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Note M - Leases

3 Months Ended

Mar. 31, 2025

NOTE M: LEASES

The Company currently leases shop, office and parking spaces in various locations in the United States and Mexico. The initial term for the majority of these leases is one year or less, with an option for early cancellation and an option to renew for subsequent one- month periods. These leases can be terminated by either party by providing notice to the other party of the intent to cancel or to not extend. Relatively short lease durations for these properties are intended to provide flexibility to the Company as changing operational needs and shifting opportunities often result in cancellation or non-renewal of these leases by the Company or the lessor.

The initial lease term for certain shop and office locations is for periods ranging from one to five years with early cancellation options. The Company prefers that leases include early cancellation provisions to prevent becoming locked into long-term leases that become operationally unjustified and to allow the flexibility to pursue more cost-effective options for similar properties if they become available. These leases often include the option to extend for additional periods, which may or may not be exercised. Based on historical experience, the Company does not always extend these leases, sometimes exercises the option to cancel leases early and sometimes lessors choose to cancel leases or not extend.

The Company leases trucks to owner-operators under our lease-to-own program. We also lease dock space to a related party at our Laredo, Texas terminal.

Right-of-Use Leases

The Company is party to operating leases that include initial terms ranging from three to five years. The initial terms of these leases have expired, and the leases are now subject to terms not exceeding one year. In accordance with the provisions of ASC Topic 842, because all of our leased properties are currently subject to leases not exceeding one year, we do not recognize any right-of-use assets or corresponding operating lease liability as of March 31, 2025.

Cash Flows

No new right-of-use assets were recognized as a non-cash asset addition that resulted from new operating lease liabilities during the three months ended March 31, 2025. No cash payments were made for amounts included in the present value of operating lease liabilities during the three months ended March 31, 2025.

Operating Lease Costs

	Three Months Ended
	March 31,
	2025		2024
		(in thousands)
Long term	$	-	$	85
Short term		779		692
Total	$	779	$	777

Lease Revenue

The Company's operating lease revenue is disclosed in the table below.

	Three Months Ended
	March 31,
	2025		2024
		(in thousands)
Leased truck revenue (recorded in revenue, before fuel surcharge)	$	2,605	$	1,991
Leased facility space revenue (recorded in non-operating income)		203		128
Total lease revenue	$	2,808	$	2,119

The Company has a lease-purchase program whereby we offer independent contractors the opportunity to lease a Company-owned truck. The terms associated with these leases require weekly lease payments over the terms of the leases, which range from 5 to 60 months. Payments under this program are classified in the Company’s financial statements under the consolidated statement of operations category Revenue.

As of March 31, 2025, the gross carrying value of trucks underlying these leases was $67.8 million and accumulated depreciation was $31.7 million. Depreciation is calculated on a straight-line basis over the estimated useful life of the equipment, down to an estimated salvage value. In most cases, the Company has agreements in place with certain manufacturers whereby salvage values are guaranteed by the manufacturer. In other cases, where salvage values are not guaranteed, estimates of salvage value are based on the expected market values of equipment at the time of disposal. During the quarter ended March 31, 2025, the Company incurred $2.5 million of depreciation expense for these assets.

The Company leases dock space to a related party at our Laredo, Texas, terminal. The dock space is depreciated in conjunction with the structures and improvements for the entire Laredo terminal on a straight-line basis over the estimated useful life of the assets. Lease income is recorded as a component of non-operating income in our condensed consolidated statements of operations.

Lease Receivables

Future minimum operating lease payments receivable at March 31, 2025:

	(in thousands)

2025 (remaining)	$	8,334
2026		7,625
2027		325
2028 and thereafter		-
Total future minimum lease payments receivable	$	16,284