| LEASES |
6. LEASES
Lessor Arrangements
The Company’s lessor arrangements consist of sales-type and direct financing leases for equipment, including vehicles and machinery, with terms ranging from 5 months to 122 months. At June 30, 2024 and December 31, 2023, the carrying value of residual assets covered by residual value guarantees and residual value insurance was $94.9 million and $84.1 million, respectively. For more information on the Company’s lessor arrangements, refer to Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2023 Form 10-K.
Total net investment in sales-type and direct financing leases consists of the following as of the periods ended (dollars in thousands):
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June 30, 2024 |
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December 31, 2023 |
Sales-type and direct financing leases: |
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Lease receivables, net of unearned income and deferred selling profit |
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$ |
483,269 |
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$ |
409,264 |
Unguaranteed residual values, net of unearned income and deferred selling profit |
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28,397 |
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21,484 |
Total net investment in sales-type and direct financing leases |
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$ |
511,666 |
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$ |
430,748 |
Lessee Arrangements
The Company’s lessee arrangements consist of operating and finance leases; however, the majority of the leases have been classified as non-cancellable operating leases and are primarily for real estate leases with remaining lease terms of up to 22 years. For more information on the Company’s lessee arrangements, refer to Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2023 Form 10-K.
The tables below provide information about the Company’s lessee lease portfolio and other supplemental lease information for the following periods ended (dollars in thousands):
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June 30, 2024 |
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December 31, 2023 |
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Operating |
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Finance |
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Operating |
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Finance |
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ROU assets |
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$ |
76,778 |
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$ |
4,210 |
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$ |
71,788 |
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$ |
4,669 |
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Lease liabilities |
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81,925 |
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6,417 |
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78,043 |
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7,052 |
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Lease Term and Discount Rate of Operating leases: |
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Weighted-average remaining lease term (years) |
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11.19 |
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4.58 |
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11.75 |
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5.08 |
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Weighted-average discount rate (1) |
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6.17 |
% |
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1.17 |
% |
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6.21 |
% |
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1.17 |
% |
(1) A lease implicit rate or an incremental borrowing rate is used based on information available at commencement date of lease or at remeasurement date.
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Six months ended June 30, |
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2024 |
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2023 |
Cash paid for amounts included in measurement of lease liabilities: |
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Operating Cash Flows from Finance Leases |
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$ |
39 |
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$ |
46 |
Operating Cash Flows from Operating Leases |
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7,084 |
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6,156 |
Financing Cash Flows from Finance Leases |
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|
636 |
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|
612 |
ROU assets obtained in exchange for lease obligations: |
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Operating leases |
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$ |
2,662 |
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$ |
(241) |
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Three months ended June 30, |
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Six months ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
Net Operating Lease Cost |
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$ |
3,438 |
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$ |
2,358 |
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$ |
6,546 |
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$ |
4,910 |
Finance Lease Cost: |
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Amortization of right-of-use assets |
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230 |
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230 |
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459 |
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459 |
Interest on lease liabilities |
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19 |
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23 |
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39 |
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46 |
Total Lease Cost |
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$ |
3,687 |
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$ |
2,611 |
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$ |
7,044 |
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$ |
5,415 |
The maturities of lessor and lessee arrangements outstanding are presented in the table below for the years ending (dollars in thousands):
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June 30, 2024 |
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Lessor |
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Lessee |
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Sales-type and Direct Financing |
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Operating |
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Finance |
For the remaining six months of 2024 |
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$ |
62,279 |
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$ |
7,450 |
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$ |
683 |
2025 |
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112,320 |
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14,326 |
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1,392 |
2026 |
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101,889 |
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11,565 |
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1,427 |
2027 |
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101,721 |
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10,156 |
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1,462 |
2028 |
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77,100 |
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9,164 |
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|
1,499 |
Thereafter |
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111,743 |
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66,906 |
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|
128 |
Total undiscounted cash flows |
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567,052 |
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119,567 |
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6,591 |
Less: Adjustments (1) |
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83,783 |
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37,642 |
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|
174 |
Total (2) |
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$ |
483,269 |
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$ |
81,925 |
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$ |
6,417 |
(1) Lessor – unearned income and unearned guaranteed residual value; Lessee – imputed interest.
(2) Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.
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