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 them from 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.

In addition to its property leases, the Company leases trucks to independent owner-operators under its lease-to-own program.

Right-of-Use Leases

The Company is party to operating leases which include initial terms ranging from three to ten years and which do not include an option for early cancellation. In accordance with the provisions of ASC Topic 842, these leases resulted in the recognition of right-of-use assets and corresponding operating lease liabilities, respectively, valued at $6.8 million as of June 30, 2026. These assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date, using the Company’s incremental borrowing rate as of the respective dates of lease inception, as the rate implicit in each lease is not readily determinable. The right-of-use assets are recorded in other assets, and the lease liability is recorded in accrued expenses and other liabilities and in other long-term liabilities on our condensed consolidated balance sheets. Lease expense is recorded on a straight-line basis over the lease term and is recorded in rent and purchased transportation in our condensed consolidated statements of operations. While these lease agreements may contain provisions to extend for a period of time after the initial term, the Company is not reasonably certain these extension options will be exercised. Therefore, potential lease payments that might occur under this extension period are not included in amounts recorded in our condensed consolidated balance sheets as of June 30, 2026.

Scheduled amounts and timing of cash flows arising from operating lease payments at June 30, 2026, are:

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 June 30, 2026. Cash paid for amounts included in the present value of operating lease liabilities was $0.4 million during the six months ended June 30, 2026, and is included in operating cash flows within the condensed consolidated statement of cash flows.

Operating Lease Costs

Lease Revenue

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

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 June 30, 2026, the gross carrying value of trucks underlying these leases was $68.4 million and accumulated depreciation was $28.4 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 June 30, 2026, the Company incurred $1.3 million of depreciation expense for these assets.

Lease Receivables

Future minimum operating lease payments receivable at June 30, 2026: