FINANCING RECEIVABLES AND OPERATING LEASES

3 Months Ended

Jun. 30, 2015

FINANCING RECEIVABLES AND OPERATING LEASES [Abstract]

FINANCING RECEIVABLES AND OPERATING LEASES

2. FINANCING RECEIVABLES AND OPERATING LEASES

Our financing receivables and operating leases consist of assets that we financed for our customers, which we manage as a portfolio of investments. Equipment financed for our customers are accounted for as investments in direct financing, sales-type or operating leases in accordance with Accounting Standards Codification (“ASC”) Topic 840, Leases. We also finance third-party software, maintenance, and services for our customers, which are classified as notes receivables. Our notes receivables are interest bearing and are often due over a period of time that corresponds with the terms of the leased products.

FINANCING RECEIVABLES—NET

Our financing receivables, net consist of the following (in thousands):

June 30, 2015	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	72,462		$	82,449		$	154,911
Estimated unguaranteed residual value (1)		-			9,068			9,068
Initial direct costs, net of amortization (2)		647			628			1,275
Unearned income		-			(6,671	)		(6,671	)
Reserve for credit losses (3)		(3,540	)		(915	)		(4,455	)
Total, net	$	69,569		$	84,559		$	154,128
Reported as:
Current	$	48,624		$	44,924		$	93,548
Long-term		20,945			39,635			60,580
Total, net	$	69,569		$	84,559		$	154,128

(1) Includes estimated unguaranteed residual values of $4,005 thousand for direct financing leases, which have been sold and accounted for as sales under Codification Topic, Transfers and Servicing.

(2) Initial direct costs are shown net of amortization of $674 thousand.

(3) For details on reserve for credit losses, refer to Note 4, “Reserves for Credit Losses.”

March 31, 2015	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	59,943		$	66,415		$	126,358
Estimated unguaranteed residual value (1)		-			8,376			8,376
Initial direct costs, net of amortization (2)		429			495			924
Unearned income		-			(5,233	)		(5,233	)
Reserve for credit losses (3)		(3,573	)		(881	)		(4,454	)
Total, net	$	56,799		$	69,172		$	125,971
Reported as:
Current	$	33,484		$	33,425		$	66,909
Long-term		23,315			35,747			59,062
Total, net	$	56,799		$	69,172		$	125,971

(1) Includes estimated unguaranteed residual values of $3,977 thousand for direct financing leases which have been sold and accounted for as sales under Codification Topic, Transfers and Servicing.

(2) Initial direct costs are shown net of amortization of $647 thousand.

(3) For details on reserve for credit losses, refer to Note 4, “Reserves for Credit Losses.”

OPERATING LEASES—NET

Operating leases—net represents leases that do not qualify as direct financing leases. The components of the operating leases—net are as follows (in thousands):

	June 30, 2015			March 31, 2015
Cost of equipment under operating leases	$	41,985		$	36,283
Accumulated depreciation		(19,831	)		(18,354	)
Investment in operating lease equipment—net (1)	$	22,154		$	17,929

(1) These totals include estimated unguaranteed residual values of $4,913 thousand and $4,340 thousand as of June 30, 2015 and March 31, 2015, respectively.

TRANSFERS OF FINANCIAL ASSETS

We enter into arrangements to transfer the contractual payments due under financing receivables and operating leases, which are accounted for as sales or secured borrowings in accordance with Codification Topic, Transfers and Servicing. For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of June 30, 2015 and March 31, 2015, we had financing receivables and operating leases of $81.2 million and $61.9 million, respectively, which were collateral for non-recourse notes payable. See Note 6, “Notes Payable and Credit Facility.”

For transfers accounted for as sales, we derecognize the carrying value of the asset transferred and recognize a net gain or loss on the sale, which is presented within net sales in the unaudited condensed consolidated statement of operations. During the three months ended June 30, 2015 and 2014, we recognized net gains of $1.5 million and $2.2 million, respectively. The fair value of assets received from these sales was $24.3 million and $56.2 million for the three months ended June 30, 2015 and 2014, respectively.