In connection with the Sipex acquisition, we assumed a lease financing obligation related to the Hillview Facility. The lease term expired March 31, 2011 and had average lease payments of approximately $1.4 million per year.

The fair value of the Hillview Facility was estimated at $13.4 million at the time of the acquisition and was included in the property, plant and equipment, net line item on the condensed consolidated balance sheet. In accordance with purchase accounting, we accounted for this sale and leaseback transaction as a financing transaction which was included in the long-term lease financing obligations line item on our condensed consolidated balance sheet as of March 27, 2011. The effective interest rate was 8.2%.

At the end of the lease term, March 31, 2011, the terminal value of $12.2 million was settled in a noncash transaction with the expiration of the Hillview Facility lease. As a result, during the first quarter of fiscal year 2012, the property, plant and equipment balance and the terminal value of $12.2 million included in the long-term lease financing obligations line were removed from our condensed consolidated balance sheet.

Depreciation for the Hillview Facility recorded using the straight-line method for the remaining useful life for the periods indicated below was as follows (in thousands):


	Three Months Ended				Six Months Ended
	October 2, 2011		September 26, 2010		October 2, 2011		September 26, 2010
Depreciation expense	$	—	$	88	$	—	$	176

In April 2008, we entered into a sublease agreement for the Hillview Facility. The sublease expired March 31, 2011. The sublease income recorded in the other income and expense, net line item in our condensed consolidated statements of operations for the periods indicated below was as follows (in thousands):


	Three Months Ended				Six Months Ended
	October 2, 2011		September 26, 2010		October 2, 2011		September 26, 2010
Sublease income	$	—	$	393	$	—	$	786

We have also acquired engineering design tools ("design tools") under capital leases. We acquired design tools of $5.2 million in December 2007 under a four-year license, $3.7 million in November 2008 under a three-year license, $1.1 million in July 2009 under a 3-year license, $1.3 million in December 2009 under a 28-month license, and $1.0 million in June 2010 under a three-year license, all of which were accounted for as capital leases and recorded in the property, plant and equipment, net line item on the condensed consolidated balance sheets. The related design tool obligations were included in other accrued expenses and in the lease financing obligation in our condensed consolidated balance sheets as of October 2, 2011 and March 27, 2011, respectively.

Amortization of the design tools recorded using the straight-line method over the remaining useful life for the periods indicated below was as follows (in thousands):


	Three Months Ended				Six Months Ended
	October 2, 2011		September 26, 2010		October 2, 2011		September 26, 2010
Amortization expense	$	894	$	894	$	1,788	$	1,737

Future minimum lease and sublease income payments for the lease financing obligations as of October 2, 2011 are as follows (in thousands):


Fiscal Years	Design Tools
2012 (6 months remaining)	$	362
2013		390

Total minimum lease payments		752
Less: amount representing interest		(52	)

Present value of minimum lease payments		700
Less: current portion of lease financing obligation		(700	)

Long-term lease financing obligation	$	—

Interest expense for the Hillview Facility lease financing obligation and design tools for the periods indicated below was as follows (in thousands):


	Three Months Ended				Six Months Ended
	October 2, 2011		September 26, 2010		October 2, 2011		September 26, 2010
Interest expense	$	58	$	321	$	118	$	639

In the course of our business, we enter into arrangements accounted for as operating leases. Our current arrangements relate to engineering design tool licenses and office space. As of October 2, 2011, our future obligations under these arrangements were $5.7 million and $2.1 million, respectively.