Note 11 - Equity Method Investment

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Equity Method Investment [Text Block]

11. EQUITY METHOD INVESTMENT

We own a 49.0% interest in TEL, a tractor and trailer equipment leasing company and used equipment reseller. There is no loss limitation on our 49.0% interest in TEL. 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. There are no third party liquidity arrangements, guarantees, and/or other commitments that may affect the fair value or risk of our interest in TEL. For the years ended December 31, 2020, 2019, and 2018 we sold tractors and trailers to TEL for $2.1 million, none, and less than $0.1 million, respectively, and received $6.6 million, $9.4 million, and $8.2 million, respectively, for providing various maintenance services, certain back-office functions, and for miscellaneous equipment. Equipment purchased from TEL totaled $0.0 million, $10.5 million, and $1.8 million in 2020, 2019, and 2018, respectively. Additionally, we paid $0.6 million, $0.6 million, and $0.9 million to TEL for leases of revenue equipment in 2020, 2019, and 2018, respectively. We recorded net deferred gains of less than $0.1 million for the year ended  December 31, 2020 and reversed previously deferred gains of less than $0.1 million for the same year ended and 2019, representing 49% of the gains on tractors and trailers 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, 2020 and 2019, respectively, are being carried as a reduction in our investment in TEL. 

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 $3.9 million in 2020, $7.0 million in 2019, and $7.7 million in 2018. We received an equity distribution from TEL for $1.5 million, $1.3 million, and $2.0 million in 2020, 2019 and 2018, which was distributed to each member based on its respective ownership percentage. 

Our accounts receivable from TEL and investment in TEL as of  December 31, 2020 and 2019, are as follows:

		2020		2019
Description:	Balance Sheet Line Item:
Accounts receivable from TEL	Driver advances and other receivables	$	661		1,251
Investment in TEL	Other assets	$	34,365	$	31,906

Our accounts receivable from TEL related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on TEL's behalf. 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,
	2020		2019
Current Assets	$	27,167	$	28,577
Non-current Assets		283,913		346,014
Current Liabilities		66,495		85,751
Non-current Liabilities		183,393		232,992
Total Equity	$	61,192	$	55,848

(in thousands)	As of the years ended December 31,
	2020		2019		2018
Revenue	$	95,016	$	110,298	$	108,801
Cost of Sales		11,617		20,404		37,307
Operating Expenses		64,581		65,058		47,281
Operating Income		18,818		24,836		24,213
Net Income	$	8,344	$	13,403	$	16,496