Note 9 - Equity Method Investment

3 Months Ended

Mar. 31, 2017

Note

Equity Method Investment

We own a minority investment in Transport Enterprise Leasing, LLC ("TEL"). 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.

May

2016,

the operating agreement with TEL was amended to, among other things, remove the previously agreed to fixed date purchase options. TEL’s majority owners are generally restricted from transferring their interests in TEL, other than to certain permitted transferees, without our consent.

We did not sell any tractors or trailers to TEL during the quarter ended

March

31,

2017,

compared to

$0.4

million during the same

2016

quarter. We received

$0.1

million and

$0.5

million, respectively, for providing various maintenance services, certain back-office functions, and for miscellaneous equipment. We recognized a net reversal of previously deferred gains totaling less than

$0.1

million for the

three

months ended

March

31,

2017

and

2016,

respectively, 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

$0.5

million at

March

31,

2017,

are being carried as a reduction in our investment in TEL. At

March

31,

2017

and

December

31,

2016,

we had accounts receivable from TEL of

$6.3

million and

$3.7

million, respectively, related to cash disbursements made pursuant to our performance of certain back-office and maintenance functions on TEL’s behalf.

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

2017

net income through

March

31,

2017,

$1.0

million. Our investment in TEL, totaling

$19.6

million and

$18.5

million, at

March

31,

2017

and

December

31,

2016,

respectively, is included in other assets in the accompanying condensed consolidated balance sheets.

See TEL's summarized financial information below:

(in thousands)	As of March 31, 2017		As of December 31, 2016
Current Assets	$	16,371	$	14,320
Non-current Assets		145,759		146,081
Current Liabilities		8,873		34,766
Non-current Liabilities		122,189		96,140
Total Equity	$	31,068	$	29,495

	For the three months ended March 31, 2017		For the three months ended March 31, 2016
Revenue	$	22,533	$	19,635
Operating Expenses		19,827		16,610
Operating Income		2,706		3,025
Net Income	$	1,637	$	1,807