PROPERTY AND EQUIPMENT

12 Months Ended

Jun. 30, 2014

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

3. PROPERTY AND EQUIPMENT

In March 2006, the Company entered into a sale and leaseback transaction with respect to its Media Center vaulting real estate. The real estate was sold for approximately $14.0 million resulting in a $1.3 million after tax gain. In accordance with the Accounting Standards Codification 840-40, the gain will be amortized over the initial 15-year lease term as reduced rent. Net proceeds at the closing of the sale and the improvement advance were used to pay off the mortgage and other outstanding debt. A $250,000 security deposit related to the lease has been recorded as a deposit in “other assets, net” in the Consolidated Balance Sheets as of June 30, 2013 and 2014.

The lease is treated as an operating lease for financial reporting purposes. After the initial lease term, the Company has four five-year options to extend the lease. Minimum annual rent payments for the initial five years of the lease was $1,111,000 and increasing annually thereafter based on the consumer price index change from year to year.

In June 2011, the Company entered into a lease amendment with respect to the Company’s Media Center facility. The amendment provides that the landlord would reimburse the Company up to $2 million for the leasehold improvements to be made by the Company to the premises. The leasehold improvements would be recorded as a fixed asset and amortized over the remaining term of the lease (until March 2021). Pursuant to the lease amendment, the Company’s monthly lease costs increased by approximately $14,000 on July 1, 2011, and by an additional $13,000 to approximately $27,000 on April 1, 2012. The Company incurred $2.1 million of costs for construction, of which $2.0 million was reimbursed by the landlord. A deferred lease incentive has been recorded for the total amount reimbursed by the landlord in accordance with ASC 840-20. The lease incentive is being amortized over the remaining lease term as an offset to rent.

In June 2014, the Company sold its Vine land and building (acquired in 2009 for $4.75 million) for $4.75 million. The Company received $1.6 million in net cash after payment of the related mortgage and transaction expenses. The gain on the sale was not material.

Property and equipment consist of the following:

	June 30,
	2013		2014
Land	$	3,985,000	$	2,405,000
Buildings		9,291,000		6,012,000
Machinery and equipment		37,938,000		38,068,000
Leasehold improvements		9,082,000		9,053,000
Computer equipment		7,901,000		7,968,000
Equipment under capital lease		995,000		1,111,000
Office equipment		506,000		507,000
CIP		104,000		104,000
Subtotal		69,802,000		65,228,000
Less accumulated depreciation and amortization		(53,809,000)		(55,055,000)
Property and equipment, net	$	15,993,000	$	10,173,000

Depreciation is expensed over the estimated lives of buildings (39 years), machinery and equipment (7 years), computer equipment (7 years) and leasehold improvements (2 to 10 years depending on the remaining term of the respective leases or estimated useful life of the improvement). Depreciation expense totaled $2,938,000, $2,405,000 and $1,841,000 for the years ended June 30, 2012, 2013 and 2014, respectively. Property under capital leases pertains to machinery and equipment, with a cost of $955,000 (with a net book value of $304,000) and $1,111,000 (with a net book value of $300,000) as of June 30, 2013 and 2014, respectively.