LEASE AGREEMENTS

12 Months Ended

Mar. 31, 2013

LEASE AGREEMENTS

LEASE AGREEMENTS

2. LEASE AGREEMENTS

The Company leases certain facilities under non-cancelable operating leases with various renewal options. For operating leases which contain fixed escalations in rental payments, the Company records the total rent payable on a straight-line basis over the original lease term. The Company incurred $787,000, $730,000 and $670,000 of operating rent expense in the fiscal years ended March 31, 2013, 2012, and 2011, respectively.   In conjunction with the Company’s lease for its headquarters, the Company has issued security in the form of a standby letter of credit in the amount of $300,000 with an original expiration date of March 1, 2006 which contains automatic extensions through April 15, 2016.

In March 2005, the Company renewed its lease agreement for its corporate headquarters and manufacturing facilities in Billerica, Massachusetts.  As part of the lease agreement, the Company’s landlord agreed to certain renovations to the Billerica facility including the construction of additional high bay manufacturing space.  The Company was responsible for a portion of the construction costs and was deemed to be the owner of the building during the construction period. In January 2007, the Company amended this lease agreement to expand its lease to include the remaining available space in the building.  During the fiscal year ended March 31, 2007, the Company capitalized $2,029,000 to record the facility on its books with an offsetting amount to the Lease Financing Liability.  In addition, amounts paid for construction were recorded as construction in progress and the landlord construction allowances of $367,000 in 2008 were recorded as additional lease financing liability.

At the completion of the construction of the initial renovations in February 2006, the lease was reviewed for potential sale-leaseback treatment in accordance with ASC 840 Leases.  Based on this review, it was determined that the lease did not qualify for sale-leaseback treatment.  As a result, building and tenant improvements and associated lease financing liabilities remained on the Company’s financial statements.  The Lease Financing Liability is being amortized over the lease term based on the payments designated in the agreement, and the building and tenant improvement assets are being depreciated on a straight line basis over the remaining lease term.

Future minimum rental payments under the Company’s non-cancelable leases, excluding real estate taxes, insurance and operating costs paid by the Company, required over the initial terms of the leases are as follows (in thousands):

Year Ending March 31,	Operating Leases		Capital Leases
2014	$	647	$	1,542
2015	303		1,542
2016	225		1,413
Total payments	$	1,175	4,497
Imputed interest			(94		)
Lease financing liability			4,403
Less:  Current portion of lease financing liability			1,489
Lease financing liability, net of current portion			$	2,914