Note 13 - Equity Method Investment

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Equity Method Investment [Text Block]

13. 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. 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, 2023 and 2022, we sold no tractors and trailers to TEL while for 2021 we sold $0.3 million of tractors and trailers to TEL. We received $0.9 million, $0.8 million, and $0.9 million respectively, for providing various maintenance services, certain back-office functions, and for miscellaneous equipment. We purchased equipment from TEL for $4.1 million in 2023 and none in  2022 or 2021, respectively. Additionally, we paid $6.8 million, $6.1 million, and $0.8 million to TEL for leases of revenue equipment and maintenance in 2023, 2022, and 2021, respectively. We had operating lease liabilities with TEL of $4.1 million and $13.8 million at December 31, 2023 and 2022, respectively, for revenue equipment leased from TEL. We recorded net reversal of gains of less than $0.1 million for the years ended  December 31, 2023 and 2022 and deferral of gains of approximately $0.1 million for the year ended December 31, 2021, 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, 2023 and 2022, 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 $21.4 million in 2023, $25.2 million in 2022, and $14.8 million in 2021. We received an equity distribution from TEL for $9.8 million, and $14.7 million in 2023 and 2022, which was distributed to each member based on its respective ownership percentage. 

Our accounts receivable and payable from TEL and investment in TEL as of  December 31, 2023 and 2022, are as follows:

Description:	Balance Sheet Line Item:	2023		2022
Accounts receivable from TEL	Driver advances and other receivables	$	37	$	9
Accounts payable to TEL	Accrued expenses	$	460	$	763
Investment in TEL	Other assets	$	66,327	$	54,727

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 accounts payable to TEL related to operating lease payments owed to TEL. 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. Additionally, the abovementioned deferred gains on sales of equipment to TEL are carried as a reduction in our investment in TEL.

See TEL's summarized financial information below.

(in thousands)	As of the years ended December 31,
	2023		2022
Current Assets	$	74,154	$	62,064
Non-current Assets		518,870		418,661
Current Liabilities		119,620		83,326
Non-current Liabilities		347,121		294,222
Total Equity	$	126,283	$	103,177

(in thousands)	As of the years ended December 31,
	2023		2022		2021
Revenue	$	151,207	$	149,347	$	104,873
Cost of Sales		14,768		28,815		8,876
Operating Expenses		79,596		60,861		58,627
Operating Income		56,843		59,671		37,370
Net Income	$	43,107	$	51,907	$	30,078