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Advances To And Investments In Joint Ventures

9 Months Ended

Sep. 30, 2011

Advances To And Investments In Joint Ventures [Abstract]

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:

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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;

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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;

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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.

Sales to joint ventures are made on an arms length basis and intercompany profits, if any, are eliminated in consolidation. Summary financial information of our foreign joint ventures in U.S. dollars was as follows at September 30, 2011 (unaudited) and December 31, 2010 (in thousands):


		BOMAY								MIEFE								AAG
		2011				2010				2011				2010				2011				2010
Assets:
Total current assets		$	46,724			$	47,401			$	3,809			$	3,842			$	1,119			$	181
Total non-current assets			5,173				5,155				92				230				47				6

Total assets		$	51,897			$	52,556			$	3,901			$	4,072			$	1,166			$	187

Liabilities and equity:
Total current liabilities		$	33,302			$	35,303			$	1,654			$	1,441			$	971			$	159
Total partnership equity			18,595				17,253				2,247				2,631				195				28

Total liabilities and equity		$	51,897			$	52,556			$	3,901			$	4,072			$	1,166			$	187


Gross sales		$	45,624			$	38,726			$	2,421			$	3,171			$	2,181			$	203

Net income			3,359				4,164				(147	)			151				189				(76	)

The Company's investment in and advances to its joint ventures were as follows:


		September 30, 2011																December 31, 2010
		BOMAY				MIEFE				AAG				TOTAL				BOMAY				MIEFE				AAG				TOTAL
Investment in joint ventures:

Balance, beginning of year		$	2,033			$	17			$	158			$	2,208			$	2,033			$	17			$	—			$	2,050

Additional amounts invested/advanced			—				—				165				165				—				—				158				158


Balance, end of period			2,033				17				323				2,373				2,033				17				158				2,208


Undistributed earnings:

Balance, beginning of year			4,221				990				(93	)			5,118				2,919				1,109				—				4,028

Equity in earnings (loss)			1,343				(72	)			49				1,320				2,341				56				(93	)			2,304

Dividend distributions			(1,038	)			(118	)			—				(1,156	)			(1,039	)			(175	)			—				(1,214	)


Balance, end of Period			4,526				800				(44	)			5, 282				4,221				990				(93	)			5,118


Foreign currency translation:

Balance, beginning of year			767				282				—				1,049				222				147				—				369

Change during the period			232				2				(14	)			220				545				135				—				680


Balance, end of period			999				284				(14	)			1,269				767				282				—				1,049


Investments, end of period		$	7,558			$	1,101			$	265			$	8,924			$	7,021			$	1,289			$	65			$	8,375

Under the equity method, the Company's share of the foreign joint ventures' earnings or losses is recognized in the statement of operations as net equity income from foreign joint ventures. Equity income from foreign joint ventures increases the carrying value of the joint ventures and equity loss from foreign joint ventures reduces the carrying value. A dividend received from the joint ventures reduces the carrying value.

The company's net equity income (expense) from foreign joint ventures (in thousands):


		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010

BOMAY		$	666			$	518			$	1,343			$	1,488
MIEFE			66				(29	)			(72	)			(76	)
AAG			90				—				49				—

Total		$	822			$	489			$	1,320			$	1,412

Joint venture management expenses			(113	)			(97	)			(359	)			(320	)

Net equity income from foreign joint ventures		$	709			$	392			$	961			$	1,092

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 from foreign joint ventures 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. Based on the evaluation in the three months ended March 31, 2010, management determined that the allowance was no longer necessary. This change in estimate increased the carrying value of the investment by approximately $660 and was included in our statements of operations as equity income from foreign 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 nine months ended September 30, 2011 and 2010, the Company incurred costs of $359 and $320, respectively, associated with these employees, including compensation, benefits and other payroll related expenses, and travel, which is included in net equity income from foreign joint ventures - joint venture management related expenses in the accompanying condensed consolidated statement 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 nine months ended September 30, 2011, the Company advanced $165 to the joint venture in accordance with the agreement.

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

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