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Note 13 - Acquisition of Lew Thompson & Son Trucking, Inc.

9 Months Ended

Sep. 30, 2024

Lew Thompson & Son Trucking, Inc. [Member]

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 13.

Acquisition of Lew Thompson & Son Trucking, Inc.

On April 26, 2023, we acquired 100% of the outstanding stock of LTST and related entities, headquartered in Huntsville, AR. LTST is a dedicated contract carrier specializing in poultry feed and live haul transportation in Northwest Arkansas and surrounding areas and was acquired to expand the Dedicated reportable segment into this niche market. The acquisition date fair value of the consideration transferred was $114.5 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 $30.0 million based on LTST's adjusted earnings before interest, taxes, depreciation, and amortization reported for the first, second, and third calendar years following closing. The total purchase, including any earnout achieved, is expected to range from $114.5 million to $134.5 million depending on the results achieved by LTST.

LTST's results have been included in the condensed consolidated financial statements since the date of acquisition and are reported within our Dedicated reportable segment.

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

		April 26, 2023
(in thousands)
Cash paid pursuant to Stock Purchase Agreement		$	105,282
Cash acquired included in historical book value of LTST's assets and liabilities			(839	)
Contingent consideration			10,016
Net purchase price		$	114,459

The contingent consideration arrangement requires us to pay up to $30.0 million of additional consideration to LTST's former shareholders based on LTST's results during the first three calendar years following closing. 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.

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 fair values of the assets acquired and liabilities assumed at the acquisition date:

		April 26, 2023
Accounts receivable		$	4,848
Driver advances and other receivables			98
Inventory and supplies			1,015
Prepaid expenses			561
Net property and equipment			42,277
Other assets, net			120
Other intangibles, net			52,870
Total identifiable assets acquired			101,789

Accounts payable			(565	)
Accrued expenses			(1,465	)
Current portion of operating lease obligations			(396	)
Current portion of insurance and claims accrual			(56	)
Long-term portion of operating lease obligations			(2,103	)
Total liabilities assumed			(4,585	)
Net identifiable assets acquired			97,204
Goodwill			17,255
Net assets acquired		$	114,459

During the nine months ended September 30, 2024 we recognized measurement period adjustments of $4.8 million, primarily related to the Section 338(h)10 election which increased goodwill from $12.4 million as of December 31, 2023 to $17.3 million as of September 30, 2024. The goodwill recognized is attributable primarily to expected cost synergies in the areas of fuel and purchases of revenue equipment. Refer to Note 14, "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 LTST included in the Company’s consolidated results of operations from the acquisition date of April 26, 2023, to the periods ended September 30, 2024 and 2023 are as follows:

(in thousands)		Three months ended								Nine months ended
		September 30, 2024				September 30, 2023				September 30, 2024				September 30, 2023
Total revenue		$	35,730			$	15,020			$	88,857			$	25,829
Net income		$	3,058			$	1,542			$	8,211			$	3,420

The following unaudited pro forma consolidated results of operations assume that the acquisition of LTST occurred as of January 1, 2023:

(in thousands)
		Three months ended				Nine months ended
		September 30, 2023				September 30, 2023
Total revenue		$	303,741			$	878,626
Net income		$	14,687			$	49,772
Basic net income per share		$	1.13			$	3.80
Diluted net income per share		$	1.07			$	3.62

The pro forma financial information for all periods presented above has been calculated after adjusting the results of LTST to reflect the business combination accounting effects resulting from this acquisition, including the amortization expense from acquired intangible assets as though the acquisition occurred as of the beginning of the Company’s fiscal year 2023. The Company's historical consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination and factually supportable. The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the Company’s 2023 fiscal year.