Note 9 - Equity Method Investment

12 Months Ended

Dec. 31, 2019

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, 2019

, 

2018

, and

2017

we sold tractors and trailers to TEL for 

none

, 

less than

$0.1

million

, and

$0.1

million, respectively, and received 

$9.4

million

,

$8.2

million

, and

$0.5

million, respectively, for providing various maintenance services, certain back-office functions, and for miscellaneous equipment. Equipment purchased from TEL totaled

$10.5

million,

$

1.8

million, and

none

in 

2019

,

2018,

and

2017,

respectively. Additionally, we paid 

$0.6

million

, 

$0.9

million

, and

$0.1

million to TEL for leases of revenue equipment in

2019

,

2018

, and

2017,

respectively.We reversed previously deferred gains of 

less than

$0.1

million

 and 

$0.2

million

for the years ending

December 31, 2019

 and

2018

, respectively, 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

at

December 31, 2019

 and

2018

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

December 31, 2019

 and

2018

, we had accounts receivable from TEL of

$1.3

million

, and 

$7.2

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 

$7.0

million

in

2019

, 

$7.7

million

in

2018

, and 

$3.4

million

in

2017

. We received an equity distribution from TEL for 

$1.2

million

in 

2019

 and

$2.0

million in each of 

2018

 and 

2017

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

$31.9

million

and 

$26.1

million

at

December 31, 2019

 and

2018

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

$4.9

million cash investment 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,
	2019		2018
Current Assets	$	28,577	$	25,877
Non-current Assets		346,014		273,987
Current Liabilities		85,751		78,530
Non-current Liabilities		232,992		176,389
Total Equity	$	55,848	$	44,945

(in thousands)	As of the years ended December 31,
	2019		2018		2017
Revenue	$	110,298	$	108,801	$	84,865
Cost of Sales		20,404		37,307		37,343
Operating Expenses		65,058		47,281		35,525
Operating Income		24,836		24,213		11,997
Net Income	$	13,403	$	16,496	$	6,954