7. INVESTMENTS

The Company is a member of a joint venture, L B Pipe & Coupling Products, LLC (the JV) with L B Industries, Inc. and James Legg until June 30, 2019. The Company and L B Industries, Inc. each have a 45% ownership interest in the JV. The JV manufactures, markets and sells various precision coupling products for the energy, utility and construction markets. Under the terms of the JV agreement, as amended, the Company was required to make capital contributions totaling approximately $3,000. The Company fulfilled these commitments during 2011. The other JV members are required to make proportionate contributions in accordance with their ownership percentages in the JV.

Under applicable guidance for variable interest entities in ASC 810, “Consolidation,” the Company determined that the JV is a variable interest entity. The Company concluded that it is not the primary beneficiary of the variable interest entity, as the Company does not have a controlling financial interest and does not have the power to direct the activities that most significantly impact the economic performance of the JV. Accordingly, the Company concluded that the equity method of accounting remains appropriate.

As of September 30, 2013 and December 31, 2012, the Company had a nonconsolidated equity method investment of $4,666 and $4,332, respectively.

The Company recorded equity in the income of the JV of approximately $296 and $310 for the three months ended September 30, 2013 and 2012, respectively. For the nine months ended September 30, 2013 and 2012, the Company recorded equity in the income of the JV of approximately $892 and $643, respectively.

During the three and nine months ended September 30, 2013, each of the JV members received a proportional distribution of equity from the JV. The Company’s 45% ownership interest resulted in a cash distribution of $90 and $558 for the three and nine months ended September 30, 2013, respectively. There were no changes to the members’ ownership interests as a result of the distribution.

The Company’s exposure to loss results from its capital contributions, net of the Company’s share of the JV’s income or loss, and its net investment in the direct financing lease related to the facility used by the JV for its operations. The carrying amounts of these items have a maximum exposure to loss at September 30, 2013 and December 31, 2012, respectively, as follows:



		September 30,		December 31,
		2013		2012

Equity method investment	$	4,666	$	4,332
Net investment in direct financing lease		1,250		1,327
	$	5,916	$	5,659

The Company is leasing five acres of land and two facilities to the JV over a period of 9.5 years, with a 5.5 year renewal period. In November 2012, the Company executed the first amendment to its lease with the JV. The amendment included the addition of a second facility built by the Company that was leased to the JV. The current monthly lease payments, including interest, approximate $17, with a balloon payment of approximately $488, which is required to be paid either at the termination of the lease, allocated over the renewal period or during the initial term of the lease. This lease qualifies as a direct financing lease under the applicable guidance in ASC 840-30, “Leases.” The Company maintained a net investment in this direct financing lease of approximately $1,250 and $1,327 at September 30, 2013 and December 31, 2012, respectively.

The following is a schedule of the direct financing minimum lease payments for the remainder of 2013 and the years 2014 and thereafter:



		Minimum Lease Payments
2013	$	29
2014		114
2015		122
2016		131
2017		140
2018 and thereafter		714
	$	1,250