Note 9 - Equity Method Investment

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Equity Method Investment [Text Block]

9.

     EQUITY METHOD INVESTMENT

We own a

49.0%

interest in TEL, 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. In

May 2016,

the operating agreement with TEL was amended to, among other things, remove the previously agreed to fixed date purchase options. Our option to acquire up to the remaining

51%

of TEL would have expired

May 31, 2016,

and TEL’s majority owners would have received the option to purchase our ownership in TEL. There are

no

current put rights to purchase or sell with any owners. TEL’s majority owners are generally restricted from transferring their interests in TEL, other than to certain permitted transferees, without our consent. For the years ended

December 31, 

2018

and

2017

, we sold tractors and trailers to TEL for 

less than

$0.1

million

and

$0.1

million

, respectively, and received 

$8.2

million

and

$5.9

million

, respectively, for providing various maintenance services, certain back-office functions, and for miscellaneous equipment. We also purchased equipment from TEL for

$1.8

million

 in

2018

. 

Additionally, we paid

$0.9

million

 and 

$0.5

million

to TEL for leases of revenue equipment in

2018

and

2017

, respectively

.We reversed previously deferred gains of 

$0.2

million

for each of the years ending

December 31,

2018

and

2017

, representing

49%

of the gains on units sold to TEL less any gains previously deferred and recognized when the equipment was sold to a

third

party.  Deferred gains totaling 

$0.2

million

 and 

$0.4

million

at

December 31,

2018

and

2017

, respectively, are being carried as a reduction in our investment in TEL. At

December 31,

2018

and

2017

, we had accounts receivable from TEL of 

$7.2

million

, and

$8.6

million

, respectively, related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on TEL's behalf.

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, which amounted to 

$7.7

million

 in

2018

, 

$3.4

million

in

2017

, and 

$3.0

million

in

2016

. We received an equity distribution from TEL for 

$2.0

million

 in each of 

2018

 and 

2017

, and 

$1.5

million

 in

2016

, which was distributed to each member based on its respective ownership percentage. Our investment in TEL, totaling 

$26.1

million

 and 

$20.1

million

at

December 31,

2018

and

2017

, respectively, is included in other assets in the accompanying consolidated balance sheet. Our investment in TEL is comprised of the

$4.9

million cash investment noted above and our equity in TEL's earnings since our investment, partially offset by dividends received since our investment for minimum tax withholdings as noted above and the abovementioned deferred gains on sales of equipment to TEL.

See TEL's summarized financial information below.

(in thousands)	As of the years ended December 31,
	2018		2017
Current Assets	$	25,877	$	19,660
Non-current Assets		273,987		183,905
Current Liabilities		78,530		53,981
Non-current Liabilities		176,389		117,135
Total Equity	$	44,945	$	32,449

(in thousands)	As of the years ended December 31,
	2018		2017		2016
Revenue	$	108,801	$	84,865	$	94,432
Operating Expenses		84,588		72,868		83,475
Operating Income		24,213		11,997		10,957
Net Income	$	16,496	$	6,954	$	6,598