Net Investment in Operating Leases and Operating Lease Repurchase Obligations

9 Months Ended

May. 30, 2015

Net Investment in Operating Leases and Operating Lease Repurchase Obligations [Abstract]

Net Investment in Operating Leases and Operating Lease Repurchase Obligations

Net Investment in Operating Leases and Operating Lease Repurchase Obligations

During the third quarter of Fiscal 2014 we delivered 520 RV rental units to Apollo, a US RV rental company. Under the terms of a sales agreement with Apollo, all units were paid for upon delivery. To secure an order of this magnitude, we contractually agreed to repurchase up to 343 of the units at specified prices after one season of rental use (by no later than December 31, 2014) provided certain conditions are met. On December 29, 2014 the repurchase timing was extended from December 31, 2014 to February 28, 2015. The original cost of these units was depreciated down to the estimated net realizable value of the rental units during the time frame that the units were in rental use. During the first quarter of Fiscal 2015, we were released of repurchase obligation for 124 units as Apollo sold the units in the market place. As units subject to repurchase were sold, we removed the remaining net investment in operating lease as well as the operating lease repurchase obligation. In the second quarter of Fiscal 2015, we were released of the remaining repurchase obligations and as a result, there were no associated assets or liabilities on the balance sheet at February 28, 2015 or thereafter.

Net lease revenue was recorded ratably over the rental period that Apollo held the units based upon the difference between the proceeds received and the estimated repurchase obligation less the estimated depreciation expense of the unit. We were not required to repurchase any units from Apollo, thus we did not record a gain or loss for the difference between the estimated residual value of the unit and the actual resale value as a component of net lease revenue. We recorded net lease revenue of $626,000 during Fiscal 2014, $5,000 and $1.3 million during the third quarter and first nine months of Fiscal 2015, respectively.

In March 2015, we received a rental order of similar size from Apollo. Under the terms of the sales agreement, this order did not include any repurchase obligation, thus no units were recorded as operating leases. We shipped approximately two-thirds of these units in the third quarter of Fiscal 2015 and will ship approximately one-third in the fourth quarter of Fiscal 2015.