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Advances To And Investments In Joint Ventures
 6 Months Ended
Jun. 30, 2011
Advances To And Investments In Joint Ventures  
Advances To And Investments In Joint Ventures
5. Advances to and Investments in Joint Ventures

We have interests in three joint ventures outside of the United States which are accounted for on the equity method:

 

  •  

BOMAY Electric Industries Company, Ltd. ("BOMAY"), in which the Company holds a 40% interest, Baoji Oilfield Machinery Co., Ltd. (a subsidiary of China National Petroleum Corporation) holds a 51% interest, and AA Energies, Inc., holds a 9% interest;

  •  

M&I Electric Far East, Ltd. ("MIEFE"), in which the Company holds a 49% interest and, Oakwell Engineering, Ltd., of Singapore holds a 51% interest, and;

  •  

AETI Alliance Group do Brazil Sistemas E Servicos Em Energia LTDA. ("AAG"), in which the Company holds a 49% interest and, Five Stars De Macae Servicos De Petroleo LTDA., of Brazil holds a 51% interest.

The carrying value of these equity method investments as of June 30, 2011 and December 31, 2010 were:

 

     June 30,
2011		      December 31,
2010		  
     (Dollars In Thousands)  

BOMAY

          $6,815                 $7,021      

MIEFE

      1,086             1,289      

AAG

      92             65      
  

 

 

     

 

 

  
         $7,993                 $8,375      
  

 

 

     

 

 

  

Under the equity method, the Company's share of the joint ventures' earnings or losses is recognized in the statements of operations as other income (expense)—equity in income of joint ventures. Joint venture income increases the carrying value of the joint ventures and joint venture losses reduce the carrying value. Dividends received from the joint ventures reduce the carrying value.

Each reporting period, the Company evaluates the carrying value of these equity method investments as to whether an impairment adjustment may be necessary. In making this evaluation, a variety of quantitative and qualitative factors are considered including national and local economic, political and market conditions, industry trends and prospects, liquidity and capital resources and other pertinent factors. Based on this evaluation for this reporting period, the Company does not believe an impairment adjustment is necessary.

During 2007, the Company's equity income in the reported results of BOMAY was net of certain expense adjustments totaling approximately $660 that were recorded to include management's estimate of warranty costs and management's estimate of a provision for doubtful accounts for contractual amounts due from BOMAY. In recording these adjustments, a variety of factors were considered by management including local operating conditions, potential warranty costs associated with the introduction of new products in the Chinese market and uncertainty regarding the collectability of amounts due from BOMAY arising from certain contractual obligations. Based on the evaluation in the three months ended March 31, 2010, management determined that the allowance was no longer necessary.

This determination was based on a number of changed circumstances including the satisfaction of all past contractual obligations by BOMAY, good historical performance of its manufactured products and positive relationships built with local management that the Company believes have eliminated any collection issues on the contractual obligations. This change in estimate increased the carrying value of the investment by approximately $660 and was included in our statements of operations as other income (expense)—equity in income of joint ventures for the three months ended March 31, 2010.

The Company employs certain individuals to maintain strong working relationships with local management, monitor activities of the joint ventures, and report to Company management. During the six months ended June 30, 2011, and 2010 the Company incurred costs of $246 and $222, respectively associated with these employees, including compensation, benefits and other payroll related expenses, and travel, which is included in other income (expense) – joint venture management related expenses in the accompanying condensed consolidated statements of operations.

During 2010, the Company entered into a joint venture agreement and holds a 49% interest in a Brazilian company, AAG, which provides electrical products and services to the Brazilian energy industries. During the six months ended June 30, 2011, the Company advanced $69 to the joint venture in accordance with the agreement.