Quarterly report pursuant to Section 13 or 15(d)

Acquisitions and Goodwill

v3.10.0.1
Acquisitions and Goodwill
9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Acquisitions and Goodwill
Acquisitions and Goodwill

Intermodal Acquisitions

As part of the Company's strategy to expand its Intermodal operations, in May 2017, we acquired certain assets of Atlantic Trucking Company, Inc., Heavy Duty Equipment Leasing, LLC, Atlantic Logistics, LLC and Transportation Holdings, Inc. (together referred to as “Atlantic” in this note) for $22,500 and an earnout of $135 to be paid in October 2018. The acquisition was funded by a combination of cash on hand and funds from our revolving credit facility. Atlantic was a privately held provider of intermodal, drayage and related services headquartered in Charleston, South Carolina. It also has terminal operations in Atlanta, Charlotte, Houston, Jacksonville, Memphis, Nashville, Norfolk and Savannah. These locations allowed Intermodal to significantly expand its footprint in the southeastern region.
In October 2017, we also acquired certain assets of Kansas City Logistics, LLC ("KCL") for $640 and an earnout of $100 paid in the second quarter of 2018. KCL provided Intermodal with an expanded footprint in the Kansas and Missouri markets.
In July 2018, we also acquired certain assets of Multi-Modal Transport Inc. ("MMT") for $3,737. The MMT acquisition provides Intermodal with an expanded footprint in the Minnesota, North Dakota, South Dakota, Iowa and Wisconsin markets, along with access to several strategic customer relationships.
The assets, liabilities, and operating results of these collective acquisitions have been included in the Company's consolidated financial statements from their dates of acquisition and have been included in the Intermodal reportable segment.
Allocations of Purchase Prices
The following table presents the allocation of the Atlantic, KCL, and MMT purchase prices to the assets acquired and liabilities assumed based on their estimated fair values and resulting residual goodwill (in thousands):

Atlantic
KCL
MMT

May 7, 2017
October 22, 2017
July 25, 2018
Tangible assets:
 
 
 
Property and equipment
$
1,821

$
223

$
81

Total tangible assets
1,821

223

81

Intangible assets:
 
 
 
Non-compete agreements
1,150

6

43

Customer relationships
13,400

234

1,659

Goodwill
6,719

277

1,954

Total intangible assets
21,269

517

3,656

Total assets acquired
23,090

740

3,737


 
 
 
Liabilities assumed:
 
 
 
Current liabilities
590

100


Total liabilities assumed
590

100


Net assets acquired
$
22,500

$
640

$
3,737


The acquired definite-lived intangible assets have the following useful lives:

Useful Lives

Atlantic
KCL
MMT
Customer relationships
15 years
15 years
15 years
Non-compete agreements
5 years
2 years
5 years

The fair value of the non-compete agreements and customer relationships assets were estimated using an income approach. The Company's inputs into fair value estimates are classified within level 3 of the fair value hierarchy as defined in the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“the FASB Codification”). Under this method, an intangible asset's fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To estimate fair value, the Company used cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were assumed to extend through the remaining economic useful life of each class of intangible asset.
 
 
 
 
 
 
 
 

Goodwill

The Company conducted its annual impairment assessments and test of goodwill for each reporting unit as of June 30, 2018 and
no impairment charges were required at that time. Goodwill impairment exists when the estimated implied fair value of goodwill is less than its carrying value. Changes in strategy or market conditions could significantly impact these fair value estimates and require adjustments to recorded asset balances. During the three months ended September 30, 2018 no indicators of impairment were identified.

The following is a summary of the changes to goodwill for the nine months ended September 30, 2018. Approximately $114,481 of goodwill is deductible for tax purposes.

 
Beginning balance, December 31, 2017
 
MMT Acquisition
 
Ending balance, September 30, 2018
Expedited LTL
 
 
 
 
 
Goodwill
$
97,593

 
$

 
$
97,593

Accumulated Impairment

 

 

 
 
 
 
 
 
TLS
 
 
 
 
 
Goodwill
45,164

 

 
45,164

Accumulated Impairment
(25,686
)
 

 
(25,686
)
 
 
 
 
 
 
Pool Distribution
 
 
 
 
 
Goodwill
12,359

 

 
12,359

Accumulated Impairment
(6,953
)
 

 
(6,953
)
 
 
 
 
 
 
Intermodal
 
 
 
 
 
Goodwill
69,194

 
1,954

 
71,148

Accumulated Impairment

 

 

 
 
 
 
 
 
Total
$
191,671

 
$
1,954

 
$
193,625