Advances to and Investments in Foreign Joint Venture Operations

12 Months Ended

Dec. 31, 2018

Equity Method Investments And Joint Ventures [Abstract]

Advances to and Investments in Foreign Joint Venture Operations

(5)	Advances to and Investments in Foreign Joint Venture Operations

The Company has a foreign joint venture agreement and holds a 40% interest in a Chinese company, BOMAY, which builds electrical systems for sale in China. The majority partner in this foreign joint venture is a subsidiary of a major Chinese oil company. M&I made an initial investment of $1.00 million in 2006 and made an additional $1.00 million investment in 2007. The Company’s equity income/loss from the foreign joint venture was $0.95 million and $0.43 million for the years ended December 31, 2018 and 2017, respectively. During the years ended December 31, 2018 and 2017, the Company received $1.1 million and $0.78 million, respectively, in dividends from BOMAY. There were no accounts receivable from BOMAY at December 31, 2018 and $0.04 million at December 31, 2017.

During 2018 and 2017, the Company also recognized approximately $0.14 million and $0.25 million for each year, respectively, for employee related expenses directly attributable to the foreign joint ventures.

Summary financial information of BOMAY in U.S. dollars was as follows at December 31, 2018 and 2017:

	BOMAY				MIEFE
	2018		2017		2018		2017
Assets:	(in thousands)				(in thousands)
Total current assets	$	59,124	$	50,000	$	-	$	121
Total non-current assets		5,742		3,457		-		15
Total assets	$	64,866	$	53,457	$	-	$	136
Liabilities and equity:
Total liabilities		38,732		25,598		-		198
Total joint ventures’ equity		26,134		27,859		-		(62	)
Total liabilities and equity	$	64,866	$	53,457	$	-	$	136


	BOMAY				MIEFE
	2018		2017		2018		2017
	(in thousands)				(in thousands)
Revenue	$	37,244	$	26,168	$	-	$	89
Gross Profit	$	7,878	$	5,654	$	-	$	23
Earnings	$	2,381	$	1,084	$	-	$	55

The Company’s investments in and advances to its foreign joint venture operations were as follows as of December 31, 2018 and 2017:

	BOMAY*						MIEFE
	2018			2017			2018			2017
Investments in foreign joint ventures:	(in thousands)						(in thousands)
Balance at beginning and end of year	$	2,033		$	2,033		$	-		$	-
Undistributed earnings:
Balance at beginning of year		7,967			8,313			-			-
Equity in earnings (loss)		953			434			-			-
Dividend distributions		(1,127	)		(780	)		-			-
Balance at end of year		7,793			7,967			-			-
Foreign currency translation:
Balance at beginning of year		737			104			210			213
Change during the year		(583	)		633			(210	)		(3	)
Balance at end of year		154			737			-			210
Total investments at end of year	$	9,980		$	10,737		$	-		$	210

*Accumulated statutory reserves in equity method investments of $2.8 million at both December 31, 2018 and 2017, respectively, are included in AETI’s consolidated retained earnings. In accordance with the People’s Republic of China, (“PRC”), regulations on enterprises with foreign ownership, an enterprise established in the PRC with foreign ownership 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.

The Company accounts for its investment in foreign joint venture operations using the equity method of accounting. Under the equity method, the Company’s share of the joint venture operations earnings or losses is recognized in the consolidated statements of operations as equity income (loss) from foreign joint ventures operations. Joint venture income increases the carrying value of the joint ventures and joint venture losses reduce the carrying value. Dividends received from the joint venture reduce the carrying value. In accordance with our long-lived asset policy, when events or circumstances indicate the carrying amount of an asset may not be recoverable, management tests long-lived assets for impairment. If the estimated future cash flows are projected to be less than the carrying amount, an impairment write-down (representing the carrying amount of the long-lived asset which exceeds the present value of estimated expected future cash flows) would be recorded as a period expense. 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 at December 31, 2018 or 2017.