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Investments in Foreign Joint Ventures

3 Months Ended

Mar. 31, 2013

Investment in Foreign Joint Ventures [Abstract]

5. Investments in Foreign Joint Ventures

We have interests in three joint ventures outside of the United States of America (“U.S.”) 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 41% interest, MIEFE’s general manager holds a 8% 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 Beppe Hans Eddy Askerbo, of Brazil, holds a 51% interest.

Sales to joint ventures are made on an arms length basis.

Summary financial information of our foreign joint ventures in U.S. dollars was as follows at March 31, 2013 (unaudited) and December 31, 2012 (in thousands):


	BOMAY				MIEFE				AAG
	2013		2012		2013		2012		2013		2012
Assets:
Total current assets	$	107,257	$	91,926	$	4,287	$	3,894	$	3,695	$	2,241
Total non-current assets		5,059		5,116		115		116		823		776

Total assets	$	112,316	$	97,042	$	4,402	$	4,010	$	4,518	$	3,017

Liabilities and equity:
Total liabilities	$	85,858	$	73,293	$	1,800	$	1,422	$	2,163	$	1,511
Total joint ventures’ equity		26,458		23,749		2,602		2,588		2,355		1,505

Total liabilities and equity	$	112,316	$	97,042	$	4,402	$	4,010	$	4,518	$	3,016


	Three Months Ended March 31,
	BOMAY				MIEFE				AAG
	2013		2012		2013		2012		2013		2012
Revenue	$	33,509	$	23,017	$	2,667	$	2,894	$	3,485	$	1,514

Earnings	$	2,502	$	1,746	$	48	$	20	$	891	$	129

The following is a summary of activity in investments in foreign joint ventures for the three months ended March 31, 2013, (unaudited) (in thousands):


	March 31, 2013
	BOMAY*		MIEFE			AAG			TOTAL
	(in thousands)
Investments in foreign joint ventures:
Balance at December 31, 2012	$	9,531	$	1,063		$	814		$	11,408
Equity in earnings (loss) in 2013		1,001		20			437			1,458
Dividend distributions in 2013		—		—			—			—
Foreign currency translation adjustment		57		(15	)		5			47

Investments, end of period	$	10,589	$	1,068		$	1,256		$	12,913

Components of investments in foreign joint ventures:
Investment in joint ventures	$	2,033	$	15		$	233		$	2,281
Undistributed earnings		7,401		774			1,098			9,273
Foreign currency translation		1,155		279			(75	)		1,359

Investments, end of period	$	10,589	$	1,068		$	1,256		$	12,913

*

Accumulated statutory reserves in equity method investments of $1.9 million at March 31, 2013 and $1.6 million at December 31, 2012 are included in AETI’s consolidated retained earnings. In accordance with the People’s Republic of China, (“PRC”), regulations on enterprises with foreign operations, an enterprise established in the PRC with foreign operations is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

Under the equity method, the Company’s share of the joint ventures’ operations’ earnings or loss is recognized in the condensed consolidated statement of operations as equity income (loss) from foreign joint ventures’ operations. Joint venture income increases the carrying value of the joint venture investment and joint venture losses, as well as dividends received from the joint ventures, reduce the carrying value of the investment. 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.

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

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