Note 7 - Acquisition of Lew Thompson & Son Trucking, Inc

12 Months Ended

Dec. 31, 2023

Lew Thompson & Son Trucking, Inc. [Member]

Notes to Financial Statements

Business Combination Disclosure [Text Block]

7. 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 $109.9 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 $109.9 million to $129.9 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 preliminary acquisition date fair value of the consideration transferred consisted of the following:

	April 26, 2023
(in thousands)
Cash paid pursuant to Stock Purchase Agreement	$	100,726
Cash acquired included in historical book value of LTST's assets and liabilities		(839	)
Contingent consideration		10,016
Net purchase price	$	109,903

The contingent consideration arrangement requires us to pay a total of 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. Refer to Note 3, "Fair Value of Financial Instruments" for information regarding changes in the contingent consideration arrangement. The allocation of the preliminary purchase price is subject to change based on finalization of the valuation of long-lived intangible assets and contingent consideration, as well as our ongoing evaluation of LTST's accounting policies for consistency with ours.

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.

(in thousands)	April 26, 2023
Accounts receivable	$	5,100
Driver advances and other receivables		98
Inventory and supplies		1,015
Prepaid expenses		561
Property and equipment		42,277
Other assets		120
Other intangibles		52,870
Total identifiable assets acquired		102,041
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		97,456
Goodwill		12,447
Net assets acquired	$	109,903

Since acquisition we recognized measurement period adjustments which increased goodwill recognized for LTST by $1.7 million to $12.4 million as of December 31, 2023. Goodwill and other intangible assets may change upon the finalization of the valuation of the contingent consideration liability and intangible assets as part of the purchase accounting for the LTST acquisition. The goodwill recognized is attributable primarily to expected cost synergies in the areas of fuel and purchases of revenue equipment, and may change as a result of our ongoing evaluation of LTST’s accounting principles for consistency with ours. Refer to Note 9, "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 to the period ended December 31, 2023 are as follows:

(in thousands)	Year Ended
	December 31, 2023
Total revenue	$	41,838
Net income	$	4,726

The following unaudited pro forma consolidated results of operations assume that the acquisition of LTST occurred as of January 1, 2022:

(in thousands)	Year Ended		Year Ended
	December 31, 2023		December 31, 2022
Total revenue	$	1,124,492	$	1,281,504
Net income	$	57,592	$	121,943
Basic net income per share	$	4.41	$	8.13
Diluted net income per share	$	4.16	$	7.86

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 2022. As noted above, the allocation is preliminary and changes to the value of the contingent consideration and finalization of our valuation could result in changes to the amount of amortization expense from acquired intangible assets included in the pro forma financial information presented above. 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 fiscal 2022.