Investment in equipment and leases, net

6 Months Ended

Jun. 30, 2023

Investment in equipment and leases, net [Abstract]

4. Investment in equipment and leases, net:

The Company’s investment in equipment and leases consists of the following (in thousands):


					Depreciation/
					Amortization
	Balance			Reclassifications,	Expense or		Balance
	December 31,			Additions	Amortization		June 30,
	2022			and Dispositions	of Leases		2023
Equipment under operating leases, net	$	7,042	$	(29)	$	(789)	$	6,224
Assets held for sale or lease, net		488		11		—		499
Initial direct costs, net		3		—		(1)		2
Total	$	7,533	$	(18)	$	(790)	$	6,725

There were no impairment losses recorded on equipment during the three and six months ended June 30, 2023 and 2022.

The Company utilizes a straight-line depreciation method over the term of the equipment lease for equipment under operating leases currently in its portfolio. Depreciation on the Company’s equipment totaled $393 thousand and $552 thousand for the three months ended June 30, 2023 and 2022, respectively, and was $789 thousand and $1.1 million for the six months ended June 30, 2023 and 2022, respectively. Total depreciation for the three months ended June 30, 2023 and 2022 includes $52 thousand and $46 thousand, respectively, of additional depreciation recorded to reflect year-to-date changes in estimated residual values of certain equipment generating revenue under month-to-month extensions. Such additional depreciation totaled $67 thousand and $47 thousand for the six months ended June 30, 2023 and 2022, respectively. The estimated residual values of equipment associated with leases on month-to-month extensions are evaluated at least semi-annually, and depreciation recorded for the change in the estimated reduction in value.

All of the Company’s lease asset purchases and capital improvements were made during the years from 2011 through 2015.

Operating leases:

Property on operating leases consists of the following (in thousands):


	Balance						Balance
	December 31,				Reclassifications		June 30,
	2022		Additions		or Dispositions		2023
Marine vessel	$	19,410	$	—	$	—	$	19,410
Transportation, rail		5,899		—		(211)		5,688
Facility – other		5,084		—		—		5,084
Manufacturing		2,753		—		—		2,753
Other		722		—		—		722
		33,868		—		(211)		33,657
Less accumulated depreciation		(26,826)		(789)		182		(27,433)
Total	$	7,042	$	(789)	$	(29)	$	6,224

The average estimated residual value for assets on operating leases was 18% of the assets’ original cost at both June 30, 2023 and December 31, 2022. There were no operating leases on non-accrual status at June 30, 2023 and December 31, 2022.

As of June 30, 2023, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):


	Operating
	Leases
Six months ending December 31, 2023	$	987
Year ending December 31, 2024		1,053
2025		171
2026		51
2027		13
Thereafter		21
	$	2,296

The useful lives for each category of leases are reviewed at a minimum of once per quarter. As of June 30, 2023 and December 31, 2022, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):


Equipment category		Useful Life
Transportation, rail		35 – 50
Marine vessel		20 – 30
Manufacturing		10 – 15
Facility - other		7 – 10
Other		7 – 10

ATEL 15, LLC 10-Q