Note 6 - Restructuring and Cost Savings Initiatives

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Restructuring and Related Activities Disclosure [Text Block]

Note 6. Restructuring and Cost Savings Initiatives

In the second quarter of 2020 we made significant changes to our operational business units, overhead structure and branding strategy in an effort to streamline our business in a manner that we believe will allow us to significantly lower our fixed costs, pay down debt and produce consistent acceptable margins.  These changes include (i) a reduction in our fleet of tractors and refrigerated trailers, which have historically produced unacceptable or unprofitable operating income, (ii) reallocation of our operating fleet toward our more profitable expedited, dedicated and irregular route operations, (iii) the sale of our Hutchins, Texas terminal and discontinued use of our Texarkana, Arkansas terminal, (iv) changes to key management and reductions to headcount, (v) the closure and early termination of our leased office space in Chattanooga, Tennessee that our brokerage group occupied, (vi) the installation of new operational processes allowing us to abandon or discontinue the use of a number of peripheral information technology infrastructure and applications and (vii) a change in our branding strategy to focus on one company name, phasing out the use of the Landair trade name.

Although the significant majority of restructuring and cost savings initiatives were completed in the second quarter of 2020, we do anticipate additional costs in the third and fourth quarters of 2020, as we continue to optimize our fleet profile and management team.

We discontinued the use of a significant amount of property and equipment, including assets owned and held under operating leases. We have adjusted the carrying value of the owned property and equipment down to fair market value less estimated costs of disposal and classified them as available held for sale as of June 30, 2020. We expect to sell all the assets within the next twelve months. We terminated the lease agreement on a leased office facility in Chattanooga, TN during the second quarter of 2020 and recognized the related loss on the termination of the right of use asset and the abandonment of leasehold improvements within the impairment of property and equipment line item of the condensed consolidated statement of operations. The following table provides a summary of the asset groups impaired, amount of the impairment and a description of the valuation technique used to determine fair value. We believe that these impairment activities are substantially complete. Accordingly, we do not expect to incur additional charges in connection with this activity.

(in thousands)

Description	Amount		Segment(s) Impacted	Value Determination
Revenue equipment	$	16,779	Highway Services and Dedicated	Third Party Market Appraisal
Terminal facility, leasehold improvements, and equipment, Texarkana, AR		7,319	Highway Services and Dedicated	Third Party Market Appraisal
Leased office facility, Chattanooga, TN		2,236	Managed Freight	Loss on ROU Asset and Leasehold Improvements
Training and orientation center, Chattanooga, TN		235	Highway Services and Dedicated	Quoted Market Price
Impairment of right-of-use asset, long lived properties, and equipment	$	26,569

Other restructuring related gains and charges incurred during the second quarter of 2020 are summarized in the table below. Unless noted below, we believe that these other restructuring related gains and charges are substantially complete. Accordingly, we do not expect to incur additional charges in connection with this activity.

(in thousands)

Description	Amount			Segment(s) Impacted	Statement of Operations Line Item
Gain on sale of Hutchins, TX terminal	$	(5,712	)	Highway Services and Dedicated	Gain on disposition of property and equipment, net
Employee separation costs (1)		1,791		Highway Services, Dedicated and Managed Freight	Salaries, wages, and related expenses
Abandonment of information technology infrastructure and applications		1,048		Highway Services and Dedicated	Gain on disposition of property and equipment, net
Change in useful life/abandonment of intangible assets		1,331		Dedicated and Managed Freight	Depreciation and amortization
Abandonment of revenue equipment held under operating leases		825		Highway Services and Dedicated	Revenue equipment rentals and purchased transportation
Contract exit costs and restructuring related costs and professional fees		695		Highway Services and Dedicated	General supplies and expenses
Total	$	(22	)

⁽¹⁾ As of June 30, 2020 we have a $1.0 million current liability related to employee separation costs.  We expect to incur additional employee separation costs in the third and fourth quarters of 2020 related to this restructuring activity, but do not have enough information to quantify at this time.