Tennessee
|
|
000-22490
|
|
62-1120025
|
(State or other jurisdiction
of incorporation)
|
|
(Commission
File Number)
|
|
(I.R.S. Employer
Identification No.)
|
1915 Snapps Ferry Road,
Building N
Greeneville, Tennessee 37745
(423) 636-7000
|
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
|
☐
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Title of each class
|
|
Trading
Symbol(s)
|
|
Name of each exchange
on which registered
|
Common Stock, $0.01 par value
|
|
FWRD
|
|
NASDAQ
|
●
|
changes in tariffs, trade restrictions, and trade agreements;
|
|
●
|
compliance with the laws of numerous taxing jurisdictions where we conduct business, potential double taxation of our international earnings and potentially adverse
tax consequences due to U.S. and foreign tax laws as they relate to our international business;
|
|
●
|
difficulties in managing or overseeing foreign operations and agents;
|
|
●
|
economic and political instabilities in some countries;
|
|
●
|
new and different sources of competition and laws and business practices favoring local competitors;
|
|
●
|
limitations on the repatriation of funds because of foreign exchange controls;
|
|
●
|
different liability standards;
|
|
●
|
intellectual property laws of countries that do not protect our rights in our intellectual property, including but not limited to, our proprietary information
systems, to the same extent as the laws of the U.S.;
|
|
●
|
compliance with multiple, conflicting, ambiguous or evolving governmental laws and regulations, including employment, tax, privacy, anti-corruption, import/export,
customs, anti-boycott, sanctions and embargoes, antitrust, data transfer, storage and protection, ESG and industry-specific laws and regulations, and our ability to identify and respond timely to compliance issues when they occur; and
|
|
●
|
the impact of uncertainties regarding the United Kingdom’s exit from the European Union (the “EU”) on regulations, current, taxes and operations, including possible
disruptions to the sale of our services or the movement of our people between the United Kingdom, the EU and other locations.
|
|
● | combining the companies’ operations and corporate functions; |
|
|
|
|
● | combining the businesses of Forward and Omni and meeting the capital requirements of the combined company following the Merger, in a manner that permits the combined company to achieve cost savings and revenue synergies anticipated to result from the Merger, the failure of which would result in the anticipated benefits of the Merger not being realized in the time frame currently anticipated or at all; |
|
|
|
|
● | integrating personnel from the two companies; |
|
|
|
|
● | integrating the companies’ technologies; |
|
|
|
|
● | integrating and unifying the offerings and services available to customers; |
|
|
|
|
● | identifying and eliminating redundant and underperforming functions and assets; |
|
|
|
|
● | harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes; |
|
|
|
|
● | maintaining existing agreements with customers, providers and vendors and avoiding delays in entering into new agreements with prospective customers, providers and vendors; |
|
|
|
|
● | addressing possible differences in business backgrounds, corporate cultures and management philosophies; |
|
|
|
|
● | consolidating the companies’ administrative and information technology infrastructure; |
|
|
|
|
● | coordinating distribution and marketing efforts; |
|
● | managing the movement of certain positions to different locations; |
|
|
|
|
● | coordinating geographically dispersed organizations; and |
|
|
|
|
● | effecting actions that may be required in connection with obtaining the requisite regulatory approvals. |
●
|
For the twelve month period ended June 30, 2023, Omni had capital expenditures of less than 2% of adjusted revenue.
|
|
●
|
For the twelve month period ended June 30, 2023, Omni delivered an unlevered free cash flow conversion of approximately 86% for such period.
|
|
● |
For the year ended December 31, 2022, Omni generated 58%, 38% and 4% of its revenue from North America, Asia and the rest of the world,
respectively.
|
● |
For the year ended December 31, 2022, on a combined company basis, combined adjusted revenue was generated 7% from each of fulfillment services feeding North
America-bound freight and final mile services, 11% from intermodal, 12% from truckload brokerage, 19% from North America inbound freight and 44% from less-than-truckload
services.
|
|
●
|
For the LTM period ended June 30, 2023, combined capital expenditures were less than 2% of pro forma adjusted revenue, which would result in a combined unlevered
free cash flow of approximately $480 million, or nearly double Forward’s standalone unlevered free cash flow, and an unlevered free cash flow conversion of approximately 88% without taking into account any incremental revenue-based EBITDA
synergy opportunities.
|
|
● |
The preliminary offering memorandum presented pro forma operating revenue, pro forma adjusted revenue, pro forma net income (loss), pro forma
EBITDA, pro forma adjusted EBITDA, pro forma further adjusted EBITDA, pro forma adjusted EBITDA margin and pro forma further adjusted EBITDA margin for the LTM period ended June 30, 2023. Pro forma adjusted revenue, pro forma EBITDA, pro
forma adjusted EBITDA, pro forma further adjusted EBITDA, pro forma adjusted EBITDA margin and pro forma further adjusted EBITDA margin are financial measures that are derived on the basis of methodologies other than in accordance with
generally accepted accounting principles in the United States (“GAAP”). Pro forma adjusted revenue is defined as pro forma operating revenue adjusted for Omni’s historical pre-acquisition
revenue and adjustments and other normalization and pro forma revenue adjustments. Pro forma EBITDA is defined as pro forma earnings before interest, taxes, depreciation and amortization. Pro forma adjusted EBITDA is defined as pro forma
EBITDA adjusted for Forward’s share based compensation expenses, due diligence and integration costs and reduction in workforce expenses and Omni’s historical pre-acquisition earnings and adjustments, fair value adjustment of contingent
consideration, transaction expenses and integration costs and other normalization and pro forma EBITDA adjustments. Pro forma further adjusted EBITDA is defined as pro forma adjusted EBITDA plus the realization of run-rate cost synergy
opportunities. Pro forma adjusted EBITDA margin is defined as pro forma adjusted EBITDA divided by pro forma adjusted revenue. Pro forma adjusted EBITDA margin is defined as pro forma further adjusted EBITDA divided by pro forma adjusted
revenue. All non-GAAP financial measures are presented on a continuing operations basis. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Forward’s and Omni’s historical financial results or
the combined company’s pro forma results prepared in accordance with GAAP. Non-GAAP financial information does not represent a comprehensive basis of accounting. These non-GAAP measures are reconciled to their most comparable GAAP measures in
the table below.
|
Pro forma year
ended December 31,
|
Pro forma
six months ended June 30,
|
Pro forma LTM
ended June 30,
|
||||||||||||||
(unaudited and $ thousands)
|
2022
|
2022
|
2023
|
2023
|
||||||||||||
Operating revenue
|
$
|
3,807,821
|
$
|
1,892,953
|
$
|
1,494,112
|
$
|
3,408,980
|
||||||||
Omni pre-acquisition revenue and adjustments(a)
|
139,311
|
115,276
|
-
|
24,035
|
||||||||||||
Omni other normalization revenue adjustments(b)
|
508
|
(5,184
|
)
|
(1,533
|
)
|
4,159
|
||||||||||
Omni pro forma revenue adjustments(c)
|
(7,292
|
)
|
(1,759
|
)
|
-
|
(5,533
|
)
|
|||||||||
Pro forma adjusted revenue
|
$
|
3,940,348
|
$
|
2,001,286
|
$
|
1,492,579
|
$
|
3,431,640
|
||||||||
Net income (loss)
|
$
|
38,099
|
$
|
(24,166
|
)
|
$
|
(51,561
|
)
|
$
|
10,704
|
||||||
Interest expense
|
168,386
|
83,770
|
82,447
|
167,063
|
||||||||||||
Depreciation and amortization
|
181,362
|
88,815
|
96,789
|
189,335
|
||||||||||||
Income tax expense (benefit)
|
8,566
|
(5,190
|
)
|
(12,940
|
)
|
816
|
||||||||||
Pro forma EBITDA
|
$
|
396,413
|
$
|
143,229
|
$
|
114,735
|
$
|
367,919
|
||||||||
Share-based compensation(d)
|
11,376
|
6,067
|
6,309
|
11,618
|
||||||||||||
Pre-acquisition earnings and adjustments (e)
|
24,195
|
18,397
|
-
|
5,798
|
||||||||||||
Fair value of contingent consideration(f)
|
(17,814
|
)
|
7,299
|
12,320
|
(12,793
|
)
|
||||||||||
Transaction expenses and integration costs(g)
|
130,647
|
108,626
|
17,721
|
39,742
|
||||||||||||
Other normalization EBITDA adjustments(h)
|
7,313
|
(5,234
|
)
|
10,005
|
22,552
|
|||||||||||
Other pro forma EBITDA adjustments(i)
|
36,641
|
20,264
|
16,057
|
32,434
|
||||||||||||
Pro forma adjusted EBITDA
|
$
|
588,771
|
$
|
298,648
|
$
|
177,147
|
$
|
467,269
|
||||||||
Pro forma adjusted EBITDA margin
|
15
|
%
|
15
|
%
|
12
|
%
|
14
|
%
|
||||||||
Annual run-rate cost synergies(j)
|
75,000
|
|||||||||||||||
Pro forma further adjusted EBITDA
|
$
|
542,270
|
||||||||||||||
Pro forma further adjusted EBITDA margin
|
16
|
%
|
(a) |
Omni pre-acquisition revenue and adjustments represent revenue of certain entities acquired by Omni during the applicable period, inclusive of due diligence adjustments,
attributable to the portion of such period occurring prior to the consummation of their respective acquisition.
|
(b) |
Omni other normalization revenue adjustments represent items considered non-operational, non-recurring, or non-cash in nature.
|
(c) |
Omni pro forma revenue adjustments represent the pro-forma impact of strategic initiatives and updated customer pricing as if each of the foregoing was implemented as of the
first day of the applicable period.
|
(d) |
Share based compensation relates to Forward's non-cash stock compensation expenses.
|
(e) |
Pre-acquisition earnings and adjustments represent the earnings of certain entities acquired by Omni during the applicable period, inclusive of due diligence adjustments,
attributable to the portion of such period occurring prior to the consummation of their respective acquisition.
|
(f) |
Fair value adjustment of contingent consideration represents the removal of fair value adjustments for performance based earn-out payments for certain entities acquired by Omni.
|
(g) |
Transaction expenses and integration costs represent advisor fees, due diligence costs and other expenses related to acquisitions, as well as
integration-related expenses of certain businesses acquired by Omni and Forward, including fees, costs and expenses incurred in connection with the Merger.
|
(h) |
Other normalization EBITDA adjustments represent items considered non-operational or non-recurring such as non-recurring bad debt expenses, sponsor and board fees, foreign
exchange rate gains and losses, and other non-recurring and non-cash expenses.
|
(i) |
Other pro forma EBITDA adjustments represent the pro forma impact of strategic initiatives, updated customer pricing, and profitability initiatives including facilities
consolidations and a reduction-in-force in 2022 and 2023, as if each of the foregoing was implemented as of the first day of the applicable period.
|
(j) |
Annual run-rate cost synergies represent cost synergies, of which up to $60 million we expect to realize within the first six months following the consummation of the Merger,
with the remaining run-rate cost savings expected to be realized by the end of 2025. There can be no assurances that the estimated synergies will be realized within the expected timeline or at all.
|
●
|
the parties’ ability to consummate the potential transaction and to meet expectations regarding the timing and completion thereof;
|
|
●
|
the satisfaction or waiver of the conditions to the completion of the potential transaction, including the receipt of all required regulatory approvals or
clearances in a timely manner and on terms acceptable to Forward;
|
|
●
|
the risk that the parties may be unable to achieve the expected strategic, financial and other benefits of the potential transaction, including the realization of
expected revenue and cost synergies, the conversion of revenue synergies to adjusted EBITDA and the achievement of deleveraging targets, within the expected time-frames or at all;
|
|
●
|
the risk that the committed financing necessary for the consummation of the potential transaction is unavailable at the closing, and that any replacement financing
may not be available on similar terms, or at all;
|
|
●
|
the risk that the businesses will not be integrated successfully or that integration may be more difficult, time-consuming or costly than expected;
|
|
●
|
the risk that operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees,
customers, clients or suppliers) may be greater than expected following the potential transaction;
|
|
●
|
the risk that, if Forward does not obtain the necessary shareholder approval for the conversion of the perpetual non-voting convertible preferred stock, Forward
will be required to pay an annual dividend on such outstanding preferred stock;
|
|
●
|
the risks associated with being a holding company with the only material assets after completion of the potential transaction being the interest in the combined
business and, accordingly, dependency upon distributions from the combined business to pay taxes and other expenses;
|
|
●
|
the requirement for Forward to pay to certain shareholders of Omni certain tax benefits that it may claim in the future, and the expected materiality of these
amounts;
|
|
●
|
risks associated with organizational structure, including payment obligations under the tax receivable agreement, which may be significant, and any accelerations or
significant increases thereto;
|
|
●
|
the inability to realize all or a portion of the tax benefits that are currently expected to result from the acquisition of certain corporate owners of Omni,
certain pre-existing tax attributes of Omni owners and tax attributes that may arise on the distribution of cash to other Omni owners in connection with the potential transaction, as well as the future exchanges of units of Forward’s
operating subsidiary and payments made under the tax receivables agreement;
|
|
●
|
increases in interest rates;
|
|
●
|
changes in Forward’s credit ratings and outlook;
|
|
●
|
risks relating to the indebtedness Forward expects to incur in connection with the potential transaction and the need to generate sufficient cash flows to service
and repay such debt;
|
|
●
|
the ability to generate the significant amount of cash needed to service the indebtedness;
|
|
●
|
the limitations and restrictions in surviving agreements governing indebtedness;
|
●
|
risks associated with the need to obtain additional financing which may not be available on favorable terms or at all; and
|
|
●
|
general economic and market conditions.
|
Exhibit
Number
|
Description
|
104
|
Cover Page Interactive Data File (embedded within the Inline XBRL document)
|
FORWARD AIR CORPORATION
(registrant)
|
||||
Date: September 20, 2023
|
By:
|
/s/ Thomas Schmitt | ||
Name: | Thomas Schmitt | |||
Title: | President and Chief Executive Officer | |||
●
|
the parties’ ability to consummate the potential transaction and to meet expectations regarding the timing and completion thereof;
|
|
●
|
the satisfaction or waiver of the conditions to the completion of the potential transaction, including the receipt of all required regulatory approvals or
clearances in a timely manner and on terms acceptable to Forward;
|
|
●
|
the risk that the parties may be unable to achieve the expected strategic, financial and other benefits of the potential transaction, including the realization of
expected revenue and cost synergies, the conversion of revenue synergies to adjusted EBITDA and the achievement of deleveraging targets, within the expected time-frames or at all;
|
|
●
|
the risk that the committed financing necessary for the consummation of the potential transaction is unavailable at the closing, and that any replacement financing
may not be available on similar terms, or at all;
|
|
●
|
the risk that the businesses will not be integrated successfully or that integration may be more difficult, time-consuming or costly than expected;
|
|
●
|
the risk that operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees,
customers, clients or suppliers) may be greater than expected following the potential transaction;
|
|
●
|
the risk that, if Forward does not obtain the necessary shareholder approval for the conversion of the perpetual non-voting convertible preferred stock, Forward
will be required to pay an annual dividend on such outstanding preferred stock;
|
|
●
|
the risks associated with being a holding company with the only material assets after completion of the potential transaction being the interest in the combined
business and, accordingly, dependency upon distributions from the combined business to pay taxes and other expenses;
|
|
●
|
the requirement for Forward to pay certain tax benefits that it may claim in the future, and the expected materiality of these amounts;
|
|
●
|
risks associated with organizational structure, including payment obligations under the tax receivable agreement, which may be significant, and any accelerations or
significant increases thereto;
|
|
●
|
the inability to realize all or a portion of the tax benefits that are currently expected to result from the acquisition of certain corporate owners of Omni,
certain pre-existing tax attributes of Omni owners and tax attributes that may arise on the distribution of cash to other Omni owners in connection with the potential transaction, as well as the future exchanges of units of Forward’s
operating subsidiary and payments made under a tax receivables agreement;
|
|
●
|
increases in interest rates;
|
|
●
|
changes in Forward’s credit ratings and outlook;
|
|
●
|
risks relating to the indebtedness Forward expects to incur in connection with the potential transaction and the need to generate sufficient cash flows to service
and repay such debt;
|
|
●
|
the ability to generate the significant amount of cash needed to service the indebtedness;
|
|
●
|
the limitations and restrictions in surviving agreements governing indebtedness;
|
|
●
|
risks associated with the need to obtain additional financing which may not be available or, if it is available, may result in a reduction in the ownership of
current Forward shareholders; and
|
|
●
|
general economic and market conditions.
|
Historical
|
Pro Forma Adjustments
|
|||||||||||||||||||||||||||
Forward
|
Omni
|
Acquisition Accounting Adjustments
|
Financing Adjustments
|
Pro Forma Combined
|
||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||||||
Current assets:
|
||||||||||||||||||||||||||||
Cash and cash equivalents
|
$
|
18,281
|
$
|
86,330
|
$
|
(150,000
|
)
|
2a.
|
$
|
162,091
|
3a.
|
$
|
116,702
|
|||||||||||||||
Accounts receivable, net
|
175,968
|
192,924
|
(2,942
|
)
|
2f.
|
365,950
|
||||||||||||||||||||||
Other current assets
|
21,538
|
33,359
|
54,897
|
|||||||||||||||||||||||||
Total current assets
|
215,787
|
312,613
|
(152,942
|
)
|
162,091
|
537,549
|
||||||||||||||||||||||
Property and equipment, net of accumulated depreciation and amortization
|
260,663
|
77,121
|
337,784
|
|||||||||||||||||||||||||
Operating lease right-of-use assets
|
144,847
|
200,249
|
(36,541
|
)
|
2b.
|
308,555
|
||||||||||||||||||||||
Goodwill
|
356,763
|
529,727
|
741,294
|
2c.
|
1,627,784
|
|||||||||||||||||||||||
Other acquired intangibles, net of accumulated amortization
|
151,218
|
769,450
|
575,454
|
2c.
|
1,496,122
|
|||||||||||||||||||||||
Other assets
|
55,295
|
13,401
|
68,696
|
|||||||||||||||||||||||||
Total assets
|
$
|
1,184,573
|
$
|
1,902,561
|
$
|
1,127,265
|
$
|
162,091
|
$
|
4,376,490
|
||||||||||||||||||
Liabilities
|
||||||||||||||||||||||||||||
Current liabilities:
|
||||||||||||||||||||||||||||
Accounts payable
|
$
|
37,085
|
$
|
31,068
|
$
|
(2,942
|
)
|
2f.
|
$
|
65,211
|
||||||||||||||||||
Accrued expenses
|
53,265
|
68,403
|
93,829
|
2e.
|
(74,750
|
)
|
3a.
|
140,747
|
||||||||||||||||||||
Other current liabilities
|
12,112
|
705
|
12,817
|
|||||||||||||||||||||||||
Current portion of debt and finance lease obligations
|
13,963
|
16,837
|
(363
|
)
|
2b.
|
(14,727
|
)
|
3b.
|
15,710
|
|||||||||||||||||||
Current portion of operating lease liabilities
|
52,801
|
39,968
|
(10,827
|
)
|
2b.
|
81,942
|
||||||||||||||||||||||
Current portion of contingent consideration
|
-
|
65,621
|
65,621
|
|||||||||||||||||||||||||
Total current liabilities
|
169,226
|
222,602
|
79,697
|
(89,477
|
)
|
382,048
|
||||||||||||||||||||||
Finance lease obligations, less current portion
|
23,461
|
9,613
|
(736
|
)
|
2b.
|
32,338
|
||||||||||||||||||||||
Long term debt, less current portion and debt issuance costs
|
119,766
|
1,397,060
|
(25,997 |
) |
251,927
|
3b.
|
1,794,750
|
|||||||||||||||||||||
Operating lease liabilities, less current portion
|
96,799
|
184,566
|
(49,999
|
)
|
2b.
|
|
231,366
|
|||||||||||||||||||||
Contingent consideration liability, less current portion
|
-
|
1,284
|
12,670
|
2a.
|
13,954
|
|||||||||||||||||||||||
Other long-term liabilities
|
48,437
|
2,860
|
51,297
|
|||||||||||||||||||||||||
Deferred income taxes
|
53,275
|
25,540
|
125,361
|
2g.
|
204,176
|
|||||||||||||||||||||||
Shareholders’ equity
|
||||||||||||||||||||||||||||
Preferred Stock, $0.01 par value
|
-
|
-
|
-
|
|||||||||||||||||||||||||
Class B Convertible Preferred Stock, $10.00 par value
|
-
|
-
|
44
|
2b.
|
44
|
|||||||||||||||||||||||
Class C Contingently Convertible Preferred Stock, $10.00 par value
|
-
|
-
|
16
|
2b.
|
16
|
|||||||||||||||||||||||
Common stock, $0.01 par value
|
258
|
-
|
8
|
2b.
|
266
|
|||||||||||||||||||||||
Additional paid-in capital
|
277,593
|
-
|
518,281
|
2b.
|
795,874
|
|||||||||||||||||||||||
Members’ equity
|
-
|
153,272
|
(153,272
|
)
|
2b.
|
-
|
||||||||||||||||||||||
Accumulated other comprehensive loss
|
-
|
(4,783
|
)
|
4,783
|
2b.
|
-
|
||||||||||||||||||||||
Retained earnings
|
395,758
|
(89,453
|
)
|
(4,376
|
)
|
2b.
|
(359
|
)
|
3b.
|
301,570
|
||||||||||||||||||
Total shareholders’ equity attributable to Forward Air Corporation
|
673,609
|
59,036
|
365,484
|
(359
|
)
|
1,071,773
|
||||||||||||||||||||||
Noncontrolling interest
|
594,788
|
2d.
|
594,788
|
|||||||||||||||||||||||||
Total shareholders’ equity
|
673,609
|
59,036
|
960,272
|
(359
|
)
|
1,666,561
|
||||||||||||||||||||||
Total liabilities and shareholders’ equity
|
$
|
1,184,573
|
$
|
1,902,561
|
$
|
1,127,265
|
$
|
162,091
|
$
|
4,376,490
|
Historical
|
Pro Forma Adjustments
|
|||||||||||||||||||||||||||
Forward
|
Omni
|
Acquisition Accounting Adjustments
|
Financing Adjustments
|
Pro Forma Combined
|
||||||||||||||||||||||||
Operating revenues
|
$
|
829,248
|
$
|
682,442
|
$
|
(17,578
|
)
|
2f.
|
$
|
1,494,112
|
||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||
Purchased transportation
|
366,860
|
409,572
|
(17,578
|
)
|
2f.
|
758,854
|
||||||||||||||||||||||
Salaries, wages and employee benefits
|
166,206
|
145,510
|
311,716
|
|||||||||||||||||||||||||
Operating leases
|
53,432
|
50,850
|
104,282
|
|||||||||||||||||||||||||
Depreciation and amortization
|
28,148
|
30,016
|
38,625
|
2c.
|
96,789
|
|||||||||||||||||||||||
Insurance and claims
|
27,142
|
-
|
27,142
|
|||||||||||||||||||||||||
Fuel expense
|
11,058
|
-
|
11,058
|
|||||||||||||||||||||||||
Change in fair value of contingent consideration
|
-
|
12,320
|
12,320
|
|||||||||||||||||||||||||
Other operating expenses
|
95,682
|
57,690
|
153,372
|
|||||||||||||||||||||||||
Total operating expenses
|
748,528
|
705,958
|
21,047
|
1,475,533
|
||||||||||||||||||||||||
Income (loss) from operations
|
80,720
|
(23,516
|
)
|
(38,625
|
)
|
18,579
|
||||||||||||||||||||||
Other expense:
|
||||||||||||||||||||||||||||
Interest expense, net
|
(4,940
|
)
|
(79,345
|
)
|
1,838
|
3c.
|
(82,447
|
)
|
||||||||||||||||||||
Other income
|
-
|
607
|
607
|
|||||||||||||||||||||||||
Foreign exchange gain (loss)
|
-
|
(1,240
|
)
|
(1,240
|
)
|
|||||||||||||||||||||||
Total other expense
|
(4,940
|
)
|
(79,978
|
)
|
1,838
|
(83,080
|
)
|
|||||||||||||||||||||
Income (loss) before income taxes
|
75,780
|
(103,494
|
)
|
(38,625
|
)
|
1,838
|
(64,501
|
)
|
||||||||||||||||||||
Income tax expense (benefit)
|
19,461
|
(674
|
)
|
(32,096
|
)
|
2g.
|
369 |
2g. |
(12,940
|
)
|
||||||||||||||||||
Net income (loss) from operations
|
56,319
|
(102,820
|
)
|
(6,529
|
)
|
1,469
|
(51,561
|
)
|
||||||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interest
|
-
|
-
|
(16,619
|
)
|
2d.
|
(16,619
|
)
|
|||||||||||||||||||||
Net income (loss) attributable to Forward Air Corporation common shareholders
|
$
|
56,319
|
$
|
(102,820
|
)
|
$
|
10,090
|
$
|
1,469
|
$
|
(34,942
|
)
|
||||||||||||||||
Net income per share
|
||||||||||||||||||||||||||||
Basic
|
$
|
2.14
|
$
|
(1.30
|
)
|
|||||||||||||||||||||||
Diluted
|
$
|
2.13
|
$
|
(1.30
|
)
|
|||||||||||||||||||||||
Weighted average number of common shares outstanding
|
||||||||||||||||||||||||||||
Basic
|
26,144
|
26,914
|
||||||||||||||||||||||||||
Diluted
|
26,258
|
26,914
|
Historical
|
Pro Forma Adjustments
|
|||||||||||||||||||||||||||
Forward
|
Omni
|
Acquisition Accounting Adjustments
|
Financing Adjustments
|
Pro Forma Combined
|
||||||||||||||||||||||||
Operating revenues
|
$
|
982.180
|
$
|
927,932
|
$
|
(17,159
|
)
|
2f.
|
$
|
1,892,953
|
||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||
Purchased transportation
|
464,322
|
635,136
|
(17,159
|
)
|
2f.
|
1,082,299
|
||||||||||||||||||||||
Salaries, wages and employee benefits
|
172,439
|
125,684
|
298,123
|
|||||||||||||||||||||||||
Operating leases
|
46,132
|
31,319
|
77,451
|
|||||||||||||||||||||||||
Depreciation and amortization
|
22,725
|
23,313
|
42,777
|
2c.
|
88,815
|
|||||||||||||||||||||||
Insurance and claims
|
25,164
|
-
|
25,164
|
|||||||||||||||||||||||||
Fuel expense
|
14,179
|
-
|
14,179
|
|||||||||||||||||||||||||
Change in fair value of contingent consideration
|
-
|
7,299
|
7,299
|
|||||||||||||||||||||||||
Other operating expenses
|
104,323
|
51,375
|
93,829
|
2e.
|
249,527
|
|||||||||||||||||||||||
Total operating expenses
|
849,284
|
874,126
|
119,447
|
1,842,857
|
||||||||||||||||||||||||
Income (loss) from operations
|
132,896
|
53,806
|
(136,606
|
)
|
50,096
|
|||||||||||||||||||||||
Other expense:
|
||||||||||||||||||||||||||||
Interest expense, net
|
(1,977)
|
(35,817
|
)
|
(45,976
|
)
|
3c.
|
(83,770
|
)
|
||||||||||||||||||||
Other income
|
-
|
715
|
715
|
|||||||||||||||||||||||||
Foreign exchange gain (loss)
|
-
|
3,603
|
3,603
|
|||||||||||||||||||||||||
Total other expense
|
(1,977
|
)
|
(31,499
|
)
|
(45,976
|
)
|
(79,452
|
)
|
||||||||||||||||||||
Income (loss) before income taxes
|
130,919
|
22,307
|
(136,606
|
)
|
(45,976
|
)
|
(29,356
|
)
|
||||||||||||||||||||
Income tax expense (benefit)
|
32,803
|
3,301
|
(33,165
|
)
|
2g.
|
(8,129 |
) |
2g. |
(5,190
|
)
|
||||||||||||||||||
Net income (loss) from operations
|
98,116
|
19,006
|
(103,441
|
)
|
(37,847
|
)
|
(24,166
|
)
|
||||||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interest
|
-
|
-
|
(7,789
|
)
|
2d.
|
(7,789
|
)
|
|||||||||||||||||||||
Net income (loss) attributable to Forward Air Corporation common shareholders
|
$
|
98,116
|
$
|
19,006
|
$
|
(95,652
|
)
|
$
|
(37,847
|
)
|
$
|
(16,377
|
)
|
|||||||||||||||
Net income per share
|
||||||||||||||||||||||||||||
Basic
|
$
|
3.63
|
$
|
(0.59
|
)
|
|||||||||||||||||||||||
Diluted
|
$
|
3.61
|
$
|
(0.59
|
)
|
|||||||||||||||||||||||
Weighted average number of common shares outstanding
|
||||||||||||||||||||||||||||
Basic
|
26,911
|
27,681
|
||||||||||||||||||||||||||
Diluted
|
27,047
|
27,681
|
Historical
|
Pro Forma Adjustments
|
|||||||||||||||||||||||||||
Forward
|
Omni
|
Acquisition Accounting Adjustments
|
Financing Adjustments
|
Pro Forma Combined
|
||||||||||||||||||||||||
Operating revenues
|
$
|
1,973,403
|
$
|
1,872,269
|
$
|
(37,851
|
)
|
2f.
|
$
|
3,807,821
|
||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||
Purchased transportation
|
906,549
|
1,242,341
|
(37,851
|
)
|
2f.
|
2,111,039
|
||||||||||||||||||||||
Salaries, wages and employee benefits
|
347,970
|
278,916
|
626,886
|
|||||||||||||||||||||||||
Operating leases
|
97,094
|
82,862
|
179,956
|
|||||||||||||||||||||||||
Depreciation and amortization
|
47,386
|
53,016
|
80,960
|
2c.
|
181,362
|
|||||||||||||||||||||||
Insurance and claims
|
49,759
|
-
|
49,759
|
|||||||||||||||||||||||||
Fuel expense
|
27,583
|
-
|
27,583
|
|||||||||||||||||||||||||
Change in fair value of contingent consideration
|
-
|
(17,814
|
)
|
(17,814
|
)
|
|||||||||||||||||||||||
Other operating expenses
|
231,086
|
116,239
|
93,829
|
2e.
|
441,154
|
|||||||||||||||||||||||
Total operating expenses
|
1,707,427
|
1,755,560
|
136,938
|
3,599,925
|
||||||||||||||||||||||||
Income (loss) from operations
|
265,976
|
116,709
|
(174,789
|
)
|
207,896
|
|||||||||||||||||||||||
Other expense:
|
||||||||||||||||||||||||||||
Interest expense, net
|
(5,138
|
)
|
(102,208
|
)
|
(61,040
|
)
|
3c.
|
(168,386
|
)
|
|||||||||||||||||||
Other income
|
-
|
4,517
|
4,517
|
|||||||||||||||||||||||||
Foreign exchange gain (loss)
|
-
|
2,638
|
2,638
|
|||||||||||||||||||||||||
Total other expense
|
(5,138
|
)
|
(95,053
|
)
|
-
|
(61,040
|
)
|
(161,231
|
)
|
|||||||||||||||||||
Income (loss) before income taxes
|
260,838
|
21,656
|
(174,789
|
)
|
(61,040
|
)
|
46,665
|
|||||||||||||||||||||
Income tax expense (benefit)
|
67,647
|
5,657
|
(53,699
|
)
|
2g.
|
(11,039 | ) |
2g. |
8,566
|
|
||||||||||||||||||
Net income (loss) from operations
|
193,191
|
15,999
|
(121,090
|
)
|
(50,001
|
)
|
38,099
|
|||||||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interest
|
-
|
-
|
12,280
|
2d.
|
|
|
|
12,280
|
||||||||||||||||||||
Net income (loss) attributable to Forward Air Corporation common shareholders
|
$
|
193,191
|
$
|
15,999
|
(133,370
|
)
|
$
|
(50,001
|
)
|
$
|
25,819
|
|||||||||||||||||
Net income per share
|
||||||||||||||||||||||||||||
Basic
|
$
|
7.17
|
$
|
0.93
|
||||||||||||||||||||||||
Diluted
|
$
|
7.14
|
$
|
0.89
|
||||||||||||||||||||||||
Weighted average number of common shares outstanding
|
||||||||||||||||||||||||||||
Basic
|
26,783
|
27,553
|
||||||||||||||||||||||||||
Diluted
|
26,926
|
42,533
|
|
1. |
The Transactions
|
|
2. |
Acquisition Accounting Adjustments
|
|
a. |
Estimated Purchase Price
|
Cash consideration
|
$
|
150,000
|
||
Contingent consideration(1)
|
$
|
12,670
|
||
Forward Common Stock issued
|
770
|
|||
Forward Series B Preferred Units issued and Opco Class B Units issued
|
4,365
|
|||
Forward Series C Preferred Units issued
|
1,592
|
|||
Opco Series C-2 Preferred Units issued
|
9,023
|
|||
Total shares of Forward Common Stock issued on an as-converted and as-exchanged basis
|
15,750
|
|||
Forward’s share price(2)
|
$
|
69.84
|
||
Equity portion of purchase price
|
$
|
1,100,010
|
||
Extinguishment of Existing Omni Credit Facilities
|
1,435,159
|
|||
Less: cash acquired
|
(86,330
|
)
|
||
Total estimated purchase price consideration, net of cash acquired
|
$
|
2,611,509
|
|
b. |
Preliminary Purchase Price Allocation
|
Accounts receivable
|
$
|
192,924
|
||
Other current and noncurrent assets
|
46,760
|
|||
Property and equipment(1)
|
77,121
|
|||
Operating lease right-of-use assets(1)
|
163,708
|
|||
Identifiable intangible assets
|
1,344,904
|
|||
Goodwill
|
1,271,021
|
|||
Total assets acquired
|
3,096,438
|
|||
Accounts payable and accrued expenses
|
99,471
|
|||
Other current and noncurrent liabilities
|
3,565
|
|||
Finance lease obligations(1)
|
13,249
|
|||
Operating lease liabilities (1)
|
163,708
|
|||
Contingent consideration(2)(3)
|
79,575
|
|||
Deferred income taxes
|
125,361
|
|||
Total liabilities assumed
|
484,929
|
|||
Net assets acquired
|
$
|
2,611,509
|
As of June 30, 2023
|
||||||||||||||||
(in thousands)
|
Eliminate Historical Omni Equity (1)
|
Record the Combination Consideration
|
Other Equity Adjustments (2)
|
Total Pro Forma Adjustment
|
||||||||||||
Preferred stock
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
||||||||
Series B Preferred units
|
–
|
44
|
–
|
44
|
||||||||||||
Series C Preferred units
|
–
|
16
|
–
|
16
|
||||||||||||
Common stock
|
–
|
8
|
–
|
8
|
||||||||||||
Additional paid-in capital
|
–
|
492,284
|
–
|
492,284
|
||||||||||||
Members’ equity
|
(153,272
|
)
|
–
|
–
|
(153,272
|
)
|
||||||||||
Accumulated other comprehensive loss
|
4,783
|
–
|
–
|
4,783
|
||||||||||||
(Accumulated deficit) retained earnings
|
89,453
|
–
|
(93,829
|
)
|
(4,376
|
)
|
||||||||||
Subtotal–shareholders’ (deficit) equity
|
$
|
(59,036
|
)
|
$
|
492,352
|
$
|
(93,829
|
)
|
$
|
339,487 |
|
c. |
Intangible Assets and Amortization Expense
|
Estimated Amortization Expense
|
||||||||||||||||
Preliminary Estimated Fair Value
|
Year ended December 31, 2022
|
Six months ended June 30, 2023
|
Six months ended June 30, 2022
|
|||||||||||||
Acquired identifiable intangible assets(1)
|
$
|
1,344,904
|
$
|
123,698
|
$
|
61,849
|
$
|
61,849
|
||||||||
Goodwill
|
1,421,021
|
|||||||||||||||
Less: Omni’s historical identifiable intangible assets
|
(769,450
|
)
|
(42,738
|
)
|
(23,224
|
)
|
(19,072
|
)
|
||||||||
Less: Omni’s historical goodwill
|
(529,727
|
)
|
||||||||||||||
Pro forma adjustment
|
$
|
1,466,748
|
|
$
|
80,960
|
$
|
38,625
|
$
|
42,777
|
|
d. |
Noncontrolling Interest Adjustment
|
|
e. |
Transaction Cost Adjustment
|
|
f. |
Intercompany Pro Forma Adjustments
|
|
g. |
Income Tax Adjustments
|
|
h. |
Reclassifications
|
As of June 30, 2023
|
|||||||||||||
(in thousands)
|
|||||||||||||
Before Reclassification
|
Reclassification
|
After Reclassification
|
|||||||||||
Accrued expenses and other
|
$
|
69,108
|
$
|
(69,108
|
)
|
(i)
|
$
|
-
|
|||||
Accrued expenses
|
-
|
68,403
|
(i)
|
68,403
|
|||||||||
Other current liabilities
|
-
|
705
|
(i)
|
705
|
|||||||||
Long-term debt, less current portion
|
1,406,673
|
(1,406,673
|
)
|
(ii)
|
-
|
||||||||
Finance lease obligations, less current portion
|
-
|
9,613
|
(ii)
|
9,613
|
|||||||||
Long term debt, less current portion and debt issuance costs
|
-
|
1,397,060
|
(ii)
|
1,397,060
|
Six Months Ended June 30, 2023
|
|||||||||||||
(in thousands)
|
|||||||||||||
Before Reclassification
|
Reclassification
|
After Reclassification
|
|||||||||||
Selling, general and administrative
|
$
|
251,804
|
$
|
(251,804
|
)
|
(iii)
|
$
|
-
|
|||||
Salaries, wages and employee benefits
|
-
|
145,510
|
(iii)
|
145,510
|
|||||||||
Operating leases
|
-
|
50,850
|
(iii), (iv)
|
50,850
|
|||||||||
Depreciation and amortization
|
32,262
|
(2,246
|
)
|
(iii), (iv)
|
30,016
|
||||||||
Other operating expenses
|
-
|
57,690
|
(iii)
|
57,690
|
Six Months Ended June 30, 2022
|
|||||||||||||
(in thousands)
|
|||||||||||||
Before Reclassification
|
Reclassification
|
After Reclassification
|
|||||||||||
Selling, general and administrative
|
$
|
208,378
|
$
|
(208,378
|
)
|
(v)
|
$
|
-
|
|||||
Salaries, wages and employee benefits
|
-
|
125,684
|
(v)
|
125,684
|
|||||||||
Operating leases
|
-
|
31,319
|
(v)
|
31,319
|
|||||||||
Other operating expenses
|
-
|
51,375
|
(v)
|
51,375
|
Year Ended December 31, 2022
|
|||||||||||||
(in thousands)
|
|||||||||||||
Before Reclassification
|
Reclassification
|
After Reclassification
|
|||||||||||
Selling, general and administrative
|
$
|
474,850
|
$
|
(474,850
|
)
|
(vi)
|
$
|
-
|
|||||
Salaries, wages and employee benefits
|
-
|
278,916
|
(vi)
|
278,916
|
|||||||||
Operating leases
|
-
|
82,862
|
(vi), (vii)
|
82,862
|
|||||||||
Depreciation and amortization
|
56,183
|
(3,167
|
)
|
(vi), (vii)
|
53,016
|
||||||||
Other operating expenses
|
-
|
116,239
|
(vi)
|
116,239
|
|
3. |
Financing Adjustments
|
As of June 30, 2023
|
||||
Repayment of Existing Omni Credit Facilities
|
$
|
(1,435,159
|
)
|
|
Repayment of Existing Forward Credit Facilities
|
(122,750
|
)
|
||
Amount of notes offered hereby(1)
|
925,000
|
|||
Amounts borrowed under the New Term Facility
|
925,000
|
|||
Cash paid for fees related to the notes offered hereby, New Term Facility and New Revolving Credit Facility
|
(55,250
|
)
|
||
Cash paid for transaction costs
|
(74,750
|
)
|
||
Total adjustment to cash
|
$
|
162,091
|
As of June 30, 2023
|
||||
Current portion of debt:
|
||||
Extinguishment of Existing Omni Credit Facilities
|
$
|
(12,102
|
)
|
|
Extinguishment of Existing Forward Credit Facilities
|
(2,625
|
)
|
||
Total adjustments to current portion of debt
|
$
|
(14,727
|
)
|
|
Debt, net of current portion:
|
||||
Extinguishment of Existing Omni Credit Facilities
|
(1,423,057
|
)
|
||
Extinguishment of Existing Forward Credit Facilities
|
(120,125
|
)
|
||
Record noncurrent portion of the notes offered hereby(1)
|
925,000
|
|||
Record noncurrent portion of the New Term Facility(1)
|
925,000
|
|||
Less: debt issuance costs(2)
|
(28,894
|
)
|
||
Total adjustment to debt, net current portion
|
$
|
277,924
|
Year ended December 31, 2022
|
Six months ended June 30, 2023
|
Six months ended June 30, 2022
|
||||||||||
Interest expense for the notes offered hereby, New Term Facility and New Revolving Credit Facility(1)
|
$
|
159,250
|
$
|
79,625
|
$
|
79,625
|
||||||
Amortization of debt issuance costs(2)
|
7,951
|
3,976
|
3,976
|
|||||||||
Total interest expense
|
167,201
|
83,601
|
83,601
|
|||||||||
Less: Omni’s historical interest expense and amortization of debt issuance costs
|
(101,371
|
)
|
(79,303
|
)
|
(35,865
|
)
|
||||||
Less: Forward’s historical interest expense and amortization of debt issuance costs
|
(4,790
|
)
|
(6,136
|
)
|
(1,760
|
)
|
||||||
Pro forma adjustment to interest expense
|
$
|
61,040
|
$
|
(1,838
|
)
|
$
|
45,976
|
● | Exercise professional judgment and maintain professional skepticism throughout the audit. |
● | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. | |
|
|
|
● | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. | |
|
|
|
● | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. | |
|
|
|
● | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
December 31,
2022
|
||||
ASSETS
|
||||
Current assets:
|
||||
Cash and cash equivalents
|
$
|
130,333
|
||
Accounts receivable:
|
||||
Billed, net
|
236,980
|
|||
Unbilled
|
31,506
|
|||
Prepaid expenses and other assets
|
34,290
|
|||
Total current assets
|
433,109
|
|||
Property and equipment, net
|
81,145
|
|||
Operating lease right-of-use assets
|
210,480
|
|||
Other assets
|
||||
Goodwill
|
531,385
|
|||
Intangible assets, net
|
792,935
|
|||
Other
|
14,820
|
|||
Total other assets
|
1,339,140
|
|||
Total assets
|
$
|
2,063,874
|
||
LIABILITIES AND MEMBERS’ EQUITY
|
||||
Current liabilities:
|
||||
Accounts payable
|
$
|
80,890
|
||
Accrued expenses
|
100,256
|
|||
Current portion of long-term debt
|
16,563
|
|||
Current portion of contingent consideration
|
71,395
|
|||
Current portion of operating lease liabilities
|
42,499
|
|||
Other
|
587
|
|||
Total current liabilities
|
312,190
|
|||
Long-term debt, less current portion
|
1,347,132
|
|||
Operating lease liabilities, less current portion
|
189,023
|
|||
Contingent consideration liability, less current portion
|
25,254
|
|||
Deferred income taxes
|
25,554
|
|||
Other long-term liabilities
|
2,862
|
|||
Total liabilities
|
1,902,015
|
|||
Commitments and contingencies (Note 9)
|
||||
Members’ equity
|
152,984
|
|||
Accumulated other comprehensive loss
|
(4,492
|
)
|
||
Retained earnings
|
13,367
|
|||
Total members’ equity
|
161,859
|
|||
Total liabilities and members’ equity
|
$
|
2,063,874
|
Year Ended
December 31,
2022
|
||||
Operating revenue
|
$
|
1,872,269
|
||
Operating expenses:
|
||||
Purchased transportation costs
|
1,242,341
|
|||
Selling, general and administrative
|
474,850
|
|||
Change in fair value of contingent consideration
|
(17,814
|
)
|
||
Depreciation and amortization
|
56,183
|
|||
Total operating expenses
|
1,755,560
|
|||
Income from operations
|
116,709
|
|||
Other expense:
|
||||
Interest expense, net
|
(102,208
|
)
|
||
Other income
|
4,517
|
|||
Foreign exchange loss
|
2,638
|
|||
Total other expense
|
(95,053
|
)
|
||
Income before income taxes
|
21,656
|
|||
Income tax expense
|
(5,657
|
)
|
||
Net income
|
$
|
15,999
|
||
Other comprehensive income
|
||||
Foreign currency translation adjustment
|
(4,387
|
)
|
||
Comprehensive income
|
$
|
11,612
|
Accumulated Other Comprehensive
Loss
|
Retained Earnings
|
Members’
Equity
|
||||||||||
Balance, January 1, 2022
|
$
|
(105
|
)
|
$
|
(2,632
|
)
|
$
|
375,494
|
||||
Issuance of member units
|
-
|
-
|
11,386
|
|||||||||
Member distributions
|
-
|
-
|
(236,633
|
)
|
||||||||
Net income
|
-
|
15,999
|
15,999
|
|||||||||
Foreign currency translation loss
|
(4,387
|
)
|
-
|
(4,387
|
)
|
|||||||
Balance, December 31, 2022
|
$
|
(4,492
|
)
|
$
|
13,367
|
$
|
161,859
|
Year Ended December 31, 2022
|
||||
Operating Activities
|
||||
Net income
|
$
|
15,999
|
||
Adjustments to reconcile net income to net cash used in operating activities:
|
||||
Depreciation and amortization
|
56,183
|
|||
Amortization of deferred financing costs
|
6,996
|
|||
Change in fair value of contingent consideration
|
(17,849
|
)
|
||
Deferred income tax
|
(1,018
|
)
|
||
Provision for bad debts
|
3,601
|
|||
Non-cash compensation and other
|
801
|
|||
Changes in operating assets and liabilities, net of effects of business acquisitions:
|
||||
Accounts receivable
|
148,140
|
|||
Prepaid and other assets
|
(11,171
|
)
|
||
Accounts payable
|
(44,420
|
)
|
||
Accrued expenses and other liabilities
|
(22,325
|
)
|
||
Net cash provided by operating activities
|
134,937
|
|||
Investing activities
|
||||
Cash paid for acquisitions, net of cash acquired
|
(132,559
|
)
|
||
Purchase of property and equipment
|
(35,564
|
)
|
||
Net cash used in investing activities
|
(168,123
|
)
|
||
Financing activities
|
||||
Proceeds from long-term debt
|
420,000
|
|||
Repayments of long-term debt
|
(10,565
|
)
|
||
Repayments of revolving line of credit
|
(20,000
|
)
|
||
Repayments of finance lease obligations
|
(3,204
|
)
|
||
Payment of debt issuance costs
|
(13,404
|
)
|
||
Cash paid to settle contingent consideration
|
(10,002
|
)
|
||
Cash received from member issuances
|
1,015
|
|||
Purchase of member units
|
(1,885
|
)
|
||
Member distributions
|
(234,510
|
)
|
||
Net cash provided by financing activities
|
127,445
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
(930
|
)
|
||
Net increase in cash and cash equivalents
|
93,329
|
|||
Cash and cash equivalents - beginning of period
|
37,004
|
|||
Cash and cash equivalents - end of period
|
$
|
130,333
|
||
Supplemental cash flow information
|
||||
Cash paid for interest
|
$
|
94,375
|
||
Cash paid for income taxes
|
$
|
8,613
|
||
Non-cash investing and financing activities
|
||||
Issuance of capital units in connection with acquisitions
|
$
|
9,709
|
||
Contingent consideration liability
|
$
|
32,700
|
||
Accrued distributions
|
$
|
7,444
|
||
Right-of-use assets – finance leases
|
$
|
13,841
|
||
Right-of-use assets – operating leases
|
$
|
176,818
|
||
Goodwill measurement period adjustment
|
$
|
1,506
|
1. |
Nature of Operations
|
|
2. |
Summary of Significant Accounting Policies
|
Estimated useful life in years
|
December 31, 2022
|
|||||||
Machinery and equipment
|
1-10
|
$
|
28,496
|
|||||
Right-of-use asset – finance leases
|
1-7
|
18,809
|
||||||
Transportation equipment
|
1-5
|
1,387
|
||||||
Office furniture and fixtures
|
1-7
|
13,403
|
||||||
Land
|
N/A
|
899
|
||||||
Leasehold improvements
|
1-10
|
37,632
|
||||||
Total assets
|
100,626
|
|||||||
Less: accumulated depreciation
|
(19,481
|
)
|
||||||
Property and equipment, net
|
$
|
81,145
|
Epic
|
Trinity
|
Millhouse
|
PLC
|
LiVe
|
AGW
|
Total
|
||||||||||||||||||||||
Estimated value at December 31, 2021
|
$
|
11,000
|
$
|
42,500
|
$
|
24,000
|
$
|
14,300
|
$
|
-
|
$
|
-
|
$
|
91,800
|
||||||||||||||
Acquisition date estimated value
|
-
|
-
|
-
|
-
|
11,400
|
21,300
|
32,700
|
|||||||||||||||||||||
Payments of contingent consideration
|
-
|
(10,002
|
)
|
-
|
-
|
-
|
-
|
(10,002
|
)
|
|||||||||||||||||||
Change in estimated value
|
288
|
(32,498
|
)
|
914
|
9,497
|
5,850
|
(1,900
|
)
|
(17,849
|
)
|
||||||||||||||||||
Estimated value at December 31, 2022
|
$
|
11,288
|
$
|
-
|
$
|
24,914
|
$
|
23,797
|
$
|
17,250
|
$
|
19,400
|
$
|
96,649
|
December 31,
2022
|
||||
Balance at beginning of the period
|
$
|
91,800
|
||
Fair value recorded at acquisition
|
32,700
|
|||
Fair value changes included in change in fair value of contingent consideration liability
|
(17,849
|
)
|
||
Payments of contingent consideration
|
(10,002
|
)
|
||
Balance at end of the period
|
$
|
96,649
|
3. |
Acquisitions
|
LiVe
|
AGW
|
Total
|
||||||||||
Cash consideration
|
$
|
37,805
|
$
|
108,664
|
$
|
146,469
|
||||||
Working capital adjustment due from seller
|
(250
|
)
|
(6,801
|
)
|
(7,051
|
)
|
||||||
Equity units
|
4,462
|
5,247
|
9,709
|
|||||||||
Contingent consideration
|
11,400
|
21,300
|
32,700
|
|||||||||
Total
|
$
|
53,417
|
$
|
128,410
|
$
|
181,827
|
||||||
Less: cash acquired
|
(1,095
|
)
|
(12,815
|
)
|
(13,910
|
)
|
||||||
Total consideration
|
$
|
52,322
|
$
|
115,595
|
$
|
167,917
|
LiVe
|
AGW
|
Total
|
||||||||||
Accounts receivable
|
$
|
7,864
|
$
|
26,886
|
$
|
34,750
|
||||||
Prepaid and other current assets
|
128
|
1,968
|
2,096
|
|||||||||
Right of use asset
|
75
|
9,446
|
9,521
|
|||||||||
Property and equipment
|
435
|
2,712
|
3,147
|
|||||||||
Other noncurrent assets
|
-
|
652
|
652
|
|||||||||
Goodwill
|
7,156
|
37,137
|
44,293
|
|||||||||
Intangible assets – customer relationships
|
42,600
|
86,400
|
129,000
|
|||||||||
Intangible assets – trade names
|
1,000
|
2,000
|
3,000
|
|||||||||
Total assets
|
$
|
59,258
|
$
|
167,201
|
$
|
226,459
|
||||||
Accounts payable
|
$
|
5,642
|
$
|
9,764
|
$
|
15,406
|
||||||
Income tax payable
|
-
|
5,610
|
5,610
|
|||||||||
Accrued expenses
|
1,219
|
4,127
|
5,346
|
|||||||||
Lease liabilities, current
|
69
|
1,698
|
1,767
|
|||||||||
Deferred income taxes, current
|
-
|
17,147
|
17,147
|
|||||||||
Other current liabilities
|
-
|
4,129
|
4,129
|
|||||||||
Lease liabilities, long-term
|
-
|
375
|
375
|
|||||||||
Other long-term liabilities
|
6
|
8,756
|
8,762
|
|||||||||
Total liabilities
|
$
|
6,936
|
$
|
51,606
|
$
|
58,542
|
||||||
Net assets acquired
|
$
|
52,322
|
$
|
115,595
|
$
|
167,917
|
4. |
Goodwill
|
December 31, 2022
|
|||
Goodwill – beginning balance
|
$
|
485,586
|
|
Goodwill additions – business combinations (Note 3)
|
44,293
|
||
Measurement period adjustments
|
1,506
|
||
Goodwill – ending balance
|
$
|
531,385
|
5. |
Intangible Assets
|
|
Weighted Average Useful Life
in Years
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
|||||||
Customer relationships
|
16.5
|
$
|
766,081
|
$
|
(65,490)
|
$
|
700,591
|
||||
Internally developed software
|
|
3.6
|
1,600
|
(437)
|
1,163
|
||||||
Trade names - finite-lived
|
|
1.2
|
9,500
|
(5,719)
|
3,781
|
||||||
Trade names - indefinite-lived
|
|
|
87,400
|
-
|
87,400
|
||||||
Total intangible assets
|
|
$
|
864,581
|
$
|
(71,646)
|
$
|
792,935
|
December 31,
|
||||
2023
|
$
|
46,315
|
||
2024
|
44,117
|
|||
2025
|
43,325
|
|||
2026
|
43,208
|
|||
2027
|
43,005
|
|||
Thereafter
|
485,565
|
|||
$
|
705,535
|
6. |
Accrued Expenses
|
December 31, 2022
|
|||
Accrued purchased transportation costs
|
$
|
22,853
|
|
Accrued compensation, benefits and withholdings
|
39,172
|
||
Value-added taxes payable
|
1,822
|
||
Accrued professional fees
|
1,263
|
||
Distributions payable
|
7,444
|
||
Current portion of accrued claims (See Note 9)
|
4,581
|
||
Other accrued expenses
|
23,121
|
||
Accrued expenses
|
$
|
100,256
|
7. |
Long-Term Debt
|
December 31, 2022
|
|||
Term loan
|
$
|
1,132,210
|
|
Subordinated term loan
|
245,000
|
||
Revolving line of credit
|
-
|
||
Finance leases of equipment
|
15,590
|
||
Total debt
|
1,392,800
|
||
Deferred financing costs, net
|
(29,105)
|
||
Total debt
|
1,363,695
|
||
Less: current portion
|
(16,563)
|
||
Total long-term debt, net of current portion
|
$
|
1,347,132
|
December 31,
|
||||
2023
|
$
|
11,455
|
||
2024
|
11,455
|
|||
2025
|
11,455
|
|||
2026
|
1,097,845
|
|||
2027
|
245,000
|
|||
Thereafter
|
-
|
|||
$
|
1,377,210
|
8. |
Leases
|
Year ended
December 31, 2022
|
||||
Lease cost
|
||||
Finance lease cost:
|
||||
Amortization of right of use asset
|
$
|
3,167
|
||
Interest on lease liabilities
|
627
|
|||
Operating lease cost:
|
47,800
|
|||
Short-term lease cost
|
10,690
|
|||
Sublease income
|
488
|
|||
Total lease cost
|
$
|
62,772
|
Finance
Leases
|
Operating
Leases
|
|||||||
2023
|
$
|
5,908
|
$
|
56,477
|
||||
2024
|
4,408
|
51,856
|
||||||
2025
|
3,563
|
40,235
|
||||||
2026
|
2,774
|
32,844
|
||||||
2027
|
703
|
26,055
|
||||||
Thereafter
|
7
|
78,792
|
||||||
$
|
17,363
|
$
|
286,259
|
Year ended
December 31, 2022
|
||||
Other information
|
||||
Cash paid for amount included in the measurement of lease liabilities:
|
||||
Operating cash flows from finance leases
|
$
|
627
|
||
Operating cash flows from operating leases
|
43,566
|
|||
Financing cash flows from finance leases
|
3,204
|
|||
Right of use asset obtained in exchange for new finance lease liabilities
|
13,841
|
|||
Right of use asset obtained in exchange for new operating lease liabilities
|
176,818
|
|||
Weighted-average remaining lease term – finance leases (in years)
|
3.7
|
|||
Weighted-average remaining lease term – operating leases (in years)
|
5.4
|
|||
Weighted-average discount rate – finance leases
|
6.1
|
%
|
||
Weighted-average discount rate – operating leases
|
6.1
|
%
|
9. |
Commitments and Contingencies
|
10. |
Income Taxes
|
Domestic
|
$
|
(11,857
|
)
|
|
Foreign
|
33,513
|
|||
Total
|
$
|
21,656
|
Income tax expense (benefit) at federal statutory rate
|
$
|
-
|
||
U.S. federal income tax benefit of subsidiary entities
|
(81
|
)
|
||
Foreign income tax expense of subsidiary entities
|
5,080
|
|||
State and local taxes, net of federal benefit
|
658
|
|||
Total income tax expense
|
$
|
5,657
|
Current
|
||||
State
|
$
|
425
|
||
Federal
|
910
|
|||
Foreign
|
5,340
|
|||
Total current
|
6,675
|
|||
Deferred
|
||||
State
|
233
|
|||
Federal
|
(991
|
)
|
||
Foreign
|
(260
|
)
|
||
Total deferred
|
(1,018
|
)
|
||
Total income tax expense
|
$
|
5,657
|
Deferred tax assets
|
||||
Accounts receivable allowances
|
$
|
87
|
||
Operating lease liability
|
2,828
|
|||
Property and equipment
|
40
|
|||
Other, net
|
117
|
|||
Total deferred tax assets
|
3,072
|
|||
Deferred tax liabilities
|
||||
Acquired intangibles
|
(25,918
|
)
|
||
Right-of-use asset
|
(2,708
|
)
|
||
Total deferred tax liabilities
|
(28,626
|
)
|
||
Net deferred tax liabilities
|
$
|
(25,554
|
)
|
11. |
Retirement Plan
|
12. |
Profit Unit Plan
|
Number of Shares
|
Weighted
Average
Grant-Date Fair Value
|
|||||||
Nonvested at December 31, 2021
|
3,635,797
|
$
|
0.30
|
|||||
Granted
|
454,475
|
1.24
|
||||||
Vested
|
(908,949
|
)
|
0.30
|
|||||
Forfeited
|
-
|
-
|
||||||
Nonvested at December 31, 2022
|
3,181,323
|
$
|
0.43
|
13. |
Related Parties
|
14. |
Subsequent Events
|
|
● | Exercise professional judgment and maintain professional skepticism throughout the audit. |
|
|
|
|
● | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. |
|
● | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. |
|
|
|
|
● | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. |
|
|
|
|
● | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
December 31,
2021
|
||||
ASSETS
|
||||
Current assets:
|
||||
Cash and cash equivalents
|
$
|
37,004
|
||
Accounts receivable:
|
||||
Billed, net
|
306,281
|
|||
Unbilled
|
65,622
|
|||
Prepaid expenses and other assets
|
29,666
|
|||
Total Current Assets
|
438,573
|
|||
Property and equipment, net
|
26,442
|
|||
Other Assets
|
||||
Goodwill
|
485,586
|
|||
Intangible assets, net
|
703,274
|
|||
Other
|
9,758
|
|||
Total Other Assets
|
1,198,618
|
|||
Total Assets
|
$
|
1,663,633
|
||
LIABILITIES AND MEMBERS’ EQUITY
|
||||
Current Liabilities:
|
||||
Accounts payable
|
$
|
110,481
|
||
Accrued expenses
|
104,667
|
|||
Current portion of long-term debt
|
9,347
|
|||
Other current liabilities
|
1,057
|
|||
Total Current Liabilities
|
225,552
|
|||
Long-term debt, less current portion
|
957,261
|
|||
Contingent consideration liability
|
91,800
|
|||
Deferred income taxes
|
9,469
|
|||
Other long-term liabilities
|
4,057
|
|||
Total Liabilities
|
1,288,139
|
|||
Commitments and Contingencies (Note 8)
|
||||
Members’ Equity
|
375,494
|
|||
Total Liabilities and Members’ Equity
|
$
|
1,663,633
|
Year Ended
December 31,
2021
|
||||
Operating revenue
|
$
|
1,515,334
|
||
Operating expenses:
|
||||
Purchased transportation costs
|
1,088,097
|
|||
Selling, general and administrative
|
300,725
|
|||
Change in fair value of contingent consideration
|
42,298
|
|||
Depreciation and amortization
|
34,970
|
|||
Total operating expenses
|
1,466,090
|
|||
Income from operations
|
49,244
|
|||
Other expense:
|
||||
Interest expense, net
|
(45,498
|
)
|
||
Foreign exchange loss
|
(962
|
)
|
||
Total other expense
|
(46,460
|
)
|
||
Income before income taxes
|
2,784
|
|||
Income tax expense
|
(5,414
|
)
|
||
Net loss
|
$
|
(2,630
|
)
|
|
Other comprehensive loss
|
||||
Foreign currency translation adjustment
|
(105
|
)
|
||
Comprehensive loss
|
$
|
(2,735
|
)
|
Accumulated Other Comprehensive
Loss
|
Members’
Equity
|
|||||||
Balance, January 1, 2021
|
$
|
-
|
$
|
587,787
|
||||
Issuance of member units
|
-
|
4,949
|
||||||
Member distributions
|
-
|
(214,507
|
)
|
|||||
Net loss
|
-
|
(2,630
|
)
|
|||||
Foreign currency translation gain
|
(105
|
)
|
(105
|
)
|
||||
Balance, December 31, 2021
|
$
|
(105
|
)
|
$
|
375,494
|
Year Ended December 31, 2021
|
||||
Operating Activities
|
||||
Net loss
|
$
|
(2,630
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||
Depreciation and amortization
|
34,970
|
|||
Amortization of deferred financing costs
|
7,777
|
|||
Change in fair value of contingent consideration
|
42,298
|
|||
Deferred income tax benefit
|
(288
|
)
|
||
Provision for bad debts
|
1,695
|
|||
Loss on disposal of property and equipment
|
(5
|
)
|
||
Changes in operating assets and liabilities, net of effects of business acquisitions:
|
||||
Accounts receivable
|
(189,973
|
)
|
||
Prepaid and other assets
|
(11,457
|
)
|
||
Accounts payable
|
46,646
|
|||
Accrued expenses and other liabilities
|
3,636
|
|||
Contingent consideration paid
|
(6,458
|
)
|
||
Net cash used in operating activities
|
(73,789
|
)
|
||
Investing activities
|
||||
Cash paid for acquisitions; net of cash acquired
|
(181,259
|
)
|
||
Acquisition purchase price adjustment
|
(8,685
|
)
|
||
Purchase of property and equipment
|
(15,330
|
)
|
||
Net cash used in investing activities
|
(205,274
|
)
|
||
Financing activities
|
||||
Proceeds from long-term debt
|
533,557
|
|||
Repayments of long-term debt
|
(28,565
|
)
|
||
Proceeds from revolving line of credit
|
53,000
|
|||
Repayments of revolving line of credit
|
(36,000
|
)
|
||
Payment of debt issuance costs
|
(15,818
|
)
|
||
Cash paid to settle contingent consideration
|
(9,840
|
)
|
||
Member distributions
|
(209,188
|
)
|
||
Net cash provided by financing activities
|
287,146
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
(180
|
)
|
||
Net increase in cash and cash equivalents
|
7,903
|
|||
Cash and cash equivalents - beginning of period
|
$ |
29,101
|
||
Cash and cash equivalents - end of period
|
$
|
37,004
|
||
Supplemental cash flow information
|
||||
Cash paid for interest
|
$
|
37,775
|
||
Cash paid for income taxes
|
$
|
1,525
|
||
Non-cash investing and financing activities
|
||||
Issuance of capital units in connection with acquisitions
|
$
|
4,949
|
||
Contingent consideration liability
|
$
|
55,960
|
||
Accrued distributions
|
$
|
5,319
|
||
Goodwill measurement period adjustment
|
$
|
1,471
|
1.
|
Nature of Operations
|
2.
|
Summary of Significant Accounting Policies
|
Estimated useful life in years
|
December 31, 2021
|
|||||||
Machinery and equipment (a)
|
1-10
|
$
|
16,752
|
|||||
Transportation equipment
|
1-5
|
1,279
|
||||||
Office furniture and fixtures
|
1-7
|
7,199
|
||||||
Leasehold improvements
|
1-10
|
7,248
|
||||||
Total assets
|
32,478
|
|||||||
Less: accumulated depreciation
|
(6,036
|
)
|
||||||
Property and equipment, net
|
$
|
26,442
|
(a)
|
Equipment under capital leases was $1,929 as of December 31, 2021.
|
Epic
|
Trinity
|
Millhouse
|
PLC
|
Total
|
||||||||||||||||
Acquisition date estimated value
|
$
|
3,560
|
$
|
17,000
|
$
|
21,100
|
$
|
14,300
|
$
|
55,960
|
||||||||||
Change in estimated value
|
7,440
|
25,500
|
2,900
|
-
|
35,840
|
|||||||||||||||
Estimated value of contingent consideration at December 31, 2021
|
$
|
11,000
|
$
|
42,500
|
$
|
24,000
|
$
|
14,300
|
$
|
91,800
|
December 31,
2021
|
||||
Balance at beginning of the period
|
$
|
9,840
|
||
Fair value recorded at acquisition
|
55,960
|
|||
Fair value changes included in change in fair value of contingent consideration liability
|
42,298
|
|||
Payments of contingent consideration
|
(16,298
|
)
|
||
Balance at end of the period
|
$
|
91,800
|
3.
|
Acquisitions
|
Epic
|
Tiger
|
Trinity
|
Millhouse
|
PLC
|
Total
|
|||||||||||||||||||
Cash consideration
|
$
|
14,620
|
$
|
9,144
|
$
|
73,389
|
$
|
22,991
|
$
|
86,863
|
$
|
207,007
|
||||||||||||
Equity units
|
3,683
|
1,266
|
-
|
-
|
-
|
4,949
|
||||||||||||||||||
Contingent consideration
|
3,560
|
-
|
17,000
|
21,100
|
14,300
|
55,960
|
||||||||||||||||||
Total
|
$
|
21,863
|
$
|
10,410
|
$
|
90,389
|
$
|
44,091
|
$
|
101,163
|
$
|
267,916
|
||||||||||||
Less: cash acquired
|
(869
|
)
|
(507
|
)
|
(18,579
|
)
|
(3,140
|
)
|
(2,653
|
)
|
(25,748
|
)
|
||||||||||||
Total consideration
|
$
|
20,994
|
$
|
9,903
|
$
|
71,810
|
$
|
40,951
|
$
|
98,510
|
$
|
242,168
|
Epic
|
Tiger
|
Trinity
|
Millhouse
|
PLC
|
Total
|
|||||||||||||||||||
Accounts receivable
|
$
|
4,589
|
$
|
2,268
|
$
|
28,388
|
$
|
18,005
|
$
|
9,096
|
$
|
62,346
|
||||||||||||
Prepaid and other current assets
|
-
|
-
|
1,670
|
1,537
|
1,129
|
4,336
|
||||||||||||||||||
Property and equipment
|
-
|
-
|
-
|
1,922
|
1,081
|
3,003
|
||||||||||||||||||
Other noncurrent assets
|
-
|
-
|
1,588
|
-
|
511
|
2,099
|
||||||||||||||||||
Goodwill
|
8,425
|
3,552
|
50,916
|
14,829
|
21,858
|
99,580
|
||||||||||||||||||
Intangible assets
|
10,800
|
5,600
|
42,100
|
30,800
|
70,300
|
159,600
|
||||||||||||||||||
Total Assets
|
$
|
23,814
|
$
|
11,420
|
$
|
124,662
|
$
|
67,093
|
$
|
103,975
|
$
|
330,964
|
||||||||||||
Accounts payable
|
$
|
1,871
|
$
|
1,232
|
$
|
12,897
|
$
|
8,654
|
$
|
2,445
|
$
|
27,099
|
||||||||||||
Accrued expenses and other liabilities
|
694
|
90
|
14,832
|
5,856
|
2,915
|
24,387
|
||||||||||||||||||
Other current liabilities
|
255
|
195
|
2,882
|
158
|
105
|
3,595
|
||||||||||||||||||
Long-term debt
|
-
|
-
|
12,388
|
11,474
|
-
|
23,862
|
||||||||||||||||||
Deferred income taxes - liability
|
-
|
-
|
9,853
|
-
|
-
|
9,853
|
||||||||||||||||||
Total Liabilities
|
$
|
2,820
|
$
|
1,517
|
$
|
52,852
|
$
|
26,142
|
$
|
5,465
|
$
|
88,796
|
||||||||||||
Net Assets Acquired
|
$
|
20,994
|
$
|
9,903
|
$
|
71,810
|
$
|
40,951
|
$
|
98,510
|
$
|
242,168
|
4.
|
Goodwill
|
December 31, 2021
|
||||
Goodwill – beginning balance
|
$
|
375,850
|
||
Goodwill additions – business combinations (Note 3)
|
99,580
|
|||
Measurement period adjustments
|
10,156
|
|||
Goodwill – ending balance
|
$
|
485,586
|
5.
|
Intangible Assets
|
Weighted Average Useful Life (in Years)
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
|||||||||||||
Customer relationships
|
18.0
|
$
|
636,700
|
$
|
(27,050
|
)
|
$
|
609,650
|
||||||||
Internally developed software
|
4.6
|
1,600
|
(116
|
)
|
1,484
|
|||||||||||
Trade names - finite-lived
|
1.5
|
6,500
|
(1,760
|
)
|
4,740
|
|||||||||||
Trade names - indefinite-lived
|
87,400
|
-
|
87,400
|
|||||||||||||
Total intangible assets
|
$
|
732,200
|
$
|
(28,926
|
)
|
$
|
703,274
|
December 31,
|
||||
2022
|
$
|
37,950
|
||
2023
|
36,190
|
|||
2024
|
34,700
|
|||
2025
|
34,700
|
|||
2026
|
34,583
|
|||
Thereafter
|
437,751
|
|||
$
|
615,874
|
|
6. |
Accrued Expenses
|
December 31, 2021
|
||||
Accrued purchased transportation costs
|
$
|
35,440
|
||
Accrued compensation, benefits and withholdings
|
25,824
|
|||
Value-added taxes payable
|
6,039
|
|||
Accrued professional fees
|
1,820
|
|||
Distributions payable
|
5,319
|
|||
Current portion of accrued claims (See Note 8)
|
3,133
|
|||
Other accrued expenses
|
27,092
|
|||
Accrued Expenses
|
$
|
104,667
|
7.
|
Long-Term Debt
|
|
December 31, 2021
|
|||
Term loan
|
$
|
887,775
|
||
Subordinated term loan
|
80,000
|
|||
Revolving line of credit
|
20,000
|
|||
Finance leases of equipment
|
1,529
|
|||
Total debt
|
989,304
|
|||
Deferred financing costs, net
|
(22,696
|
)
|
||
Total debt
|
966,608
|
|||
Less: current portion
|
(9,347
|
)
|
||
Total long-term debt, net of current portion
|
$
|
957,261
|
December 31,
|
||||
2022
|
$
|
9,347
|
||
2023
|
9,326
|
|||
2024
|
9,200
|
|||
2025
|
29,193
|
|||
2026
|
852,238
|
|||
Thereafter
|
80,000
|
|||
$
|
989,304
|
8.
|
Commitments and Contingencies
|
Year ended December 31,
|
Leases
|
Subleases
|
Net
|
||||||
2022
|
$
|
39,940
|
$
|
311
|
$
|
39,629
|
|||
2023
|
29,595
|
74
|
29,521
|
||||||
2024
|
18,349
|
-
|
18,349
|
||||||
2025
|
10,733
|
-
|
10,733
|
||||||
2026
|
5,390
|
-
|
5,390
|
||||||
Thereafter
|
9,865
|
-
|
9,865
|
||||||
$
|
113,872
|
$
|
385
|
$
|
113,487
|
9.
|
Income Taxes
|
Year Ended December 31, 2021
|
||||
Current
|
||||
State
|
$
|
742
|
||
Federal
|
1,202
|
|||
Foreign
|
3,758
|
|||
Total Current
|
5,702
|
|||
Deferred
|
||||
Federal
|
(477
|
)
|
||
Foreign
|
189
|
|||
Total Income Tax Expense
|
$
|
5,414
|
10.
|
Retirement Plan
|
11.
|
Profit Unit Plan
|
Return on Investment
|
Vest %
|
|
Less than 2.0
|
None
|
|
2.0 to 2.5
|
33.33%
|
|
2.5 to 3.0
|
66.67%
|
|
More than 3.0
|
100.00%
|
12.
|
Related Parties
|
13.
|
Subsequent Events
|
June 30, 2023
|
December 31,
2022
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
86,330
|
$
|
130,333
|
||||
Accounts receivable:
|
||||||||
Billed, net of allowance of $5,091 and $6,091
|
170,463
|
236,980
|
||||||
Unbilled
|
22,461
|
31,506
|
||||||
Prepaid expenses and other assets
|
33,359
|
34,290
|
||||||
Total current assets
|
312,613
|
433,109
|
||||||
Property and equipment, net
|
77,121
|
81,145
|
||||||
Operating lease right-of-use assets
|
200,249
|
210,480
|
||||||
Other assets
|
||||||||
Goodwill
|
529,727
|
531,385
|
||||||
Intangible assets, net
|
769,450
|
792,935
|
||||||
Other
|
13,401
|
14,820
|
||||||
Total other assets
|
1,312,578
|
1,339,140
|
||||||
Total assets
|
$
|
1,902,561
|
$
|
2,063,874
|
||||
LIABILITIES AND MEMBERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
31,068
|
$
|
80,890
|
||||
Accrued expenses and other
|
69,108
|
100,843
|
||||||
Current portion of long-term debt
|
16,837
|
16,563
|
||||||
Current portion of contingent consideration
|
65,621
|
71,395
|
||||||
Current portion of operating lease liabilities
|
39,968
|
42,499
|
||||||
Total current liabilities
|
222,602
|
312,190
|
||||||
Long-term debt, less current portion
|
1,406,673
|
1,347,132
|
||||||
Operating lease liabilities, less current portion
|
184,566
|
189,023
|
||||||
Contingent consideration liability, less current portion
|
1,284
|
25,254
|
||||||
Deferred income taxes
|
25,540
|
25,554
|
||||||
Other long-term liabilities
|
2,860
|
2,862
|
||||||
Total liabilities
|
1,843,525
|
1,902,015
|
||||||
Commitments and contingencies (Note 7)
|
||||||||
Members’ equity
|
153,272
|
152,984
|
||||||
Accumulated other comprehensive loss
|
(4,783
|
)
|
(4,492
|
)
|
||||
Retained earnings
|
(89,453
|
)
|
13,367
|
|||||
Total members’ equity
|
59,036
|
161,859
|
||||||
Total liabilities and members’ equity
|
$
|
1,902,561
|
$
|
2,063,874
|
Six Months Ended June 30,
|
||||||||
2023
|
2022
|
|||||||
Operating revenue
|
$
|
682,442
|
$
|
927,932
|
||||
Operating expenses:
|
||||||||
Purchased transportation costs
|
409,572
|
635,136
|
||||||
Selling, general and administrative
|
251,804
|
208,378
|
||||||
Change in fair value of contingent consideration
|
12,320
|
7,299
|
||||||
Depreciation and amortization
|
32,262
|
23,313
|
||||||
Total operating expenses
|
705,958
|
874,126
|
||||||
Income (loss) from operations
|
(23,516
|
)
|
53,806
|
|||||
Other expense:
|
||||||||
Interest expense, net
|
(79,345
|
)
|
(35,817
|
)
|
||||
Other income
|
607
|
715
|
||||||
Foreign exchange gain (loss)
|
(1,240
|
)
|
3,603
|
|||||
Total other expense
|
(79,978
|
)
|
(31,499
|
)
|
||||
Income (loss) before income taxes
|
(103,494
|
)
|
22,307
|
|||||
Income tax benefit (expense)
|
674
|
(3,301
|
)
|
|||||
Net income (loss)
|
$
|
(102,820
|
)
|
$
|
19,006
|
|||
Other comprehensive income (loss)
|
||||||||
Foreign currency translation adjustment
|
(291
|
)
|
(5,248
|
)
|
||||
Comprehensive income (loss)
|
$
|
(103,111
|
)
|
$
|
13,758
|
Accumulated Other Comprehensive
Loss
|
Retained Earnings
|
Members’
Equity
|
||||||||||
Balance, January 1, 2023
|
$
|
(4,492
|
)
|
$
|
13,367
|
$
|
161,859
|
|||||
Issuance of member units
|
-
|
-
|
288
|
|||||||||
Net loss
|
-
|
(102,820
|
)
|
(102,820
|
)
|
|||||||
Foreign currency translation loss
|
(291
|
)
|
-
|
(291
|
)
|
|||||||
Balance, June 30, 2023
|
$
|
(4,783
|
)
|
$
|
(89,453
|
)
|
$
|
59,036
|
Accumulated Other Comprehensive
Loss
|
Retained Earnings
|
Members’
Equity
|
||||||||||
Balance, January 1, 2022
|
$
|
(105
|
)
|
$
|
(2,632
|
)
|
$
|
375,494
|
||||
Issuance of member units
|
-
|
-
|
7,863
|
|||||||||
Member distributions
|
-
|
-
|
(227,569
|
)
|
||||||||
Net income
|
-
|
19,006
|
19,006
|
|||||||||
Foreign currency translation loss
|
(5,248
|
)
|
-
|
(5,248
|
)
|
|||||||
Balance, June 30, 2022
|
$
|
(5,353
|
)
|
$
|
16,374
|
$
|
169,546
|
Six Months Ended June 30,
|
||||||||
2023
|
2022
|
|||||||
Operating Activities
|
||||||||
Net income (loss)
|
$
|
(102,820
|
)
|
$
|
19,006
|
|||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
|
||||||||
Depreciation and amortization
|
32,262
|
23,313
|
||||||
Amortization of deferred financing costs
|
3,618
|
2,579
|
||||||
Change in fair value of contingent consideration
|
12,320
|
7,299
|
||||||
Other operating activities
|
219
|
3,248
|
||||||
Changes in operating assets and liabilities, net of effects of business acquisitions:
|
||||||||
Accounts receivable
|
75,214
|
101,903
|
||||||
Prepaid and other assets
|
2,585
|
(16,927
|
)
|
|||||
Accounts payable
|
(48,601
|
)
|
(22,480
|
)
|
||||
Accrued expenses and other liabilities
|
(22,006
|
)
|
(43,854
|
)
|
||||
Contingent consideration paid
|
(7,229
|
)
|
-
|
|||||
Net cash (used in) provided by operating activities
|
(54,438
|
)
|
74,087
|
|||||
Investing activities
|
||||||||
Cash paid for acquisitions; net of cash acquired
|
250
|
(36,710
|
)
|
|||||
Purchase of property and equipment and other investing
|
(4,925
|
)
|
(15,196
|
)
|
||||
Net cash used in investing activities
|
(4,675
|
)
|
(51,906
|
)
|
||||
Financing activities
|
||||||||
Proceeds from long-term debt
|
64,000
|
320,000
|
||||||
Repayments of long-term debt
|
(6,051
|
)
|
(4,838
|
)
|
||||
Repayments of revolving line of credit
|
-
|
(20,000
|
)
|
|||||
Repayments of finance lease obligations
|
(2,101
|
)
|
(1,227
|
)
|
||||
Payment of debt issuance costs
|
(511
|
)
|
(12,372
|
)
|
||||
Cash paid to settle contingent consideration
|
(33,981
|
)
|
-
|
|||||
Cash received from member issuances
|
-
|
600
|
||||||
Purchase of member units
|
-
|
(1,885
|
)
|
|||||
Member distributions
|
(7,439
|
)
|
(208,469
|
)
|
||||
Net cash provided by financing activities
|
13,917
|
71,809
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
1,193
|
(2,162
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
(44,003
|
)
|
91,828
|
|||||
Cash and cash equivalents - beginning of period
|
130,333
|
37,004
|
||||||
Cash and cash equivalents - end of period
|
$
|
86,330
|
$
|
128,832
|
||||
Supplemental cash flow information
|
||||||||
Cash paid for interest
|
$
|
76,036
|
$
|
33,156
|
1. |
Nature of Operations
|
2. |
Basis of Presentation
|
3. |
Acquisitions
|
LiVe
|
AGW
|
Total
|
||||||||||
Cash consideration (a)
|
$
|
38,055
|
$
|
108,664
|
$
|
146,719
|
||||||
Working capital adjustment due from seller
|
-
|
(6,801
|
)
|
(6,801
|
)
|
|||||||
Equity units
|
4,462
|
5,247
|
9,709
|
|||||||||
Contingent consideration
|
11,400
|
21,300
|
32,700
|
|||||||||
Total
|
$
|
53,917
|
$
|
128,410
|
$
|
182,327
|
||||||
Less: cash acquired
|
(1,345
|
)
|
(12,815
|
)
|
(14,160
|
)
|
||||||
Total consideration
|
$
|
52,572
|
$
|
115,595
|
$
|
168,167
|
(a) |
Cash consideration for LiVe includes post-close amounts received.
|
LiVe
|
AGW
|
Total
|
||||||||||
Accounts receivable
|
$
|
7,864
|
$
|
26,886
|
$
|
34,750
|
||||||
Prepaid and other current assets
|
378
|
1,968
|
2,346
|
|||||||||
Right of use asset
|
75
|
9,446
|
9,521
|
|||||||||
Property and equipment
|
435
|
2,712
|
3,147
|
|||||||||
Other noncurrent assets
|
-
|
652
|
652
|
|||||||||
Goodwill
|
7,156
|
37,137
|
44,293
|
|||||||||
Intangible assets – customer relationships
|
42,600
|
86,400
|
129,000
|
|||||||||
Intangible assets – trade names
|
1,000
|
2,000
|
3,000
|
|||||||||
Total assets
|
$
|
59,508
|
$
|
167,201
|
$
|
226,709
|
||||||
Accounts payable
|
$
|
5,642
|
$
|
9,764
|
$
|
15,406
|
||||||
Income tax payable
|
-
|
5,610
|
5,610
|
|||||||||
Accrued expenses
|
1,219
|
4,127
|
5,346
|
|||||||||
Lease liabilities, current
|
69
|
1,698
|
1,767
|
|||||||||
Deferred income taxes, current
|
-
|
17,147
|
17,147
|
|||||||||
Other current liabilities
|
-
|
4,129
|
4,129
|
|||||||||
Lease liabilities, long-term
|
-
|
375
|
375
|
|||||||||
Other long-term liabilities
|
6
|
8,756
|
8,762
|
|||||||||
Total liabilities
|
$
|
6,936
|
$
|
51,606
|
$
|
58,542
|
||||||
Net assets acquired
|
$
|
52,572
|
$
|
115,595
|
$
|
168,167
|
4. |
Goodwill
|
June 30,
2023
|
December 31, 2022
|
|||||||
Goodwill – beginning balance
|
$
|
531,385
|
$
|
485,586
|
||||
Goodwill additions – business combinations (Note 3)
|
-
|
44,293
|
||||||
Foreign currency translation
|
(1,658
|
)
|
-
|
|||||
Measurement period adjustments
|
-
|
1,506
|
||||||
Goodwill – ending balance
|
$
|
529,727
|
$
|
531,385
|
5. |
Intangible Assets
|
June 30, 2023
|
||||||||||||||||
Weighted Average Useful Life
in Years
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
|||||||||||||
Customer relationships
|
16.0
|
$
|
765,815
|
$
|
(86,604
|
)
|
$
|
679,211
|
||||||||
Internally developed software
|
3.1
|
1,600
|
(597
|
)
|
1,003
|
|||||||||||
Trade names - finite-lived
|
1.0
|
9,500
|
(7,664
|
)
|
1,836
|
|||||||||||
Trade names - indefinite-lived
|
87,400
|
-
|
87,400
|
|||||||||||||
Total intangible assets
|
$
|
864,315
|
$
|
(94,865
|
)
|
$
|
769,450
|
December 31, 2022
|
||||||||||||||||
Weighted Average Useful Life
in Years
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
|||||||||||||
Customer relationships
|
16.5
|
$
|
766,081
|
$
|
(65,490
|
)
|
$
|
700,591
|
||||||||
Internally developed software
|
3.6
|
1,600
|
(437
|
)
|
1,163
|
|||||||||||
Trade names - finite-lived
|
1.2
|
9,500
|
(5,719
|
)
|
3,781
|
|||||||||||
Trade names - indefinite-lived
|
87,400
|
-
|
87,400
|
|||||||||||||
Total intangible assets
|
$
|
864,581
|
$
|
(71,646
|
)
|
$
|
792,935
|
Remainder of 2023
|
$
|
22,830
|
||
2024
|
44,117
|
|||
2025
|
43,325
|
|||
2026
|
43,208
|
|||
2027
|
43,005
|
|||
Thereafter
|
485,565
|
|||
$
|
682,050
|
6. |
Long-Term Debt
|
June 30, 2023
|
December 31, 2022
|
|||||||
Term loan
|
$
|
1,190,159
|
$
|
1,132,210
|
||||
Subordinated term loan
|
245,000
|
245,000
|
||||||
Finance leases of equipment
|
14,348
|
15,590
|
||||||
Total debt
|
1,449,507
|
1,392,800
|
||||||
Deferred financing costs, net
|
(25,997
|
)
|
(29,105
|
)
|
||||
Total debt
|
1,423,510
|
1,363,695
|
||||||
Less: current portion
|
(16,837
|
)
|
(16,563
|
)
|
||||
Total long-term debt, net of current portion
|
$
|
1,406,673
|
$
|
1,347,132
|
Remainder of 2023
|
$
|
6,052
|
||
2024
|
12,102
|
|||
2025
|
12,102
|
|||
2026
|
1,159,903
|
|||
2027
|
245,000
|
|||
Thereafter
|
-
|
|||
$
|
1,435,159
|
7. |
Commitments and Contingencies
|
8. |
Fair Value of Financial Instruments
|
Balance at January 1, 2023
|
$
|
96,649
|
||
Fair value changes included in change in fair value of contingent consideration liability
|
12,320
|
|||
Payments of contingent consideration
|
(42,064
|
)
|
||
Balance at June 30, 2023
|
$
|
66,905
|
9. |
Income Taxes
|
10. |
Related Parties
|
11. |
Subsequent Events
|