Note 9 - Equity Method Investment

9 Months Ended

Sep. 30, 2015

Note 9.

Equity Method Investment

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 own a 49.0% interest in TEL and 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 nine-month period ended September 30, 2015, we sold tractors and trailers to TEL totaling $6.2 million and received $0.8 million for providing various maintenance services, certain back-office functions, and for miscellaneous equipment. We recognized net deferred gains of less than $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 $0.8 million at September 30, 2015, are being carried as a reduction in our investment in TEL. At September 30, 2015 and December 31, 2014, we had a receivable from TEL for $2.6 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 $3.7 million. Our investment in TEL, totaling $15.9 million and $12.2 million, at September 30, 2015 and December 31, 2014, respectively, is included in other assets in the accompanying condensed consolidated balance sheets.