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Note 11 - Equity Method Investment

9 Months Ended

Sep. 30, 2021

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. In May 2016, the operating agreement with TEL was amended to, among other things, remove the previously agreed to fixed date purchase options. 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 $1.0 million and $0.0 million during the nine months ended September 30, 2021 and 2020, respectively, and we received $0.7 million and $6.3 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 nine months ended September 30, 2021 and 2020. Additionally, we paid approximately $0.2 million and $0.1 million to TEL for leases of revenue equipment during each of the nine months ended September 30, 2021 and 2020, respectively. We recognized a net deferral of gains totaling less than $0.1 million and net reversal of previously deferred gains totaling less than $0.1 million for the nine months ended September 30, 2021 and 2020, 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 $0.3 million and $0.2 million at September 30, 2021 and 2020, respectively, are being carried as a reduction in our investment in TEL. At September 30, 2021 and December 31, 2020, we had accounts receivable from TEL of $0.8 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.

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 2021 net income through September 30, 2021, or $9.6 million. We received $2.0 million of equity distributions from TEL during the nine months ended September 30, 2021.

Our accounts receivable from TEL and investment in TEL as of September 30, 2021 and December 31, 2020 are as follows (in thousands):

Description:	Balance Sheet Line Item:		September 30, 2021				December 31, 2020
Accounts receivable from TEL	Driver advances and other receivables		$	830			$	661
Investment in TEL	Other assets			41,924				34,365

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 September 30,				As of December 31,
		2021				2020
Total Assets		$	350,253			$	374,591
Total Liabilities			273,870				318,743
Total Equity		$	76,383			$	55,848

(in thousands)		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2021				2020				2021				2020
Revenue		$	27,626			$	22,984			$	76,063			$	72,202
Cost of Sales			3,030				2,748				6,263				10,332
Operating Expenses			16,214				15,184				45,156				51,708
Operating Income			8,382				5,052				24,644				10,162
Net Income		$	6,572			$	2,729			$	19,191			$	2,308