Note 11 - Equity Method Investment

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Equity Method Investment [Text Block]

Note 11. Equity Method Investment

We own a 49.0% interest in Transport Enterprise Leasing, LLC ("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. 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.

We sold tractors and trailers to TEL for $0.0 million and $1.0 million during the six months ended June 30, 2022 and 2021, respectively, and we received $0.4 million and $0.4 million, respectively, for providing various maintenance services, certain back-office functions, building and lot rental, and for miscellaneous equipment for the same periods. There was no equipment purchased from TEL during the six months ended June 30, 2022 and 2021. Additionally, we paid approximately $2.2 million and $0.1 million to TEL for leases of revenue equipment during each of the six months ended June 30, 2022 and 2021, respectively. We recognized a net reversal of previously deferred gains totaling less than $0.1 million for the six months ended June 30, 2022 and 2021, 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 $0.2 million and $0.3 million at  June 30, 2022 and 2021, respectively, are being carried as a reduction in our investment in TEL. At  June 30, 2022 and  December 31, 2021, we had accounts receivable from TEL of $0.1 million and $0.7 million, respectively, related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on TEL’s behalf and operating lease obligations to TEL of $1.4 million and $0.0 million, respectively.

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 2022 net income through June 30, 2022, or $13.9 million. We received no equity distributions from TEL during the six months ended June 30, 2022.

Our accounts receivable from TEL and investment in TEL as of  June 30, 2022 and December 31, 2021 are as follows (in thousands):

Description:	Balance Sheet Line Item:	June 30, 2022		December 31, 2021
Accounts receivable from TEL	Driver advances and other receivables	$	80	$	802
Investment in TEL	Other assets		58,088		44,196
Operating lease obligations	Current portion of operating lease obligations		1,442		-

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.

See TEL's summarized financial information below:

(in thousands)	As of June 30,		As of December 31,
	2022		2021
Total Assets	$	391,952	$	346,218
Total Liabilities		283,296		264,948
Total Equity	$	108,656	$	81,270

(in thousands)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenue	$	33,857	$	25,534	$	66,096	$	48,438
Cost of Sales		5,645		2,091		10,118		3,233
Operating Expenses		11,754		15,036		24,028		28,942
Operating Income		16,458		8,407		31,950		16,263
Net Income	$	14,728	$	6,615	$	28,386	$	12,619