Property, Plant and Equipment

Property, plant and equipment as of September 27, 2014 and September 28, 2013 consisted of (in thousands):



	2014		2013
Land, buildings and improvements	$	283,569	$	212,195
Machinery and equipment	331,981		312,941
Computer hardware and software	95,780		91,565
Construction in progress	9,694		67,518
Total property, plant and equipment, gross	721,024		684,219
Less: accumulated depreciation	386,098		359,158
Total property, plant and equipment, net	$	334,926	$	325,061

The major component of the construction in progress balance as of September 28, 2013 was related to the facility investment in Neenah, Wisconsin, which was completed in the first quarter of fiscal 2014.

Assets held under capital leases and included in property, plant and equipment as of September 27, 2014 and September 28, 2013 consisted of (in thousands):



	2014		2013
Buildings and improvements	$	23,141	$	23,147
Machinery and equipment	3,669		3,294
Total property, plant and equipment held under capital leases, gross	26,810		26,441
Less: accumulated amortization	19,405		16,513
Total property, plant and equipment held under capital leases, net	$	7,405	$	9,928

The building and improvements category in the above table includes a leased manufacturing facility in San Diego, California, which is no longer used by the Company and has been subleased. The San Diego facility is recorded at the net present value of the sublease income, net of cash outflows for broker commissions and building improvements associated with the subleases. The net book value of the San Diego facility is reduced on a monthly basis by the amortization of the sublease cash receipts, net of certain cash outflows associated with the subleases. The net book value of the San Diego facility is approximately $4.3 million as of September 27, 2014.

Amortization of assets held under capital leases totaled $0.6 million, $0.6 million and $0.8 million for fiscal 2014, 2013 and 2012, respectively. Capital lease additions totaled $1.4 million, $1.4 million, and $0.1 million for fiscal 2014, 2013 and 2012, respectively.

As of September 27, 2014, September 28, 2013 and September 29, 2012, accounts payable included approximately $7.0 million, $10.9 million and $11.5 million, respectively, related to the purchase of property, plant and equipment, which have been treated as non-cash transactions for purposes of the Consolidated Statements of Cash Flows.

The Company’s lease agreement for the building shell and land of its facility in Guadalajara, Mexico, which opened on August 21, 2014, includes a ten year base lease term (that commenced upon the completion of construction in the fourth quarter of fiscal 2014), with two five-year renewal options. This lease did not qualify as a sale-leaseback transaction, and therefore was accounted for as a non-cash financing transaction. Since the Company believes that it will exercise both renewal options, the lease is being accounted for using a 20 year lease term.

In the third quarter of fiscal 2014, the Company capitalized the building shell as a non-cash financing obligation of approximately $8.0 million; the financing obligation will be increased by interest expense and land rent expense, and reduced by contractual payments. During the fourth quarter of fiscal 2014, the Company capitalized related leasehold improvements of approximately $16.2 million. The Company includes both these amounts in "Property, plant and equipment" in the Consolidated Balance Sheets and depreciates the underlying assets accordingly. At the end of the 20-year lease term, the net book value of the assets will approximate the balance of the financing obligation.

If the Company does not exercise both renewal options or exercises the first but not the second, it would record a loss related to the disposal of the underlying assets in operating results of $3.2 million in fiscal 2024 or $0.3 million in fiscal 2029, respectively.

The future minimum payments under the ten year base lease agreement, as well as the two five year renewal options, are as follows (in thousands):



2015	1,406
2016	1,440
2017	1,476
2018	1,513
2019	1,550
2020 through 2024	8,353

	$	15,738

2025 through 2029	9,451
2030 through 2034	10,870