Property and Equipment

9 Months Ended

Jun. 30, 2013

6. Property and Equipment

Property and equipment consisted of the following:

	June 30, 2013		September 30, 2012
	(in thousands)

Land and buildings	$	5,565	$	5,537
Equipment, furniture and fixtures	205,511		177,710
Leasehold improvements	25,045		26,180
Total property and equipment	236,121		209,427
Accumulated depreciation	(148,745)		(135,118)
Property and equipment, net	$	87,376	$	74,309

For the three and nine months ended June 30, 2013, the depreciation expense related to property and equipment, including assets under capital leases, was $8.1 million and $22.4 million, respectively, compared to $6.1 million and $19.7 million for the prior-year periods.

In the third quarter of 2013, in connection with exit activities related to vacating leased facilities we recorded a loss of $6.5 million. The loss consisted of an accrued liability of $4.1 million for estimated contract termination costs associated with the long-term non-cancelable leases of those facilities, reduced by $0.3 million of write-offs of prorated portions of existing deferred items previously recognized in connection with the leases, and $2.7 million in net write-offs of fixed assets, primarily leasehold improvements, furniture and fixtures, that were no longer in use after vacating the facilities. The loss is recorded in other costs of revenue on the condensed consolidated statements of operations.

We initially measured the lease contract termination liability at the fair value of the prorated portion of the lease payments associated with the vacated facilities, reduced by estimated sublease rentals and other costs. If the actual timing and potential termination costs or realization of sublease income differ from our estimates, the resulting liabilities could vary from recorded amounts. These liabilities are reviewed periodically and adjusted when necessary. We expect the remaining lease payments to be paid through the various lease expiration dates that continue until 2021. The following is a reconciliation of the beginning and ending balances of these liabilities related to lease contract termination costs:

		ECS		TSS		Total
		(in thousands)

Balance at September 30, 2012		$	–	$	2,940	$	2,940
Costs incurred and charged to expense		3,744		330		4,074
Adjustments (1)		–		(1,009)		(1,009)
Balance at June 30, 2013		$	3,744	$	2,261	$	6,005


(1)	Adjustments of the actual timing and potential termination costs or realization of sublease income.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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