Proficient Auto Logistics, Inc Leases Disclosure

Note 12 — Leases

 

Lessee — The Company leases real estate and transportation-related equipment under operating and finance leases. The real estate operating leases, which generally have fixed payments with expiration dates ranging from one to three years and primarily include office buildings and trailers. The operating leases and finance leases for equipment generally have fixed payments with expiration dates ranging from four to six years and include transportation equipment, such as trucks and trailers. The Company’s leases can include an option to extend the lease, or to terminate the lease early, which may include a termination penalty. The Company includes these options to extend or terminate the lease in the lease term when the Company is reasonably certain to exercise these options. The Company has leases with related parties – see discussion at Note 17 Related party transactions.

 

The Company has certain leases which have initial terms of twelve months or less (“short-term leases”). The Company elected to exclude these leases from recognition, and these leases have not been included in the Company’s recognized ROU assets and operating lease liabilities. The Company records rent expense related to the short-term leases within general, selling, and other operating expense on the consolidated statements of operations.

 

The following table presents certain information related to lease costs for finance and operating leases as of:

 

		Successor				Predecessor
		December 31, 2024				Period from January 1, 2024 to May 12, 2024				December 31, 2023				December 31, 2022
Operating lease cost		$	1,506,424			$	27,951			$	28,918			$	177,742
Finance lease costs:
Amortization of finance lease assets			20,671				160,032				483,731				483,731
Interest on lease liabilities			3,362				132,062				201,072				323,420
Short-term lease costs			577,265				99,533				145,923				177,066
Total lease costs		$	2,107,722			$	419,578			$	859,644			$	1,161,959

As of December 31, 2024 (Successor) and December 31, 2023 (Predecessor), the weighted-average discount rate for operating leases was 6.88% and 0.86%, respectively. The weighted-average remaining lease term as of December 31, 2024 (Successor) and December 31, 2023 (Predecessor), was 7.2 years and less than a year respectively. As of December 31, 2024 (Successor) and December 31, 2023 (Predecessor), the weighted-average discount rate for finance leases was 12.08% and 9.26%, respectively and the weighted-average remaining lease term was 1.05 years and 1.07 years, respectively.

 

As of December 31, 2024, future maturities of the lease liabilities were as follows:

 

		Operating leases				Finance leases
For the year ending December 31:
2025		$	2,517,743			$	96,134
2026			1,885,483				8,011
2027			1,515,781				-
2028			1,569,744				-
2029			1,501,591				-
Thereafter			5,285,602				-
Total undiscounted cash flows			14,275,944				104,145
Less: present value factor			(3,191,740	)			(6,618	)
Total lease liabilities			11,084,204				97,527
Less: current portion –			(1,825,970	)			(89,184	)
Total long-term lease liabilities		$	9,258,234			$	8,343

 

As of December 31, 2024 and 2023, the right-of-use assets net book value related to the Company’s finance lease obligations totaled $201,501 and $3,535,854, respectively, and were recorded within property and equipment, net on the consolidated balance sheet.

 

Lessor — The Company finances various types of transportation-related equipment to independent third parties under lease contracts which are generally for a term of one to eight years and contain an option for the lessee to return or purchase the equipment at a bargain purchase price. The Company classifies these leases as a sales-type lease. The Company assesses a third party’s ability to pay based on the financial capacity and intention to pay, considering all relevant facts and circumstances, including past experiences with that third party or similar third parties. For those leases classified as sales-type leases where collectability is not probable at lease commencement, the Company does not derecognize the underlying asset, and the payments received for these leases are recorded as deposit liabilities. Deposit liabilities of $4,578,301 and $348,134 were reported in accrued liabilities on the consolidated balance sheet as of December 31, 2024 (Successor) and December 31, 2023 (Predecessor), respectively. The determination of collectability is an ongoing assessment, at the time that collectability is determined probable, including in instances where a lease is terminated where collectability is determined probable, the liability and assets will be derecognized with a corresponding earnings recognition.

Lease receivables are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased assets and any initial direct costs incurred to originate these leases, less unearned income, which is accreted to interest income over the lease term using the interest method. Lease receivables of $441,177 and $35,055 are reported as net investment in leases on the consolidated balance sheet as of December 31, 2024 (Successor) and December 31, 2023 (Predecessor), respectively.

 

For the period ended December 31, 2024 (Successor), for the period from January 1, 2024 to May 12, 2024 (Predecessor), for the period ended December 31, 2023 (Predecessor), and for the period December 31, 2022 (Predecessor), the Company recorded sales-type lease revenue of $887,357, $196,814, $25,000, and $60,094, respectively, within operating revenue on the consolidated statement of operations.

 

For the period ended December 31, 2024 (Successor), for the period from January 1, 2024 to May 12, 2024 (Predecessor), for the period December 31, 2023 (Predecessor), and for the period December 31, 2022 (Predecessor), the Company recorded interest income of $24,466, $0, $2,488, and $3,488, respectively, within interest expense, net on the consolidated statements of operations.

 

As of December 31, 2024, future minimum lease payments expected to be collected were as follows:

 

For the year ending December 31:
2025		$	303,771
2026			157,755
2027			29,880
Total undiscounted cash payments			491,406
Less: present value factor			(49,629	)
Total net investment in lease			441,777
Less: current portion			266,447
Total net investment in lease, less current portion		$	175,330