Captial Lease and Financing Transactions

6 Months Ended

Sep. 24, 2016

Capital Lease and Financing Transactions

Capital Lease and Financing Transactions

8. Capital Leases and Financing Transactions

As of September 24, 2016, the Company had non-cancelable capital leases for property and equipment rentals with principal and interest payments due monthly. The liability under capital lease arrangements as of September 24, 2016 totals $0.9 million.

During fiscal 2016, the Company acquired leases related to two retail stores, two office buildings, one distribution center facility and land as part of the Sheplers Acquisition. On July 30, 2007, Sheplers sold these properties to an unrelated third-party real estate company and simultaneously entered into an arrangement with the third-party real estate company to lease back these properties. Sheplers maintained continuing involvement in these properties such that this sale did not qualify for sale-leaseback accounting treatment. This transaction is recorded as a financing transaction with the assets and related financing obligation recorded on the balance sheet. The lease has a 20-year term expiring in 2027 and includes renewal options and certain default provisions requiring the Company to perform repairs and maintenance, make timely rent payments and insure the buildings and equipment. The liability under the financing transaction as of September 24, 2016 totals $7.6 million.

The total liability under capital lease and financing transactions as of September 24, 2016 is $8.5 million and is included as capital lease obligations in the condensed consolidated balance sheet. The current portion of the capital lease arrangements is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets. The interest rates range from 6.1% to 11.1%.

The net property and equipment involved in the Company’s capital leases and financing transaction are included in property and equipment as follows:


	September 24,		March 26,
(in thousands)	2016		2016
Buildings	$	7,588	$	7,588
Land		2,530		2,530
Site improvements		410		410
Equipment		63		63
Property and equipment, gross		10,591		10,591
Less: accumulated depreciation		(908)		(551)
Property and equipment, net	$	9,683	$	10,040

As of September 24, 2016, future minimum capital lease and financing transaction payments are as follows:


Fiscal Year	(in thousands)
2017		641
2018		1,286
2019		1,309
2020		1,321
2021		1,346
Thereafter		8,310
Total		14,213
Less: Imputed interest		(5,748)
Present value of capital leases and financing transaction		8,465
Less: Current capital leases and financing transaction		(401)
Noncurrent capital leases and financing transaction	$	8,064