Investments in Foreign Joint Ventures | 9 Months Ended |
Sep. 30, 2014 |
Equity Method Investments And Joint Ventures [Abstract] | ' |
Investments in Foreign Joint Ventures | ' |
5. Investments in Foreign Joint Ventures |
Effective May 1, 2014, we have interests in two 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, Sonepar, (private company) of France holds a 51% interest, and; | | | | | | | | | | | | | | | | | | | | | | |
Effective April 30, 2014 the Company withdrew from the AETI Alliance Group do Brazil Sistemas E Servicos Em Energia LTDA. (“AAG”)joint venture in exchange for the book value at April 30, 2014 of approximately $0.6 million, receivable from AAG in 12 equal monthly payments. The Company has received four payments through September 30, 2014. |
Sales to joint ventures are made on an arm’s length basis. |
Summary (unaudited) financial information of our foreign joint ventures in U.S. dollars was as follows at September 30, 2014 and December 31, 2013 and the three months and nine months ended September 30, 2014 and 2013 (in thousands): |
|
| BOMAY | | | MIEFE | | | AAG | |
| 2014 | | | 2013 | | | 2014 | | | 2013 | | | 2014* | | | 2013 | |
Assets: | | | | | | | | | | | | | | | | | | | | | | | |
Total current assets | $ | 77,458 | | | $ | 94,220 | | | $ | 3,932 | | | $ | 3,855 | | | $ | - | | | $ | 2,572 | |
Total non-current assets | | 4,788 | | | | 5,122 | | | | 126 | | | | 114 | | | | - | | | | 1,550 | |
Total assets | $ | 82,246 | | | $ | 99,342 | | | $ | 4,058 | | | $ | 3,969 | | | $ | - | | | $ | 4,122 | |
Liabilities and equity: | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | $ | 53,749 | | | $ | 72,644 | | | $ | 2,533 | | | $ | 1,197 | | | $ | - | | | $ | 1,291 | |
Total joint ventures’ equity | | 28,497 | | | | 26,698 | | | | 1,525 | | | | 2,772 | | | | - | | | | 2,831 | |
Total liabilities and equity | $ | 82,246 | | | $ | 99,342 | | | $ | 4,058 | | | $ | 3,969 | | | $ | - | | | $ | 4,122 | |
|
*As of April 30, 2014, the Company withdrew from the AAG Joint Venture. |
|
| Three Months Ended September 30, | |
| BOMAY | | | MIEFE | | | AAG | |
| 2014 | | | 2013 | | | 2014 | | | 2013 | | | 2014* | | | 2013 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Revenue | $ | 9,995 | | | $ | 17,995 | | | $ | 1,359 | | | $ | 1,530 | | | $ | - | | | $ | 1,434 | |
Gross Profit | $ | 2,353 | | | $ | 2,853 | | | $ | 567 | | | $ | 372 | | | $ | - | | | $ | 259 | |
Earnings | $ | 712 | | | $ | 1,187 | | | $ | 158 | | | $ | (29 | ) | | $ | - | | | $ | (59 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
*As of April 30, 2014, the Company withdrew from the AAG Joint Venture. | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | |
| BOMAY | | | MIEFE | | | AAG | |
| 2014 | | | 2013 | | | 2014 | | | 2013 | | | 2014* | | | 2013 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Revenue | $ | 67,209 | | | $ | 82,986 | | | $ | 4,571 | | | $ | 7,021 | | | $ | 1,078 | | | $ | 9,433 | |
Gross Profit | $ | 9,812 | | | $ | 10,451 | | | $ | 1,686 | | | $ | 1,659 | | | $ | 154 | | | $ | 3,691 | |
Earnings | $ | 4,483 | | | $ | 5,308 | | | $ | 339 | | | $ | 356 | | | $ | 4 | | | $ | 1,777 | |
|
|
*Items represent the Joint Venture’s final four months ending April 2014. |
|
The following is a summary of activity in investments in foreign joint ventures for the nine months ended September 30, 2014 (unaudited): |
|
| 30-Sep-14 | | | | | | | | | |
| BOMAY** | | | MIEFE | | | AAG | | | TOTAL | | | | | | | | | |
| (in thousands) | | | | | | | | | |
Investments in foreign joint ventures: | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2013 | $ | 10,609 | | | $ | 1,138 | | | $ | 1,286 | | | $ | 13,033 | | | | | | | | | |
Equity in earnings (loss) in 2014 | | 1,793 | | | | 139 | | | | 2 | | | | 1,934 | | | | | | | | | |
Dividend distributions in 2014 | | (1,042 | ) | | | (650 | ) | | | (830 | ) | | | (2,522 | ) | | | | | | | | |
Foreign currency translation adjustment | | (77 | ) | | | (98 | ) | | | 178 | | | | 3 | | | | | | | | | |
Withdrawal from joint venture* | | - | | | | - | | | | (636 | ) | | | (636 | ) | | | | | | | | |
Investments, end of period | $ | 11,283 | | | $ | 529 | | | $ | - | | | $ | 11,812 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Components of investments in foreign joint ventures: | | | | | | | | | | | | | | | | | | | | | | | |
Investment in joint ventures | $ | 2,033 | | | $ | 15 | | | $ | - | | | $ | 2,048 | | | | | | | | | |
Undistributed earnings | | 7,896 | | | | 358 | | | | - | | | | 8,254 | | | | | | | | | |
Foreign currency translation | | 1,354 | | | | 156 | | | | - | | | | 1,510 | | | | | | | | | |
Investments, end of period | $ | 11,283 | | | $ | 529 | | | $ | - | | | $ | 11,812 | | | | | | | | | |
|
|
* | Represents the 49% of the net book value at April 30, 2014, of which $188,000 has been received from AAG at September 30, 2014. No gain or loss was recorded because the receivable equals the Company’s total investment in AAG. The remaining receivable is included in accounts receivables. | | | | | | | | | | | | | | | | | | | | | | |
** | Accumulated statutory reserves of $1.86 million in equity method investments at September 30, 2014 and December 31, 2013 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. | | | | | | | | | | | | | | | | | | | | | | |
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. |