Note 11 - Equity Method Investment

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Equity Method Investment [Text Block]

Note 11. Equity Method Investment

We own a minority investment in Transport Enterprise Leasing, LLC ("TEL"). 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. TEL’s majority owners are generally restricted from transferring their interests in TEL, other than to certain permitted transferees, without our consent. We sold no tractors or trailers to TEL during the nine-months ended September 30, 2020 and 2019, and we received $6.3 million and $7.1 million, respectively, for providing various maintenance services, certain back-office functions, and for miscellaneous equipment. We recognized a net reversal of previously deferred gains totaling less than $0.1 million for the nine-months ended September 30, 2020 and 2019, representing 49% of the gains on units sold to TEL less any gains previously deferred and recognized when the equipment was subsequently sold to a third party. Deferred gains, totaling $0.1 million and $0.2 million at  September 30, 2020 and 2019, respectively, are being carried as a reduction in our investment in TEL. At  September 30, 2020 and  December 31, 2019, we had accounts receivable from TEL of $0.8 million and $1.2 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 2020 net income through September 30, 2020, or $1.0 million. We received no equity distribution from TEL during the nine-months ended September 30, 2020 and $1.2 million during the three and nine months ended September 30, 2019. Our investment in TEL, totaling $33.0 million and $32.4 million, as of  September 30, 2020 and December 31, 2019, respectively, is included in other assets in the accompanying condensed consolidated balance sheets.

See TEL's summarized financial information below:

(in thousands)	As of September 30,		As of December 31,
	2020		2019
Total Assets	$	337,699	$	374,591
Total Liabilities		279,543		318,743
Total Equity	$	58,156	$	55,848

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenue	$	22,984	$	30,709	$	72,202	$	82,683
Cost of Sales		2,748		6,302		10,332		17,213
Operating Expenses		15,184		16,634		51,708		42,775
Operating Income		5,052		7,773		10,162		22,695
Net Income	$	2,729	$	4,585	$	2,308	$	14,452