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Investment in Leasing Operations:

12 Months Ended

Dec. 31, 2022

3. Investment in Leasing Operations:

In May 2021, the Company made the decision to no longer solicit new leasing customers in its middle-market leasing business and will pursue an orderly run-off of this leasing portfolio.

In August 2020, the Company made the decision to no longer originate financing transactions in its small-ticket financing business. The Company sold the small-ticket portfolio in November 2020 for its approximate carrying value of $0.7 million.

Investment in leasing operations consists of the following:


	December 31, 2022		December 25, 2021
Direct financing and sales-type leases:
Minimum lease payments receivable	$	294,100	$	3,387,500
Estimated unguaranteed residual value of equipment		461,700		1,316,100
Unearned lease income, net of initial direct costs deferred		(103,800)		(418,100)
Security deposits		(303,300)		(1,122,500)
Total investment in direct financing and sales-type leases		348,700		3,163,000
Allowance for credit losses		(7,100)		(63,600)
Net investment in direct financing and sales-type leases		341,600		3,099,400
Operating leases:
Operating lease assets		716,100		626,200
Less accumulated depreciation and amortization		(707,400)		(605,700)
Net investment in operating leases		8,700		20,500
Total net investment in leasing operations	$	350,300	$	3,119,900

As of December 31, 2022, the $350,300 total net investment in leases consisted of $344,900 classified as current and $5,400 classified as long-term. As of December 25, 2021, the $3.1 million total net investment in leases consisted of $2.9 million classified as current and $0.2 million classified as long-term.

As of December 31, 2022 and December 25, 2021, no customers had leased assets totaling more than 10% of the Company’s total assets.

Future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred, is as follows as of December 31, 2022:


	Direct Financing and Sales-Type Leases
	Minimum Lease		Income
Fiscal Year	Payments Receivable		Amortization
2023	$	290,600	$	103,700
2024		3,500		100
	$	294,100	$	103,800

The activity in the allowance for credit losses for leasing operations during 2022, 2021 and 2020, respectively, is as follows:


	December 31, 2022		December 25, 2021		December 26, 2020
Balance at beginning of period	$	63,600	$	270,200	$	580,600
Provisions charged to expense		(57,900)		(206,600)		(79,300)
Recoveries		1,400		—		(11,800)
Deductions for amounts written-off		—		—		(219,300)
Balance at end of period	$	7,100	$	63,600	$	270,200

The Company’s investment in direct financing and sales-type leases (“Investment In Leases”) and allowance for credit losses by loss evaluation methodology are as follows:


	December 31, 2022				December 25, 2021
	Investment		Allowance for		Investment		Allowance for
	In Leases		Credit Losses		In Leases		Credit Losses
Collectively evaluated for loss potential	$	348,700	$	7,100	$	3,163,000	$	63,600
Individually evaluated for loss potential		—		—		—		—
Total	$	348,700	$	7,100	$	3,163,000	$	63,600

The Company’s key credit quality indicator for its investment in direct financing and sales-type leases is the status of the lease, defined as accruing or non-accrual. Leases that are accruing income are considered to have a lower risk of loss.

Non-accrual leases are those that the Company believes have a higher risk of loss. The following table sets forth information regarding the Company’s accruing and non-accrual leases. Delinquent balances are determined based on the contractual terms of the lease.


	December 31, 2022
	0-60 Days		61-90 Days		Over 90 Days
	Delinquent		Delinquent		Delinquent and
	and Accruing		and Accruing		Accruing		Non-Accrual		Total

Total investment in leases	$	348,700	$	—	$	—	$	—	$	348,700


	December 25, 2021
	0-60 Days		61-90 Days		Over 90 Days
	Delinquent		Delinquent		Delinquent and
	and Accruing		and Accruing		Accruing		Non-Accrual		Total

Total investment in leases	$	3,163,000	$	—	$	—	$	—	$	3,163,000

The Company leases high-technology and other business-essential equipment to its leasing customers. Upon expiration of the initial term or extended lease term, depending on the structure of the lease, the customer may return the equipment, renew the lease for an additional term, or purchase the equipment. Due to the uncertainty of such outcome at the end of the lease term, the lease as recorded at commencement represents only the current terms of the agreement. As a lessor, the Company’s leases do not contain non-lease components. The residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate. The Company’s risk management strategy for its residual value includes the contractual obligations of its customers to maintain, service, and insure the leased equipment, the use of third party remarketers as well as the analytical review of historical asset dispositions.

Leasing income as presented on the Consolidated Statements of Operations consists of the following:


	Year Ended		Year Ended		Year Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Interest income on direct financing and sales-type leases	$	760,500	$	1,755,200	$	3,651,700
Selling profit (loss) at commencement of sales-type leases		1,326,900		1,829,800		2,117,500
Operating lease income		2,243,300		2,017,300		2,346,500
Income on sales of equipment under lease		1,798,000		4,799,400		5,246,000
Other		809,000		746,600		1,122,300
Leasing income	$	6,937,700	$	11,148,300	$	14,484,000