Sale-Leaseback of Dixon Distribution Center

6 Months Ended

Jan. 28, 2017

Sale-Leaseback of Dixon Distribution Center

9. Sale-Leaseback of Dixon Distribution Center

On May 5, 2015, the Company sold its distribution center in Dixon, California for net proceeds of $25.9 million, and entered into a leaseback of the property from the purchaser for a period of 15 years.

Under the terms of the lease agreement, the Company is required to maintain a $3.5 million unconditional irrevocable letter of credit that reduces our line-of-credit borrowing base for a period of up to 10 years. Due to the Company’s continuing involvement through the irrevocable letter of credit, the Company has accounted for the sale-leaseback as a financing liability. Payments made by the Company are allocated between interest expense and a reduction to the sale-leaseback financing liability.

Payments (including interest) made by the Company related to the sale-leaseback financing liability during the 26 weeks ended January 28, 2017 and January 30, 2016 totaled $0.9 million and $0.9 million, respectively. The interest portion of the payments was $0.8 and $0.8 million during the 26 weeks ended January 28, 2017 and January 30, 2016, respectively.

As of January 28, 2017, future payments on the sale-leaseback financing liability, excluding renewals, are as follows (in thousands):


Fiscal years ending	Payments
July 29, 2017	$	908
August 4, 2018		1,834
August 3, 2019		1,856
August 1, 2020		1,880
July 31, 2021		1,903
July 30, 2022		1,927
Thereafter		28,485

Total payments		38,793
Less amount representing interest		(12,384	)
Less unamortized deferred financing costs		(739	)

Total sale-leaseback financing liability, net of unamortized deferred financing costs		25,670
Less current portion of sale-leaseback financing liability included in accrued and other current liabilities		(244	)

Long-term portion of sale-leaseback financing liability, net of unamortized deferred financing costs	$	25,426

As of January 28, 2017, the net carrying value of the Dixon distribution center included in property and equipment on our condensed consolidated balance sheets amounted to $18.2 million.

GYMBOREE CORP 10-Q