CMRG » Topics » N. Subsequent Event (Unaudited)

This excerpt taken from the CMRG 10-K filed Mar 31, 2006.

N. Subsequent Event (Unaudited)

Subsequent to year end, on January 30, 2006, the Company entered into a sale-leaseback transaction with Spirit. Pursuant to the sale-leaseback transaction, the Company sold to Spirit its rights, title and interest in its headquarters and distribution center property for $57.0 million. The property consists of a 755,992 gross square foot building located on approximately 27.3 acres in Canton, MA. The transaction funded and closed on February 1, 2006.



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At the closing, the Company entered into a Lease Agreement with SPE, a wholly-owned subsidiary of Spirit (the “Lease Agreement”) whereby the Company agreed to lease the property back for an annual rent of $4.6 million, payable monthly and in advance. The initial period of the Lease Agreement is for 20 years and will expire January 31, 2026 unless an option period is exercised. At that time, the Company will have the opportunity to extend the Lease Agreement for six additional successive periods of five years. In addition, on February 1, 2011, the fifth anniversary of the Lease Agreement, and for every fifth anniversary thereafter, the base rent will be subject to a rent increase not to exceed the lesser of 7% or a percentage based on changes in the Consumer Price Index.

In the first quarter of fiscal 2006, the Company will realize a gain of approximately $29.3 million on the sale of property, net of approximately $1.0 million of transaction costs. The gain will be deferred and amortized over the initial term of the related lease agreement of 20 years in accordance with SFAS No. 98, Accounting for Leases. The annual recognition of the gain of approximately $1.5 million will offset the expected annual rent pursuant to the lease of $4.6 million.

The Company used the net proceeds from the sale of approximately $56.0 million to reduce outstanding borrowings under its Amended Credit Facility and to repay in full its term loan.

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