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Business Combinations and Asset Acquisitions | 12 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
Business Combination Disclosure | BUSINESS ACQUISITIONS ECM Acquisition On July 1, 2021, pursuant to a Unit Purchase Agreement, we acquired an 80% ownership interest in ECM Associated, LLC ("ECM”), based in Cheswick, Pennsylvania, for $141.3 million after net working capital changes and net of cash acquired. We have an exclusive option to purchase the remaining 20% ownership interest in ECM upon the occurrence of certain events or after a period of five years following transaction close, based on a fixed multiple of ECM’s average annual adjusted earnings before interest, taxes, depreciation and amortization. The noncontrolling interest holder also has an option to put the remaining 20% ownership interest to us on the same terms. We record the 20% remaining interest in temporary equity – redeemable noncontrolling interest in the consolidated balance sheets. ECM, through its ECM Transport, LLC (“ECM Transport”) and Motor Carrier Service (“MCS”) subsidiaries, provides regional truckload carrier services in the Mid-Atlantic, Ohio, and Northeast regions of the U.S. and operates nearly 500 trucks and 2,000 trailers in its network of eight operational facilities and 18 drop yards. The primary reason for this acquisition was to expand our fleet size, operational facilities, geographic market presence, and short-haul expertise in a segment in which consumer demand and supply chain needs are growing. We financed the cash transaction through a combination of cash on hand, existing credit facilities, and the addition of a $100.0 million unsecured fixed-rate term loan commitment with BMO Harris Bank N.A. on June 30, 2021. For more information regarding our debt, see Note 8 – Debt and Credit Facilities. The results of operations for ECM are included in our consolidated financial statements beginning July 1, 2021. Revenues generated by ECM are reported in our Truckload Transportation Services (“TTS”) segment. We incurred transaction costs related to the acquisition, such as legal and professional fees, of $1.0 million for the year ended December 31, 2021, which is included in other operating expenses on the consolidated statements of income. NEHDS Acquisition On November 22, 2021, we acquired 100% of the equity interests in NEHDS Logistics, LLC (“NEHDS”), based in Monroe, Connecticut, for a cash purchase price of $63.1 million after including the impacts of contingent consideration, net working capital changes and cash acquired. We financed the transaction through a combination of cash on hand and existing credit facilities. NEHDS is a final mile residential delivery provider with access to a network of 400 final mile delivery trucks serving customers primarily in the Northeast and Midwest U.S. markets. NEHDS delivers primarily big and bulky products (primarily furniture and appliances) using 2-person delivery teams performing residential and commercial deliveries through a network of 19 cross dock, warehouse, and customer facilities. The results of operations for NEHDS are included in our consolidated financial statements beginning November 22, 2021. Revenues generated by NEHDS are reported in Final Mile within our Werner Logistics segment. We incurred transaction costs related to the acquisition, such as legal and professional fees, of $0.6 million for the year ended December 31, 2021, which is included in other operating expenses on the consolidated statements of income. Purchase Price Allocations We accounted for the purchases of ECM and NEHDS using the acquisition method of accounting under U.S. generally accepted accounting principles (GAAP). The purchase price of each acquisition has been allocated to the assets acquired and liabilities assumed using market data and valuation techniques. The purchase price allocation for ECM is considered final. The estimated fair values of the assets acquired and liabilities assumed are considered provisional for NEHDS, pending the completion of the valuation of acquired tangible assets, an independent valuation of certain acquired intangible assets, and the calculation of deferred taxes based upon the underlying tax basis of assets acquired and liabilities assumed. The determination of estimated fair values requires management to make significant estimates and assumptions. We believe that the information available provides a reasonable basis for estimating the values of assets acquired and liabilities assumed in the NEHDS acquisition; however, these provisional estimates may be adjusted upon the availability of new information regarding facts and circumstances which existed at the acquisition date, and such adjustments may impact future earnings. We expect to finalize the valuation of assets and liabilities for NEHDS as soon as practicable, but not later than one year from the acquisition date. Any adjustments to the initial estimates of the fair value of the acquired assets and liabilities assumed in the NEHDS acquisition will be recorded as adjustments to the respective assets and liabilities, with the residual amounts allocated to goodwill. The purchase price allocations for ECM and NEHDS as of December 31, 2021 are summarized as follows (in thousands):
| ECM |  | NEHDS |
Purchase Price |  |  |  |
Cash consideration paid | 155,686 |  | (1) | 60,332 |  | (2)
Cash and cash equivalents acquired | (13,327) |  |  | (332) |  |
Contingent consideration arrangement | — |  |  | 2,500 |  | (3)
Working capital surplus (deficiency) | (1,068) |  |  | 554 |  |
Total purchase price (fair value of consideration) | 141,291 |  |  | 63,054 |  |
Provisional Purchase Price Allocation |  |  |  |
Current assets | 17,468 |  |  | 3,508 |  |
Property and equipment | 88,632 |  |  | 5,420 |  |
Intangible assets | 37,200 |  |  | 20,000 |  |
Other non-current assets | 3,644 |  |  | 12,122 |  |
Total assets acquired | 146,944 |  |  | 41,050 |  |
Current liabilities | (7,721) |  |  | (4,014) |  |
Other long-term liabilities | (2,460) |  |  | (10,516) |  |
Total liabilities assumed | (10,181) |  |  | (14,530) |  |
Temporary equity - redeemable noncontrolling interest in ECM | (33,556) |  |  | — |  |
Goodwill | $ | 38,084 |  |  | $ | 36,534 |  |
(1) At closing, $1.5 million of the cash consideration was placed in escrow to cover post-closing adjustments and to secure certain indemnification obligations of the sellers. (2) At closing, $3.1 million of the cash consideration was placed in escrow to cover post-closing adjustments and to secure certain indemnification obligations of the sellers. (3) The contingent consideration arrangement, also referred to as earnout, requires us to pay the former owners of NEHDS additional amounts in cash if certain levels of gross profit and revenues are earned during calendar year 2022. The potential undiscounted amount of all future earnout payments that we could be required to make is between $0 and $4.0 million. The fair value of the contingent consideration arrangement of $2.5 million was estimated by management. Goodwill and Intangible Assets Goodwill associated with the ECM and NEHDS acquisitions was primarily attributable to acquiring and retaining each of the companies’ existing networks and the anticipated synergies from combining the operations of the Company and the acquired companies. The goodwill associated with the acquisitions above is expected to be deductible for income tax purposes. We have allocated a total of $57.2 million of the purchase prices above to finite-lived intangible assets, consisting of customer relationships and trade names. The estimated fair values of the intangible assets were determined, with the assistance of an independent third-party valuation firm, using the multi-period excess earnings method for customer relationships and the relief-from-royalty method for trade names. All methods are forms of the income approach, which require a forecast of all the expected future cash flows. The following table summarizes the major classes of intangible assets and the respective weighted-average estimated amortization periods:
| Estimated Fair Value (in thousands) |  | Weighted-Average Estimated Amortization Period (Years)
Customer relationships | $ | 40,200 |  |  | 10
Trade names | 17,000 |  |  | 12
Total intangible assets | $ | 57,200 |  |  |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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