgrading our ERP systems due to the discontinued third party support of certain of our aged legacy systems, our changing IT needs when considering the transitioning state of our business from our origins towards becoming a leading IT solution provider and the ongoing desire to integrate multiple systems upon which we currently operate as a result of multiple acquisitions. In this regard, we previously purchased licenses for Microsoft Dynamics AX and other related modules to provide a complete, robust and integrated ERP solution and have expended time, effort and resources to implement this AX solution for our legacy businesses. We believe the implementation and upgrade of our systems should help us to gain further efficiencies across our organizations. Our newly acquired En Pointe business has operated for a number of years on an implemented and successfully functioning SAP system. As a result of the En Pointe acquisition, we considered new issues related to the costs, risks and benefits of either continuing the implementation of our AX solution and moving En Pointe to such AX solution or moving the legacy businesses to the SAP solution. In response, we shifted certain of our IT development efforts towards assessing these respective costs, risks and benefits. There are significant risks and uncertainties in adopting and implementing a new ERP system and as part of our assessment of these alternatives, we considered the fact that En Pointe has been successfully functioning on its SAP system for many years while none of our businesses have operated on the AX system. While we believe the AX solution has many valuable features and that it has been essential that we have undertaken our AX development efforts to date, we have weighed these attributes and the transition risk inherent with any such new solution against the fact that En Pointe, with similar business characteristics and system needs to our legacy businesses, has been successfully operating on its SAP system for a number of years. As a result of the assessments performed, our management concluded that the SAP solution is the best, most viable and cost effective option for our consolidated business going forward. To that end, in late October 2015, our management determined, and our Board of Directors approved such determination, to adopt the SAP platform across all of our business units and approved the non-cash write-off of the remaining $22.1 million of work in process software previously capitalized for all major phases of the design, configuration and customization of the AX solution to date. For the year ended December 31, 2015, a total of $25.4 million non-cash charge related to the ERP and CRM write-offs was included in “Selling, general and administrative expenses” on our Consolidated Statements of Operations.