Note 11 - Equity Method Investment

12 Months Ended

Dec. 31, 2011

Equity Method Investments Disclosure [Text Block]

11.           EQUITY METHOD INVESTMENT

On May 31, 2011, we acquired a 49.0% interest in Transport Enterprise Leasing, LLC for $1.5 million in cash. Additionally, TEL’s majority owners are eligible to receive an earn-out of up to $4.5 million over two years, of which $1.0 million is included in accrued expenses at December 31, 2011 on the consolidated balance sheet related to amounts due TEL’s majority owners as a result of its 2011 earnings.  Any earn-out payments will increase our investment balance should they be required. TEL is a tractor and trailer equipment leasing company and used equipment reseller. We have not guaranteed any of TEL’s debt and have no obligation to provide funding, services or assets. Under the agreement, we have an option to acquire 100% of TEL between January 1, 2013 and May 31, 2016, by purchasing the majority owners’ interest based on a multiple of TEL’s average earnings before income and taxes, adjusted for certain items including cash and debt balances as of the acquisition date. Subsequent to May 31, 2016, TEL’s majority owners’ have the option to acquire our interest based on the same terms detailed above. During the seven month period ended December 31, 2011, we sold tractors and trailers to TEL for $5.4 million and received $0.5 million for providing various maintenance services, certain back-office functions and for miscellaneous equipment. We deferred $0.6 million in gains on the tractors and trailers sold to TEL until the equipment is subsequently sold to a third party.  The deferred gains are being carried as a reduction in our investment in TEL.  At December 31, 2011, we had a receivable from TEL for $0.6 million related to cash disbursements made pursuant to a cash management agreement.

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL’s net income since May 31, 2011, or $0.7 million. In the third quarter of 2011, we received an equity distribution from TEL for $0.2 million that was distributed to each member based on their respective ownership percentage in order to satisfy estimated tax payments resulting from TEL’s earnings.  The distribution is the result of TEL being a limited liability company and thus its earnings pass through to the members and are taxed for federal and certain state income on their respective tax returns. Our investment in TEL, totaling $2.4 million at December 31, 2011, is included in other assets in the accompanying consolidated balance sheet.

See TEL’s summarized financial information below subsequent to our investment.

(in thousands)	As of and for the seven months ended December 31,
	2011
Current Assets	$	3,805
Non-current Assets		11,255
Current Liabilities		5,136
Non-current Liabilities		8,739
Total Equity		1,185
Revenue	$	31,070
Operating Expenses		29,426
Operating Income		1,644
Net Income	$	1,331