Leases and Commitments

12 Months Ended

Dec. 31, 2018

NOTE 9. LEASES AND COMMITMENTS

Capital leases

The Company leases certain equipment under capital leases with terms ranging from 36 to 84 months. Balances related to these capitalized leases are included in "Property and equipment" line items in the accompanying consolidated balance sheets and are set forth in the table below for the periods indicated (in thousands).


	Capitalized Costs		Accumulated Amortization		Net Book Value
December 31, 2018	$	87,910	$	16,415	$	71,495
December 31, 2017	66,785		23,254		43,531

The Company has capitalized lease obligations relating to revenue equipment of $70.8 million, of which $17.3 million represents the current portion. These leases have various termination dates extending through November 2025 and contain renewal or fixed price purchase options. The effective interest rates on the leases range from nil to 4.08% as of December 31, 2018. The lease agreements require payment of property taxes, maintenance and operating expenses. Amortization of assets under capital leases was $5.8 million, $7.4 million, and $6.2 million for the years ended December 31, 2018, 2017 and 2016, respectively. The Company entered into $42.8 million, $2.6 million, and $29.6 million in non-cash capitalized lease obligations for the years ended December 31, 2018, 2017 and 2016, respectively.

During 2017, the Company completed a capital sale-leaseback transactions under which certain Company-owned tractors were sold to an unrelated party for net proceeds of $2.5 million with a term of 48 months. No deferred gain was recognized on the transaction.

Operating leases

Rent expense is set forth in the table below for the periods indicated (in thousands):


	Year Ended December 31,
	2018		2017		2016
Equipment rent (1)	$	10,840	$	10,173	$	7,443
Building and office rent (2)	1,586		1,619		2,001
Total rent expense	$	12,426	$	11,792	$	9,444

1.Expense relating to tractors, trailers and other operating equipment is recorded in the "Equipment rent" line item in the accompanying consolidated statement of operations and comprehensive income (loss).

2.Expense relating to buildings and office equipment is recorded in the "Operations and maintenance" line item in the accompanying consolidated statement of operations and comprehensive income (loss).

During the second quarter of 2018, the Company completed an operating sale-leaseback transaction under which it sold certain owned trailers to an unrelated party for net proceeds of $5.3 million and entered into an operating lease with the buyer for a term of 6 months. The $5.3 million in proceeds was received from the purchaser in early July 2018. The Company recorded a liability of approximately $1.3 million representing the deferred gain on the sale and amortized such amount to earnings ratably over the lease term.

During the first quarter of 2017, the Company completed an operating sale-leaseback transaction under which it sold certain owned tractors to an unrelated party for net proceeds of $11.0 million and entered into an operating lease with the buyer for a term of 41 months. The Company recorded a deferred gain of approximately $0.03 million on the sale, which is amortized to earnings ratably over the lease term. The deferred gain is included in the “Deferred gain” line item in the accompanying condensed consolidated balance sheets.

As of December 31, 2018, the future minimum payments including interest under capitalized leases with initial terms of one year or more and future rentals under operating leases for certain facilities, office equipment and revenue equipment with initial terms of one year or more were as follows for the years indicated (in thousands).


	2019		2020		2021		2022		2023		Thereafter
Future minimum payments	$	19,319	$	22,833	$	7,328	$	7,328	$	18,648	$	2,566
Future rentals under operating leases	9,088		5,370		1,308		920		708		1,358

Other commitments

As of December 31, 2018, the Company had commitments for purchases of revenue and non-revenue equipment in the amount of $32.8 million. The Company typically has the option to cancel revenue equipment orders within a 60 to 90 day period prior to scheduled production.

Related party transactions

In the normal course of business, the Company leases office and shop space from a related party under a monthly operating lease. Rent expense for this space was approximately $0.1 million for the year ended December 31, 2018, and is included in the "Operations and maintenance" line item in the accompanying consolidated statement of operations and comprehensive income (loss).