Commitments and contingencies
|12 Months Ended
Sep. 30, 2015
|Commitments and contingencies
|Commitments and contingencies
12. Commitments and contingencies
Certain contracts require us to provide a surety bond as a guarantee of performance. At September 30, 2015, we had performance bond commitments totaling $27.3 million. These bonds are typically renewed annually and remain in place until the contractual obligations have been satisfied. Although the triggering events vary from contract to contract, in general we would only be liable for the amount of these guarantees in the event of default in our performance of our obligations under each contract, the probability of which we believe is remote.
We lease office space and equipment under various operating leases. Lease expense for the years ended September 30, 2015, 2014 and 2013 was $67.1 million, $61.8 million and $49.0 million, respectively. Sublease income for the year ended September 30, 2015 was $0.5 million. Our operating leases may contain rent escalations or concessions. Lease expense is recorded on a straight-line basis over the life of the respective lease.
Minimum future lease commitments under leases in effect as of September 30, 2015 are as follows (in thousands):
We anticipate future sublease income of $1.2 million per fiscal year through fiscal year 2020.
Acquired loss-making contract
As part of the acquisition of PSI in April 2012, we acquired a systems-integration contract that was anticipated to record significant future losses. The fair value of the obligation to provide these services at a loss was calculated and recorded on our balance sheet at acquisition as deferred revenue of $15.1 million.
The contract was an arrangement that included both significant production and customization of software as well as postcontract customer support for these services. As we were unable to estimate the costs of providing these services, management deferred all revenue and costs related to service in anticipation of recognizing revenue at the commencement of the postcontract customer support services.
In February 2013, we received a formal notice of termination for convenience for this contract. The work was terminated as part of a broad, state-wide initiative to focus resources on a select number of projects. At the termination of this agreement, we reimbursed the client for certain funds received and undertook to provide future services. All other obligations to provide services have been extinguished and no material future costs will be incurred. Accordingly, revenue of $16.0 million was recognized in the year ended September 30, 2013. In addition, costs of $5.1 million, including costs which had been deferred, were recognized in the same period for an operating profit of $10.9 million.
We have an employment agreement with our Chief Executive Officer with a term ending in April 2018.
Collective bargaining agreements
Approximately 18% of our employees are covered by collective bargaining agreements or similar arrangements.