ACQUISITION OF DAVIS TRANSFER COMPANY

12 Months Ended

Dec. 31, 2019

ACQUISITION OF DAVIS TRANSFER COMPANY

ACQUISITION OF DAVIS TRANSFER COMPANY

NOTE 4. ACQUISITION OF DAVIS TRANSFER COMPANY

On October 18, 2018, USA Truck Inc. acquired 100% of the outstanding equity of Davis Transfer Company for $52.56 million in cash and $0.75 million in Company stock.  The acquisition of Davis Transfer Company allowed us to grow our base of drivers, expand and diversify our customer base, and improve our operating network of terminal facilities.  The purchase price was subject to a customary working capital adjustment post-closing.  The equity purchase agreement includes an agreement to execute an Internal Revenue Code Section 338(h)(10) election.  As a result, the acquisition of Davis was treated as an asset acquisition for income tax purposes and the $5.2 million in goodwill acquired was deductible for tax purposes.  Acquisition related expenses of $0.6 million were included in “Other, net” expenses line item in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2018.

The following unaudited pro forma financial information for the year ended December 31, 2018 assumes that the Davis Transfer Company acquisition occurred as of January 1, 2018.  Pro forma adjustments reflected in the financial information below relate to accounting policy changes such as changes in depreciation expense of revenue equipment, amortization of intangible assets, and accounting for certain operations and maintenance costs, along with other adjustments for terminal rent expense to align Davis Transfer Company results with those of the Company and income tax effects for the periods presented.

	Year Ended December 31,
	2018
	(in thousands)
Operating revenue	$	575,226
Net income		15,709

These unaudited pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred at the beginning of the period presented or that may be obtained in the future.

The following table summarizes the final fair value of the assets acquired and liabilities assumed at the closing date of the Davis Transfer Company acquisition.  A working capital adjustment of $0.3 million was recorded during 2019, which affected goodwill and the total cash consideration paid.  

	(in thousands)
Cash	$	810
Accounts receivable		4,582
Other current assets		1,036
Property and equipment		25,604
Intangible assets		18,040
Goodwill		5,231
Total assets		55,303
Accounts payable and accrued expenses		(1,581)
Insurance accruals		(417)
Total consideration transferred	$	53,305
Total Purchase Price Consideration
Cash paid		52,555
Stock granted		750
Total consideration	$	53,305
Net cash paid	$	51,745