Sale/Leaseback Arrangements

3 Months Ended

Jun. 30, 2014

(13)

SALE/LEASEBACK ARRANGEMENTS

During the first quarter of fiscal 2015, the company sold one vessel to an unrelated third party, and simultaneously entered into bareboat charter agreements with the purchaser. The sale/leaseback transaction resulted in proceeds to the company of $13.4 million and a deferred gain of $9.4 million. The carrying value of the vessel was $4.0 million at the date of sale. The lease will expire in the quarter ending June 2021. Under the sale/leaseback agreement the company has the right to re-acquire the vessel at 61% of the original sales price at the end of the sixth year, deliver the vessel to the owner at the end of the lease term, purchase the vessel at its then fair market value at the end of the lease term or extend the lease for 24 months at mutually agreeable lease rates.

The company is accounting for this transaction as a sale/leaseback with operating lease treatment and will expense lease payments over the lease term. The deferred gain will be amortized to gain on asset dispositions, net ratably over the respective lease term. Any deferred gain balance remaining upon the repurchase of the vessel would reduce the vessels’ stated cost if the company elected to exercise the purchase options.

As of June 30, 2014, the future minimum lease payments for this sale/leaseback are as follows:


Fiscal year ending	Amount (In thousands)
Remaining nine-months of 2015		$	804
2016			1,072
2017			1,072
2018			1,191
2019			1,310
Thereafter			2,620
Total future lease payments		$	8,069