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LEASES | 9 Months Ended
--- | ---
Sep. 30, 2023
Leases [Abstract] |
LEASES | LEASES Lessee Activities The Company records a right-of-use (“ROU”) asset and lease liability for substantially all leases for which it is a lessee, in accordance with Accounting Standards Codification (“ASC”) 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has no significant lease agreements in place for which the Company is a lessor. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys the right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration. The Company leases certain industrial spaces, office spaces, land, and equipment. Some leases include one or more options to renew, with renewal terms that can extend the lease term from generally 1 to 5 years. The exercise of lease renewal options is at the Company’s sole discretion, and are included in the lease term only to the extent such renewal options are reasonably certain of being exercised at lease commencement. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. During the nine months ended September 30, 2023, leased assets obtained in exchange for new operating lease liabilities totaled approximately $9.4 million. During the nine months ended September 30, 2022, leased assets obtained in exchange for new operating lease liabilities totaled approximately $16.4 million. As of September 30, 2023, obligations related to operating leases that the Company has executed but have not yet commenced were nominal. As described in the Company’s Annual Report on Form 10-K for the year ended December, 31, 2022, during 2022, the Company entered into sale-leaseback-sublease transactions. Such contracts were entered into in contemplation of each other and are thus recorded on a net basis. Certain of the transactions occurred with a related party—such transactions were at market value and arm’s length. Leased assets and liabilities included within the Condensed Consolidated Balance Sheets consist of the following (in thousands):
|  | Classification |  | September 30, 2023 |  | December 31, 2022
Right-of-Use Assets |  |  |  |  |  |
Operating |  | Other assets |  | $ | 30,209 |  |  | $ | 23,003 |
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating |  | Other accrued liabilities |  | $ | 7,835 |  |  | $ | 6,120 |
Noncurrent |  |  |  |  |  |
Operating |  | Other non-current liabilities |  | 22,374 |  |  | 16,883 |
Total lease liabilities |  |  |  | $ | 30,209 |  |  | $ | 23,003 |
Lease costs included in the Condensed Consolidated Statements of Operations consist of the following (in thousands):
|  | Classification |  | Three Months Ended September 30, 2023 |  | Three Months Ended September 30, 2022
Operating lease cost |  | Cost of sales, selling expenses and general and administrative expense |  | $ | 2,442 |  |  | $ | 1,559 |
Finance lease cost |  |  |  |  |  |
Amortization of ROU leased assets |  | Depreciation and amortization within Cost of sales |  | — |  |  | — |
Interest on lease liabilities |  | Interest expense |  | — |  |  | — |
Net lease cost |  |  |  | $ | 2,442 |  |  | $ | 1,559 |
|  | Classification |  | Nine Months Ended September 30, 2023 |  | Nine Months Ended September 30, 2022
Operating lease cost |  | Cost of sales, selling expenses and general and administrative expense |  | $ | 6,440 |  |  | $ | 3,877 |
Finance lease cost |  |  |  |  |  |
Amortization of ROU leased assets |  | Depreciation and amortization within Cost of sales |  | — |  |  | 36 |
Interest on lease liabilities |  | Interest expense |  | — |  |  | 1 |
Net lease cost |  |  |  | $ | 6,440 |  |  | $ | 3,914 |
Maturity of the Company’s lease liabilities as of September 30, 2023 is as follows (in thousands):
|  | Operating Leases |  | Finance Leases |  | Total
2023 (remainder) |  | $ | 2,313 |  |  | $ | — |  |  | $ | 2,313 |
2024 |  | 8,960 |  |  | — |  |  | 8,960 |
2025 |  | 7,907 |  |  | — |  |  | 7,907 |
2026 |  | 6,972 |  |  | — |  |  | 6,972 |
2027 |  | 4,349 |  |  | — |  |  | 4,349 |
Thereafter |  | 2,986 |  |  | — |  |  | 2,986 |
Total lease payments |  | $ | 33,487 |  |  | $ | — |  |  | $ | 33,487 |
Less: interest |  | 3,278 |  |  | — |  |  |
Present value of lease payments |  | $ | 30,209 |  |  | $ | — |  |  |
As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Remaining lease term and discount rates are as follows:
|  | September 30, 2023 |  | December 31, 2022
Weighted average remaining lease term (years) |  |  |  |
Operating leases |  | 4.1 |  | 4.3
Weighted average discount rate |  |  |  |
Operating leases |  | 4.96 | % |  | 4.92 | %
Lease costs included in the Condensed Consolidated Statements of Cash Flows are as follows (in thousands):
|  | Nine Months Ended September 30, 2023 |  | Nine Months Ended September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 6,434 |  |  | $ | 3,917 |
Operating cash flows from finance leases |  | $ | — |  |  | $ | 1 |
Financing cash flows from finance leases |  | $ | — |  |  | $ | 59 |
Lessor and Sublessor Activities The Company leases dry van trailers to customers under full-service lease agreements and operating lease agreements. At the inception of a contract, in accordance with the applicable accounting guidance (ASC 842, Leases) the Company considers whether the arrangement contains a lease and, as applicable, performs the required lease classification tests. The Company, as a lessor, has no sales-type or direct financing lease arrangements as of September 30, 2023. The Company’s full-service lease agreements are an integrated service that include lease component amounts related to the use of the trailer, as well as non-lease components for preventative maintenance, certain repairs as defined in the related agreement, and ad valorem taxes. In accordance with the applicable accounting guidance (ASC 842, Leases), the Company has elected to combine lease and non-lease components when reporting revenue for the full-service underlying class of leased assets. Initial lease terms are generally three to five years. Certain of the Company’s leases provide customers with renewal options that provide the ability to extend the lease term for a period of generally one to five years. In addition, some leases include options for the customer to purchase the trailers at fair market value, as determined by the Company at or near the end of the lease. The Company’s lease agreements generally do not have residual value guarantees nor permit customers to terminate the lease agreements prior to natural expiration. As stipulated in the lease agreements, the Company may receive reimbursements from customers for certain damage or required repairs to the trailers. During the year ended December 31, 2022, the Company entered into sale-leaseback-sublease transactions. Such contracts were entered into in contemplation of each other and are thus recorded on a net basis. The net revenue from these contracts was insignificant for all periods presented but such revenue is included in the tables below. Certain of the Company’s leases and subleases are with a related party—such transactions were at market value and entered into at arm’s length. Lease income is included in Net sales on the Company’s Condensed Consolidated Statements of Operations, and is recorded in the Parts & Services operating segment. For the three and nine months ended September 30, 2023 and 2022, the Company’s lease income consisted of the following components (in thousands):
|  | Three Months Ended September 30, 2023 |  | Three Months Ended September 30, 2022
Operating lease income |  |  |  |
Fixed lease income |  | $ | 324 |  |  | $ | 42 |
Variable lease income |  | — |  |  | — |
Total lease income 1 |  | $ | 324 |  |  | $ | 42 |
|  | Nine Months Ended September 30, 2023 |  | Nine Months Ended September 30, 2022
Operating lease income |  |  |  |
Fixed lease income |  | $ | 503 |  |  | $ | 63 |
Variable lease income |  | — |  |  | — |
Total lease income 1 |  | $ | 503 |  |  | $ | 63 |
————————— (1) As noted above, net revenue related to subleases was insignificant for all periods presented but such revenue is included in the tables above. The following table shows the Company’s future contractual receipts from noncancelable operating leases for the years ended December 31 as of September 30, 2023 (in thousands):
|  | Operating Leases 2
2023 (remainder) |  | $ | 371 |
2024 |  | 1,485 |
2025 |  | 1,473 |
2026 |  | 1,473 |
2027 |  | 1,360 |
Thereafter |  | 667 |
Total contractual receipts |  | $ | 6,829 |
————————— (2) The future contractual receipts due under the Company’s full-service operating leases include amounts related to preventative maintenance, certain repairs as defined in the related agreements, and ad valorem taxes. Net revenue related to the Company’s subleases are also included in the table above.
LEASES | LEASES Lessee Activities The Company records a right-of-use (“ROU”) asset and lease liability for substantially all leases for which it is a lessee, in accordance with Accounting Standards Codification (“ASC”) 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has no significant lease agreements in place for which the Company is a lessor. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys the right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration. The Company leases certain industrial spaces, office spaces, land, and equipment. Some leases include one or more options to renew, with renewal terms that can extend the lease term from generally 1 to 5 years. The exercise of lease renewal options is at the Company’s sole discretion, and are included in the lease term only to the extent such renewal options are reasonably certain of being exercised at lease commencement. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. During the nine months ended September 30, 2023, leased assets obtained in exchange for new operating lease liabilities totaled approximately $9.4 million. During the nine months ended September 30, 2022, leased assets obtained in exchange for new operating lease liabilities totaled approximately $16.4 million. As of September 30, 2023, obligations related to operating leases that the Company has executed but have not yet commenced were nominal. As described in the Company’s Annual Report on Form 10-K for the year ended December, 31, 2022, during 2022, the Company entered into sale-leaseback-sublease transactions. Such contracts were entered into in contemplation of each other and are thus recorded on a net basis. Certain of the transactions occurred with a related party—such transactions were at market value and arm’s length. Leased assets and liabilities included within the Condensed Consolidated Balance Sheets consist of the following (in thousands):
|  | Classification |  | September 30, 2023 |  | December 31, 2022
Right-of-Use Assets |  |  |  |  |  |
Operating |  | Other assets |  | $ | 30,209 |  |  | $ | 23,003 |
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating |  | Other accrued liabilities |  | $ | 7,835 |  |  | $ | 6,120 |
Noncurrent |  |  |  |  |  |
Operating |  | Other non-current liabilities |  | 22,374 |  |  | 16,883 |
Total lease liabilities |  |  |  | $ | 30,209 |  |  | $ | 23,003 |
Lease costs included in the Condensed Consolidated Statements of Operations consist of the following (in thousands):
|  | Classification |  | Three Months Ended September 30, 2023 |  | Three Months Ended September 30, 2022
Operating lease cost |  | Cost of sales, selling expenses and general and administrative expense |  | $ | 2,442 |  |  | $ | 1,559 |
Finance lease cost |  |  |  |  |  |
Amortization of ROU leased assets |  | Depreciation and amortization within Cost of sales |  | — |  |  | — |
Interest on lease liabilities |  | Interest expense |  | — |  |  | — |
Net lease cost |  |  |  | $ | 2,442 |  |  | $ | 1,559 |
|  | Classification |  | Nine Months Ended September 30, 2023 |  | Nine Months Ended September 30, 2022
Operating lease cost |  | Cost of sales, selling expenses and general and administrative expense |  | $ | 6,440 |  |  | $ | 3,877 |
Finance lease cost |  |  |  |  |  |
Amortization of ROU leased assets |  | Depreciation and amortization within Cost of sales |  | — |  |  | 36 |
Interest on lease liabilities |  | Interest expense |  | — |  |  | 1 |
Net lease cost |  |  |  | $ | 6,440 |  |  | $ | 3,914 |
Maturity of the Company’s lease liabilities as of September 30, 2023 is as follows (in thousands):
|  | Operating Leases |  | Finance Leases |  | Total
2023 (remainder) |  | $ | 2,313 |  |  | $ | — |  |  | $ | 2,313 |
2024 |  | 8,960 |  |  | — |  |  | 8,960 |
2025 |  | 7,907 |  |  | — |  |  | 7,907 |
2026 |  | 6,972 |  |  | — |  |  | 6,972 |
2027 |  | 4,349 |  |  | — |  |  | 4,349 |
Thereafter |  | 2,986 |  |  | — |  |  | 2,986 |
Total lease payments |  | $ | 33,487 |  |  | $ | — |  |  | $ | 33,487 |
Less: interest |  | 3,278 |  |  | — |  |  |
Present value of lease payments |  | $ | 30,209 |  |  | $ | — |  |  |
As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Remaining lease term and discount rates are as follows:
|  | September 30, 2023 |  | December 31, 2022
Weighted average remaining lease term (years) |  |  |  |
Operating leases |  | 4.1 |  | 4.3
Weighted average discount rate |  |  |  |
Operating leases |  | 4.96 | % |  | 4.92 | %
Lease costs included in the Condensed Consolidated Statements of Cash Flows are as follows (in thousands):
|  | Nine Months Ended September 30, 2023 |  | Nine Months Ended September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 6,434 |  |  | $ | 3,917 |
Operating cash flows from finance leases |  | $ | — |  |  | $ | 1 |
Financing cash flows from finance leases |  | $ | — |  |  | $ | 59 |
Lessor and Sublessor Activities The Company leases dry van trailers to customers under full-service lease agreements and operating lease agreements. At the inception of a contract, in accordance with the applicable accounting guidance (ASC 842, Leases) the Company considers whether the arrangement contains a lease and, as applicable, performs the required lease classification tests. The Company, as a lessor, has no sales-type or direct financing lease arrangements as of September 30, 2023. The Company’s full-service lease agreements are an integrated service that include lease component amounts related to the use of the trailer, as well as non-lease components for preventative maintenance, certain repairs as defined in the related agreement, and ad valorem taxes. In accordance with the applicable accounting guidance (ASC 842, Leases), the Company has elected to combine lease and non-lease components when reporting revenue for the full-service underlying class of leased assets. Initial lease terms are generally three to five years. Certain of the Company’s leases provide customers with renewal options that provide the ability to extend the lease term for a period of generally one to five years. In addition, some leases include options for the customer to purchase the trailers at fair market value, as determined by the Company at or near the end of the lease. The Company’s lease agreements generally do not have residual value guarantees nor permit customers to terminate the lease agreements prior to natural expiration. As stipulated in the lease agreements, the Company may receive reimbursements from customers for certain damage or required repairs to the trailers. During the year ended December 31, 2022, the Company entered into sale-leaseback-sublease transactions. Such contracts were entered into in contemplation of each other and are thus recorded on a net basis. The net revenue from these contracts was insignificant for all periods presented but such revenue is included in the tables below. Certain of the Company’s leases and subleases are with a related party—such transactions were at market value and entered into at arm’s length. Lease income is included in Net sales on the Company’s Condensed Consolidated Statements of Operations, and is recorded in the Parts & Services operating segment. For the three and nine months ended September 30, 2023 and 2022, the Company’s lease income consisted of the following components (in thousands):
|  | Three Months Ended September 30, 2023 |  | Three Months Ended September 30, 2022
Operating lease income |  |  |  |
Fixed lease income |  | $ | 324 |  |  | $ | 42 |
Variable lease income |  | — |  |  | — |
Total lease income 1 |  | $ | 324 |  |  | $ | 42 |
|  | Nine Months Ended September 30, 2023 |  | Nine Months Ended September 30, 2022
Operating lease income |  |  |  |
Fixed lease income |  | $ | 503 |  |  | $ | 63 |
Variable lease income |  | — |  |  | — |
Total lease income 1 |  | $ | 503 |  |  | $ | 63 |
————————— (1) As noted above, net revenue related to subleases was insignificant for all periods presented but such revenue is included in the tables above. The following table shows the Company’s future contractual receipts from noncancelable operating leases for the years ended December 31 as of September 30, 2023 (in thousands):
|  | Operating Leases 2
2023 (remainder) |  | $ | 371 |
2024 |  | 1,485 |
2025 |  | 1,473 |
2026 |  | 1,473 |
2027 |  | 1,360 |
Thereafter |  | 667 |
Total contractual receipts |  | $ | 6,829 |
————————— (2) The future contractual receipts due under the Company’s full-service operating leases include amounts related to preventative maintenance, certain repairs as defined in the related agreements, and ad valorem taxes. Net revenue related to the Company’s subleases are also included in the table above.

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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