Invacare 2015 Annual Report Download - page 96

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-24
On April 23, 2015, the company entered into a real estate sales leaseback transaction which resulted in the recording of an
initial deferred gain of $7,414,000, the majority of which is included in Other Long-Term Obligations and will be recognized over
the 20-year life of the leases. The gain realized in 2015 was $171,000. The decrease in the uncertain tax obligation was driven
primarily by a reclassification from long term obligations to current taxes payable based on the amount expected be paid in the
next twelve months.
Leases and Commitments
The company leases a portion of its facilities, transportation equipment, data processing equipment and certain other
equipment. These leases have terms from 1 to 20 years and provide for renewal options. Generally, the company is required to
pay taxes and normal expenses of operating the facilities and equipment. As of December 31, 2015, the company is committed
under non-cancelable operating leases, which have initial or remaining terms in excess of one year and expire on various dates
through 2024. Lease expenses were approximately $20,360,000 in 2015, $23,568,000 in 2014 and $24,726,000 in 2013.
On April 23, 2015, the company sold and leased back, under four separate lease agreements, four properties located in Ohio
and one property in Florida for net proceeds of $23,000,000, which were used to reduce debt under the U.S. and Canadian Credit
Facility. The total annual rent for the properties will be $2,275,000 for the first year, which can increase annually over the 20 year
term of the leases based on the applicable geographical consumer price index (CPI). Each of the four lease agreements contains
three 10-year renewals with the rent for each option term based on the greater of the then-current fair market rent for each property
or the then- current rate and increasing annually by the applicable CPI. Under the terms of the lease agreements, the company is
responsible for all taxes, insurance and utilities. The company is permitted to sublet the properties; however, the properties are
currently being utilized exclusively by the company and there is no current subletting. The company is required to adequately
maintain each of the properties and any leasehold improvements will be amortized over the lesser of the lives of the improvements
or the remaining lease lives.
In connection with the transaction, the requirements for sale lease-back accounting were met. Accordingly, the company
recorded the sale of the properties, removed the related property and equipment from the company's balance sheet, recognized an
initial deferred gain of $7,414,000 and an immediate loss of $257,000 related to one property and recorded new lease liabilities.
Specifically, the company recorded four capital leases totaling $32,339,000 and one operating lease related to leased land, which
was not a material component of the transaction. The gains on the sales of the properties are required to be deferred and recognized
over the life of the leases as the property sold is being leased back. The deferred gain is classified under Other Long-Term Obligations
on the Condensed Consolidated Balance Sheet.
The amount of buildings and equipment capitalized in connection with capital leases was $42,640,000 and $12,123,000 at
December 31, 2015 and 2014, respectively. At December 31, 2015 and 2014, accumulated amortization was $7,667,000 and
$7,143,000, respectively, which is included in depreciation expense.
Future minimum operating and capital lease commitments, as of December 31, 2015, are as follows (in thousands):
Capital Leases Operating Leases
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,375 $ 15,067
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,375 8,804
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,848 5,005
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,671 2,378
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,671 1,101
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,872 268
Total future minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,812 $ 32,623
Amounts representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,839)
Present value of minimum lease payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,973