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Business Combinations | 12 Months Ended
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Dec. 31, 2024
Business Combinations [Abstract] |
Acquisitions | NOTE 4. Business Combinations EASO Transaction On October 23, 2024, we entered into an investment agreement with Corporación Interamericana de Logística, S.A. de C.V. and certain associated entities (commonly known as “EASO”), a family-led, intermodal and trucking logistics provider headquartered in Mexico City to acquire a controlling interest in EASO. EASO specializes in intermodal, dedicated trucking, truckload and freight brokerage services. Through a network of terminals across Mexico, EASO serves the entire Mexican domestic market and main logistics hubs in the U.S. using its intermodal cross-border network. The estimated fair value of total consideration transferred was approximately $55 million for a 51% equity stake in EASO. The financial res ults of EASO, since the date of acquisition, are included in our ITS segment. The EASO investment transaction expanded our intermodal and transportation solutions business. With a substantial increase in cross-border trade activity from nearshoring, this transaction improves our ability to provide a cross-border service offering and provides increased intermodal conversion opportunities. The initial accounting for the EASO transaction is incomplete as we, with the support of our valuation specialist, are in the process of finalizing the fair market value calculations of the acquired net assets as well as non-controlling interests. In addition, we are in the preparation and review process of the applicable future cash flows used in determining the purchase accounting. Finally, certain post-closing activities outlined in the investment agreement remain incomplete. As a result, the amounts recorded in the consolidated financial statements related to the EASO transaction are preliminary and the measurement period remains open. The following table summarizes the preliminary purchase price allocation to the assets acquired and liabilities assumed as of the date of the investment agreement (in thousands):
| October 23, 2024 |
Cash and cash equivalents | $ | 2,018 |
Accounts receivable trade, net |  | 15,138 |
Other receivables |  | 8,258 |
Prepaid taxes |  | 1,174 |
Prepaid expenses and other current assets |  | 1,790 |
Property and equipment, net |  | 15,770 |
Right-of-use assets - operating leases |  | 1,647 |
Other intangibles |  | 36,661 |
Goodwill |  | 43,398 |
Other non-current assets |  | 243 |
Total assets acquired | $ | 126,096 |
Accounts payable trade | $ | 9,976 |
Accounts payable other |  | 6,047 |
Accrued payroll |  | 526 |
Accrued other |  | 841 |
Lease liability - operating leases (current) |  | 336 |
Current portion of long-term debt |  | 1,031 |
Long-term debt |  | 2,017 |
Lease liability - operating leases (non-current) |  | 1,311 |
Deferred taxes |  | 300 |
Total liabilities assumed | $ | 22,384 |
Total purchase price allocation | $ | 103,712 |
Less: non-controlling interests |  | 48,996 |
Consideration transferred for 51% ownership |  | 54,716 |
Less: contingent consideration due to sellers |  | 3,721 |
Cash contributed for 51% ownership |  | 50,995 |
Less: cash and cash equivalents acquired |  | 2,018 |
Less: deferred cash consideration |  | 30,639 |
Cash paid, net | $ | 18,338 |
The following table summarizes the preliminary estimated acquisition date fair value of consideration transferred and purchase price allocation.
| October 23, 2024 |
Cash | $ | 20,356 |
Deferred cash consideration |  | 30,639 |
Contingent consideration |  | 3,721 |
Total consideration transferred |  | 54,716 |
Non-controlling interests |  | 48,996 |
Total purchase price allocation | $ | 103,712 |
The EASO transaction was accounted for as a purchase business combination in accordance with ASC 805 “Business Combinations.” In connection with the transaction, we performed a consolidation analysis concluding that we control all EASO entities through either a majority voting interest or as the primary beneficiary of a variable interest entity. As a result, 100% of assets acquired, liabilities assumed and non-controlling interests were recorded in the accompanying Consolidated Balance Sheet at their estimated fair values as of October 23, 2024, with the remaining unallocated purchase price recorded as goodwill. The goodwill recognized in the EASO transaction was primarily attributable to potential expansion and future development of the business. This goodwill is not expected to be deductible for tax purposes. Total consideration transferred includes $30.6 million of deferred cash consideration, all or a portion of which may be paid at least two years after the closing date of the transaction. As a result of the restrictions on this deferred consideration in the investment agreement, we have classified the associated cash as Restricted Cash in the accompanying Consolidated Balance Sheet. As of December 31, 2024, the balances of Deferred Consideration and Restricted Cash were $30.6 million and $28.7 million, respectively, on the Consolidated Balance Sheets. Total consideration transferred includes $3.7 million of contingent consideration related to certain operating tax balances existing prior to the transaction for which we have agreed to reimburse the full amount of cash collected within two years of the closing date of the transaction. The estimated fair value of such contingent consideration is based on estimated collectability of such operating tax balances within the agreed timeframe. Our investment in one of the EASO entities, Corporación Interamericana de Logística, S.A. de C.V. (“CIL”), qualifies as a Variable Interest Entity (“VIE”). Based on the rights provided in the investment and shareholder agreements, as well as the design of the VIE, our majority exposure to the variability associated with economic performance of the VIE, and the relationship and significance of activities of the VIE to us, we determined that we are most closely associated with the VIE and are therefore considered the primary beneficiary. During a period from 2030 to 2032, Hub will have the right, but not the obligation, to purchase an amount of issued and outstanding shares of EASO such that, upon exercising this call right, we would own 80% of all of the issued and outstanding shares of EASO at a purchase price based on earnings multiples as defined in the shareholders agreement. We evaluated this call right and concluded that it does not meet the definition of a derivative, resulting in the non-controlling interest and embedded call right being classified as permanent equity. We incurred approximately $2.8 million of transaction costs associated with the transaction in 2024 that were expensed as incurred and are reflected in general and administrative expense in the accompanying Consolidated Statements of Income. The components of “Other intangibles” listed in the above table as of the transaction date are preliminarily estimated based on prior acquisitions as follows (in thousands):
| Closing Date |  |  | Accumulated |  |  | Balance at |  | Estimated Useful
| Amount |  |  | Amortization |  |  | December 31, 2024 |  | Life
Customer relationships | $ | 31,661 |  |  | $ | 510 |  |  | $ | 31,151 |  | 10 years
Trade name |  | 5,000 |  |  |  | 56 |  |  |  | 4,944 |  | 15 years
Subtotal | $ | 36,661 |  |  | $ | 566 |  |  |  | 36,095 |  |
Effect of translation |  |  |  |  |  |  |  | (1,094 | ) |
Ending Balance |  |  |  |  |  |  | $ | 35,001 |  |
The above intangible assets are amortized using the straight-line method. Amortization expense related to this transaction for the year ended December 31, 2024 was $0.6 million. The intangible assets have a weighted average useful life of approximately 10.54 years as of December 31, 2024. Amortization expense related to EASO investment agreement for the next five years is estimated as follows (in thousands):
|  | Total |
2025 |  | $ | 3,390 |
2026 |  |  | 3,390 |
2027 |  |  | 3,390 |
2028 |  |  | 3,390 |
2029 |  |  | 3,390 |
From the date of the transaction through December 31, 2024, EASO's revenue was $20.3 million and operating income was $0.5 million. Forward Air Final Mile Acquisition On December 20, 2023, we acquired 100% of the equity interest of Forward Air Final Mile (“FAFM”). FAFM provides residential last mile delivery services and installation of big and bulky goods, with a focus on appliances, throughout the United States. Total consideration for the transaction was $257.2 million. $260.9 million was paid in cash in December 2023 while $3.7 million was received from the seller in the second quarter of 2024 as part of the post-closing true-up of net working capital. The financial results of FAFM, since the date of acquisition, are included in our Logistics segment. The FAFM acquisition expanded our final mile services to include the delivery and installation of appliances. FAFM provides residential last mile delivery services through a non-asset business model, working with a network of over 350 carriers throughout the country. Based on refined inputs incorporated into the fair market value calculations during 2024, we have estimated that the fair value of intangible assets totals $95.1 million as of December 31, 2024. This represents a $39.4 million decrease relative to the initial estimated fair value of the intangible assets and results in a corresponding increase to goodwill. The following table summarizes the allocation of the total consideration to the assets acquired and liabilities assumed as of the date of the acquisition (in thousands):
| December 20, 2023 |
Accounts receivable trade | $ | 28,086 |
Prepaid expenses and other current assets |  | 2,305 |
Property and equipment |  | 2,424 |
Right-of-use assets - operating leases |  | 15,258 |
Other intangibles |  | 95,100 |
Goodwill |  | 142,433 |
Other assets |  | 173 |
Total assets acquired | $ | 285,779 |
Accounts payable trade | $ | 155 |
Accounts payable other |  | 2,298 |
Accrued payroll |  | 1,271 |
Accrued other |  | 9,562 |
Lease liability - operating leases short-term |  | 5,697 |
Other long-term liabilities |  | 19 |
Lease liability - operating leases long-term |  | 9,560 |
Total liabilities assumed | $ | 28,562 |
Total consideration | $ | 257,217 |
Cash paid, net | $ | 257,217 |
The FAFM acquisition was accounted for as a purchase business combination in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed were recorded in the accompanying consolidated balance sheet at their fair values as of December 20, 2023, with the remaining unallocated purchase price recorded as goodwill. The goodwill recognized in the FAFM acquisition was primarily attributable to potential expansion and future development of the acquired business. Tax history and attributes are not inherited in an equity purchase of this kind, however, the goodwill and other intangibles recognized in this purchase will be fully tax deductible over a period of 15 years. We incurred approximately $5.1 million of transaction costs associated with this transaction prior to the closing date that are reflected in general and administrative expense and insurance and claims expense in the accompanying Consolidated Statements of Income for the year ended December 31, 2023. The components of “Other intangibles” listed in the above table as of the acquisition date are based on fair market valuations with amounts as follows (in thousands):
| Closing Date |  |  | Accumulated |  |  | Balance at |  | Estimated Useful
| Amount |  |  | Amortization |  |  | December 31, 2024 |  | Life
Customer relationships | $ | 92,900 |  |  | $ | 7,444 |  |  | $ | 85,456 |  | 13 years
Developed technology | $ | 1,200 |  |  | $ | 625 |  |  | $ | 575 |  | 2 years
Independent service provider network relationships | $ | 1,000 |  |  | $ | 1,000 |  |  | $ | - |  | 1 year
The above intangible assets are amortized using the straight-line method. Amortization expense related to this acquisition for the year ended December 31, 2024 was $8.6 million. The intangible assets have a remaining weighted average useful life of approximately 11.84 years as of December 31, 2024. Amortization expense related to FAFM for the next five years is expected to be as follows (in thousands):
|  | Total |
2025 |  | $ | 7,721 |
2026 |  |  | 7,146 |
2027 |  |  | 7,146 |
2028 |  |  | 7,146 |
2029 |  |  | 7,146 |
FAFM's actual results are included in our consolidated financial statements since the acquisition date of December 20, 2023. The following unaudited pro forma consolidated results of operations present the effects of FAFM as though it had been acquired as of January 1, 2023 (in thousands, except for per share amounts):
|  | Twelve Months Ended |
|  | December 31, 2023 |
Revenue |  | $ | 4,476,469 |
Net income |  | $ | 192,371 |
Earnings per share |  |  |
Basic |  | $ | 3.04 |
Diluted |  | $ | 3.01 |
The unaudited pro forma consolidated results for the periods above were prepared using the acquisition method of accounting and are based on the historical financial information of Hub and FAFM. The historical financial information has been adjusted to give effect to the pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the FAFM acquisition as of January 1, 2023.

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