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Sale-Leaseback Financing Transaction | 3 Months Ended
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Jul. 31, 2022
Financing Liability [Abstract] |
Sale-Leaseback Financing Transaction | Sale-Leaseback Financing Transaction On December 22, 2021, the Company entered into an Agreement for Purchase and Sale of Real Property with CAI Investments Sub-Series 100 LLC, a Nevada limited liability company (the "Buyer"), for the Company’s headquarters and manufacturing facilities (the "Property") located at 2700 West Front Street in Statesville, North Carolina (the "Sale Agreement"). The Sale Agreement was finalized on March 24, 2022 and coincided with the Company and the Buyer entering into a 20-year lease, effective on such date between the Company and CAI Investments Medical Products I Master Lessee LLC ("Lessor"), an affiliate of Buyer (the "Lease Agreement"). At the same time, the Buyer and its affiliates formed a new, debt-financed affiliate CAI Investments Medical Products I, DST ("Trust") and contributed the Property to the Trust. According to the terms of the contemporaneous lease, the Trust leased the Property to its affiliated Lessor, which in turn sub-leased the Property to the Company (together with the Sale Agreement, the "Sale-Leaseback Arrangement"). The Sale-Leaseback Arrangement is repayable over a 20-year term, with four renewal options of five years each. Under the terms of the Lease Agreement, the Company’s initial basic rent is approximately $158,000 per month, with annual increases of approximately 2% each year of the initial term. The Company accounted for the Sale-Leaseback Arrangement as a financing transaction with the Buyer in accordance with ASC 842, "Leases," as the Lease Agreement was determined to be a finance lease. The Company concluded the Lease Agreement met the qualifications to be classified as a finance lease due to the significance of the present value of the lease payments, using a discount rate of 4.75% to reflect the Company’s incremental borrowing rate, compared to the fair value of the leased property as of the lease commencement date. In measuring the lease payments for the present value analysis, the Company elected the practical expedient to combine the lease component (the leased facilities) with the non-lease component (property management provided by the Buyer/Lessor) into a single lease component. The presence of a finance lease indicates that control of the Property has not transferred to the Buyer/Lessor and, as such, the transaction was deemed a failed sale-leaseback and must be accounted for as a financing arrangement. As a result of this determination, the Company is viewed as having received the sale proceeds from the Buyer/Lessor in the form of a hypothetical loan collateralized by its leased facilities. The hypothetical loan is payable as principal and interest in the form of “lease payments” to the Buyer/Lessor. As such, the Company will not derecognize the Property from its books for accounting purposes until the lease ends. No gain or loss was recognized under GAAP related to the Sale-Leaseback Arrangement. As of July 31, 2022, the carrying value of the financing liability was $29,209,000, net of $753,000 in debt issuance costs, of which $591,000 was classified as current on the Consolidated Balance Sheet with $28,618,000 classified as long-term. As of April 30, 2022, the carrying value of the financing liability was $29,350,000, net of $768,000 in debt issuance costs, of which $575,000 was classified as current on the Consolidated Balance Sheet with $28,775,000 classified as long-term. The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method. Interest expense associated with the financing arrangement was $332,000 for the quarter ended July 31, 2022. The Company will depreciate the building down to zero over the 20-year assumed economic life of the Property so that at the end of the lease term, the remaining carrying amount of the financing liability will equal the carrying amount of the land of $41,000. Remaining future cash payments related to the financing liability as of July 31, 2022 are as follows:
($ in thousands) |  |
Remainder of 2023 |  | $ | 1,421 |
2024 |  | 1,931 |
2025 |  | 1,970 |
2026 |  | 2,009 |
2027 |  | 2,050 |
Thereafter |  | 35,958 |
Total Minimum Liability Payments |  | 45,339 |
Imputed Interest |  | (16,130) |
Total |  | $ | 29,209 |

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- Definition Financing Liability + References No definition available. + Details
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- Definition The entire disclosure for sale leaseback transaction. Includes, but is not limited to, terms and conditions of transaction and gain (loss) from transaction. + References Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -SubTopic 40 -URI http://asc.fasb.org/subtopic&trid=2209073 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 40 -URI http://asc.fasb.org/subtopic&trid=77888253 + Details
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