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Note 14 - Acquisition of AAT Carriers, Inc.
 9 Months Ended
Sep. 30, 2023
AAT Carriers Inc [Member]  
Notes to Financial Statements  
Business Combination Disclosure [Text Block]

Note 14.

Acquisition of AAT Carriers, Inc.

 

On February 9, 2022, we acquired 100% of the outstanding stock of AAT headquartered in Chattanooga, TN. AAT specializes in highly regulated, time-sensitive loads for the U.S. government. The acquisition date fair value of the consideration transferred was $54.7 million. The Stock Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions. The Stock Purchase Agreement includes an earnout component of up to an aggregate of $20.0 million based on AAT's adjusted earnings before interest, taxes, depreciation, and amortization reported for the first and second years following closing. The total purchase price, including any earnout achieved, is expected to range from $38.5 million to $57.0 million depending on the results achieved by AAT.

 

AAT’s results have been included in the consolidated financial statements since the date of acquisition and are reported within our Expedited reportable segment.

 

The acquisition date fair value of the consideration transferred consisted of the following:

 

  

February 9, 2022

 

(in thousands)

    

Cash paid pursuant to Stock Purchase Agreement

 $40,347 

Cash acquired included in historical book value of AAT's assets and liabilities

  (1,846

)

Contingent consideration

  16,210 

Net purchase price

 $54,711 

 

The contingent consideration arrangement requires us to pay up to $20.0 million of additional consideration to AAT's former shareholders based on AAT's results during the first two post-acquisition years. We estimated the fair value of the contingent consideration using a probability-weighted model. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. Refer to Note 3, "Fair Value of Financial Instruments" for information regarding changes in the contingent consideration arrangement.

 

Because of our 338(h)10 election, all goodwill related to the acquisition is deductible for tax purposes, and there are no deferred income taxes arising from the acquisition.

 

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date.

 

  

February 9, 2022

 

Accounts receivable

 $842 

Prepaid expenses

  33 

Other short-term assets

  19 

Net property and equipment

  7,994 

Credentialing intangible asset

  32,000 

Total identifiable assets acquired

  40,888 
     

Accounts payable

  (19

)

Accrued expenses

  (1,396

)

Finance lease obligations

  (458

)

Other long-term liabilities

  (3

)

Total liabilities assumed

  (1,876

)

Net identifiable assets acquired

  39,012 

Goodwill

  15,699 

Net assets acquired

 $54,711 

 

The goodwill recognized is attributable primarily to expected cost synergies in the areas of fuel and purchases of revenue equipment. Refer to Note 15, "Goodwill and Other Assets" for a summary of changes to goodwill during the period as well as information related to the identifiable intangible asset acquired.

 

The amounts of revenue and earnings of AAT included in the Company’s consolidated results of operations from the acquisition date to the periods ended September 30, 2023 and 2022 are as follows:
 

(in thousands) Three months ended  Nine months ended 
  September 30,  September 30, 
  2023  2022  2023  2022 
Total revenue $9,989  $10,354  $30,287  $22,941 
Net income $3,110  $4,297  $9,354  $9,151