4. Investment in equipment and leases, net:

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

Impairment of investments in leases and assets held for sale or lease:

Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. Impairment losses are recorded as an adjustment to the net investment in operating leases. No impairment losses were recorded during the three and six months ended June 30, 2012 and 2011.

The Company utilizes a straight line depreciation method over the term of the equipment lease for equipment on operating leases currently in its portfolio. Depreciation expense on the Company’s equipment totaled $259 thousand and $361 thousand for the respective three months ended June 30, 2012 and 2011, and was $571 thousand and $692 thousand for the respective six months ended June 30, 2012 and 2011.

All of the leased property was acquired during the period from 1999 through 2002.

Operating leases:

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

The average estimated residual value for assets on operating leases was 10% of the assets’ original cost at both June 30, 2012 and December 31, 2011.

The Company earns revenues from its containers, marine vessel and certain other assets based on utilization of such assets or through fixed term leases. Contingent rentals (i.e., short-term, operating charter hire payments) and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of Operating Lease Revenues, and totaled $623 thousand and $581 thousand for the respective three months ended June 30, 2012 and 2011, and was $1.2 million for each of the six months ended June 30, 2012 and 2011.

As of June 30, 2012 and December 31, 2011, the Company had no operating leases in non-accrual status.

Direct financing leases:

As of June 30, 2012, the investment in direct financing leases primarily consists of railcars and manufacturing equipment. At December 31, 2011, such investment consisted of railcars as well as construction and manufacturing equipment.

The components of the Company’s investment in direct financing leases as of June 30, 2012 and December 31, 2011 are as follows (in thousands):

There were no net investments in direct financing leases in non-accrual status as of June 30, 2012 and December 31, 2011.

At June 30, 2012, the aggregate amount of future lease payments is as follows (in thousands):