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SALE/LEASEBACK ARRANGEMENTS

During the third quarter of fiscal 2015, the company sold three vessels to unrelated third parties, and simultaneously entered into bareboat charter agreements with the purchasers. The sale/leaseback transactions resulted in total proceeds to the company of $78.2 million and deferred gains of $45.0 million. The carrying value of the vessels was $33.2 million at the dates of sale. Two leases expire in the quarter ending December 2022 and the third lease expires in the quarter ending December 2023. Under the sale/leaseback agreements the company has the right to re-acquire two vessels at approximately 60% of the original sales price at the end of the seventh year and the third vessel at approximately 60% of the original sales price at the end of the eighth year, deliver the vessel to the owners at the end of the lease term, purchase the vessels at their then fair market values at the end of the lease terms or extend the leases for 24 months at mutually agreeable lease rates.

During the second 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 $19.4 million and a deferred gain of $11.2 million. The carrying value of the vessel was $8.2 million at the date of sale. The lease will expire in the quarter ending March 2023. Under the sale/leaseback agreement the company has the right to re-acquire the vessel at 47% of the original sales price in the middle of the eighth 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.

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 these transactions as sale/leasebacks with operating lease treatment and will expense lease payments over the lease term. The deferred gains 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 vessels would reduce the vessels’ stated cost if the company elects to exercise the purchase options.

During the third quarter of fiscal 2015, the company elected to repurchase from its lessor the remaining leased vessel from the sale/leaseback transaction that originated during Fiscal 2006 for $11.2 million. This vessel was then sold and leased back again in December 2014.

As of December 31, 2014, the future minimum lease payments for the vessels under the operating lease terms are as follows:


Fiscal year ending (In thousands)	Fiscal 2015 Sale/Leasebacks		Fiscal 2014 Sale/Leasebacks		Total
Remaining three months of 2015	$	2,043		5,220		7,263
2016		8,174		20,879		29,053
2017		8,174		20,879		29,053
2018		8,293		23,485		31,778
2019		8,744		24,800		33,544
Thereafter		37,554		65,263		102,817
Total future lease payments	$	72,982		160,526		233,508

For the quarters and nine months ended December 31, 2014 and 2013, the company expensed approximately $7.2 million and $5.8 million and $20.2 million and $13.8 million, respectively, on all of its bareboat charter arrangements.