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Note 15 - Acquisition of Landair Holdings, Inc. | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Business Combination Disclosure [Text Block] |
15. | ACQUISITION OF LANDAIR HOLDINGS, INC.
On July 3, 2018, we acquired 100% of the outstanding stock of Landair Holdings, Inc., a Tennessee corporation (“Landair”). The total cash paid was $106.7 million, including (i) $83.0 million in cash to Landair's former owners, (ii) $3.2 million reimbursement to Landair's former owners and $5.0 million in state taxes paid by Landair after the acquisition related to our Internal Revenue Code Section 338 (h)( 10 ) election, which is still subject to finalization, and (iii) approximately $15.5 million for the debt of Landair, which we have paid in full, but not considering approximately $0.8 million of cash balances acquired. The Stock Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions. Landair is a leading dedicated and for-hire truckload carrier, as well as a supplier of transportation management, warehousing and logistics inventory management services. Landair’s results have been included in the consolidated financial statements since the date of acquisition. Landair’s trucking operations’ results are reported within our Truckload segment, while Landair’s logistics operations’ results are reported within our Managed Freight segment. The allocation of the preliminary purchase price detailed below as of the fiscal year ended December 31, 2018 is subject to change based on finalization of the valuation of long-lived and intangible assets, as well as our ongoing evaluation of Landair’s accounting principles for consistency with ours.
| December 31, 2018
(in thousands) |  |  |  |  |  |  |  |
Cash paid |  |  |  |  |  | $ | 106,700 |
Allocated to: |  |  |  |  |  |  |  |
Historical book value of Landair’s assets and liabilities |  | $ | 25,589 |  |  |  |  |
Adjustments to recognize assets and liabilities at acquisition-date fair value: |  |  |  |  |  |  |  |
Property, plant, and equipment |  |  | (7,450 | ) |  |  |  |
Other assets |  |  | (1,094 | ) |  |  |  |
Liabilities |  |  | (829 | ) |  |  |  |
Fair value of tangible net assets acquired |  |  |  |  |  |  | 16,216 |
Post-acquisition goodwill adjustments |  |  |  |  |  |  | (626 | )
Identifiable intangibles at acquisition-date fair value |  |  |  |  |  |  | 34,000 |
Debt paid at closing |  |  |  |  |  |  | 15,512 |
Excess of consideration transferred over the net amount of assets and liabilities recognized |  |  |  |  |  | $ | 41,598 |
Cash paid pursuant to Stock Purchase Agreement |  |  |  |  |  | $ | 106,700 |
Cash acquired included in historical book value of Landair assets and liabilities |  |  |  |  |  |  | (754 | )
Net purchase price |  |  |  |  |  | $ | 105,946 |
Deferred income taxes arising from the acquisition are immaterial because of our 338 (h)( 10 ) election. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date.
|  | July 3, 2018 |
Cash and cash equivalents |  | $ | 754 |
Accounts receivable |  |  | 16,339 |
Driver advances and other receivables |  |  | 566 |
Inventory and supplies |  |  | 3 |
Prepaid expenses |  |  | 1,010 |
Assets held for sale |  |  | 128 |
Net property and equipment |  |  | 26,164 |
Other assets, net |  |  | 22 |
Other intangibles, net |  |  | 34,000 |
Total identifiable assets acquired |  |  | 78,986 |
Accounts payable |  |  | (5,475 | )
Accrued expenses |  |  | (5,015 | )
Insurance and claims accrual |  |  | (2,645 | )
Other short-term liabilities |  |  | (123 | )
Total liabilities assumed |  |  | (13,258 | )
Net identifiable assets acquired |  |  | 65,728 |
Goodwill |  |  | 40,972 |
Net assets acquired |  | $ | 106,700 |
The goodwill recognized is attributable primarily to expected cost synergies in the areas of insurance and claims, workers' compensation, fuel, and purchases of revenue equipment. Additionally, Landair and the historical Company have limited customer overlap, and as such we expect to be able to cross-sell services between historical customers and those of Landair. The amounts of revenue and earnings of Landair included in the Company’s consolidated results of operations from the acquisition date to the period ended December 31, 2018 are as follows:
(in thousands) |  | Year Ended |
|  | December 31, 2018 |
Total revenue |  | $ | 85,124 |
Net income |  | $ | 7,418 |
The following unaudited pro forma consolidated results of operations for the years ended December 31, 2018 and 2017 assume that the acquisition of Landair occurred as of January 1, 2017:
(in thousands) |  | Year Ended |
|  | December 31, |
|  | 2018 |  |  | 2017 |
Total revenue |  | $ | 960,205 |  |  | $ | 825,850 |
Net income |  | $ | 45,387 |  |  | $ | 56,440 |
Basic net income per share |  | $ | 2.49 |  |  | $ | 3.09 |
Diluted net income per share |  | $ | 2.46 |  |  | $ | 3.07 |
For the year ended December 31, 2018, the pro forma results include an immaterial amount of adjustments to conform Landair to the accounting policies of the Company related to operations and maintenance and insurance and claims. In addition, salaries, wages, and related expenses decreased by a net of $2.1 million related to sale bonuses and non-recurring compensation paid to a prior owner of Landair, partially offset by restricted shares granted to key retained employees. General supplies and expenses decreased by $3.4 million related to non-recurring acquisition-related expenses. Depreciation and amortization increased by $1.1 million due to the amortization of intangible assets as detailed in Note 5, partially offset by a net decrease resulting from the depreciation of property, plant, and equipment using useful lives consistent with those utilized by the Company. Interest expense, net increased by approximately $2.0 million as a result of the financing obtained by the Company to fund the Landair Acquisition. Income tax expense was adjusted by approximately $1.7 million for the effect of each of the aforementioned adjustments. Results for the year ended December 31, 2018 exclude two days of Landair’s operations that occurred between the period ended June 30, 2018 and our acquisition on July 3, 2018, but this effect is immaterial. For the year ended December 31, 2017, the pro forma results include an immaterial amount of adjustments to conform Landair to the accounting policies of the Company related to operations and maintenance and insurance and claims. Depreciation and amortization increased by approximately $2.2 million due to the amortization of intangible assets as detailed in Note 5, partially offset by a net decrease resulting from the depreciation of property, plant, and equipment using useful lives consistent with those utilized by the Company. Interest expense, net increased $4.0 million as a result of the financing obtained by the Company to fund the Landair Acquisition. Income tax expense was adjusted by an immaterial amount for the effect of each of the aforementioned adjustments. The pro forma adjustments have been made solely for informational purposes. The actual results reported by the consolidated company in periods following the acquisition may differ significantly from that reflected in the unaudited pro forma consolidated results of operations for a number of reasons, including but not limited to cost savings from operating efficiencies, synergies and the impact of the incremental costs incurred in integrating the two companies. As a result, the unaudited pro forma consolidated results of operations are not intended to represent and does not purport to be indicative of what the combined company’s results of operations would have been had the acquisition been completed on the applicable dates of this unaudited pro forma consolidated results of operations. In addition, the unaudited pro forma consolidated results of operations do not purport to project the future results of operations of the consolidated company.

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