Note 9.

Equity Method Investment

In May 2011, we acquired a 49.0% interest in TEL for $1.5 million in cash. Additionally, TEL’s majority owners were eligible to receive an earn-out of up to $4.5 million for TEL’s results through December 31, 2012, of which $1.0 million was earned based on TEL’s 2011 results and $2.4 million was earned based on TEL’s 2012 results. The earn-out payments increased our investment balance and there are no additional possible earn-outs.

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. We have an option to acquire 100% of TEL through May 31, 2016, by purchasing the majority owners’ interest based on a multiple of TEL’s average earnings before interest and taxes, adjusted for certain items including cash and debt balances as of the acquisition date. Subsequent to May 31, 2016, TEL’s majority owners have the option to acquire our interest based on the same terms detailed above. During the six-month period ended June 30, 2015, we sold tractors and trailers to TEL totaling $5.8 million and received $0.6 million for providing various maintenance services, certain back-office functions, and for miscellaneous equipment. We recognized net deferred gains of $0.1 million representing 49% of the gains on the units sold to TEL less any gains previously deferred and recognized when the equipment was subsequently sold to a third party. The deferred gains, totaling $0.9 million at June 30, 2015, are being carried as a reduction in our investment in TEL. At June 30, 2015 and December 31, 2014, we had a receivable from TEL for $2.3 million and $2.2 million, respectively, related to cash disbursements made pursuant to a cash management agreement and related to providing various maintenance services, certain back-office functions, and for miscellaneous equipment.

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 2015 net income, or $2.7 million. Our investment in TEL, totaling $14.8 million and $12.2 million, at June 30, 2015 and December 31, 2014, respectively, is included in other assets in the accompanying condensed consolidated balance sheets. Our investment in TEL is comprised of the $1.5 million cash investment noted above and our equity in TEL’s earnings since our investment, partially offset by dividends received since our investment for minimum tax withholdings and the abovementioned gains on sales of equipment to TEL.

See TEL’s summarized financial information below:

(in thousands)	As of June 30, 2015		As of December 31, 2014
Current Assets	$	13,515	$	14,525
Non-current Assets		83,119		64,731
Current Liabilities		5,429		16,733
Non-current Liabilities		68,841		45,687
Total Equity	$	22,364	$	16,836

	For the three months ended June 30, 2015		For the three months ended June 30, 2014		For the six months ended June 30, 2015		For the six months ended June 30, 2014
Revenue	$	34,386	$	23,242	$	63,415	$	40,889
Operating Expenses		30,850		20,956		56,403		36,493
Operating Income		3,536		2,286		7,012		4,396
Net Income	$	2,750	$	1,766	$	5,527	$	3,427