Schneider National Inc

2. ACQUISITIONS

M&M Transport Services, LLC

On August 1, 2023 (“Acquisition Date”), we acquired 100% of the membership interest in M&M for $243.8 million, inclusive of cash and other working capital adjustments. M&M is a dedicated trucking company located primarily in New England with nearly 500 tractors and 1,900 trailers which we believe complements our dedicated operations.

The acquisition of M&M was accounted for under the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized on the consolidated balance sheets at their fair value as of the Acquisition Date. Fair value estimates of acquired transportation equipment were based on an independent appraisal, giving consideration to the highest and best use of the assets with key assumptions based on the market approach. These inputs represent Level 3 measurements in the fair value hierarchy and required significant judgments and estimates at the time of valuation. The assistance of an independent third-party valuation firm was used to determine the estimated fair values and useful lives of finite-lived intangible assets including customer relationships and trademarks. Valuation methods used were the multi-period excess earnings method and relief from royalty method for customer relationships and trademarks, respectively. Non-compete agreements were recorded based on the amount paid at closing.

The excess of the purchase price over the estimated fair values of assets acquired and liabilities assumed was recorded as goodwill within the Truckload segment. The goodwill is attributable to expected synergies and growth opportunities within our dedicated business and is expected to be deductible for tax purposes.

Acquisition-related costs, which consist of fees incurred for advisory, legal, and accounting services were $0.9 million and were included in other general expenses in the Company’s consolidated statements of comprehensive income for the period ended December 31, 2023.

Certain amounts recorded in connection with the acquisition are still considered preliminary as we continue to gather the necessary information to finalize our fair value estimates and provisional amounts. Provisional amounts include items related to indemnification assets and liabilities and deferred taxes.

During the measurement period, which is up to one year from the acquisition date, we may adjust provisional amounts that were recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date. We anticipate finalizing the determination of fair value no later than July 31, 2024.

The preliminary purchase price allocation for M&M, which may be adjusted as we finalize our fair value estimates and provisional amounts, was as follows:

The above adjustments made during the measurement period were primarily related to working capital, accrued taxes, and intangible assets.

The following unaudited pro forma revenues give effect to the acquisition had it been effective January 1, 2021. Combined unaudited pro forma operating revenues of the Company and M&M would have been approximately $5,569.6 million during the year ended December 31, 2023, $6,729.6 million during the year ended December 31, 2022, and $5,720.5 million during the year ended December 31, 2021, and our earnings for the same periods would not have been materially different.

deBoer Transportation, Inc.

We entered into a Securities Purchase Agreement, dated June 7, 2022, to acquire 100% of the outstanding equity of deBoer, a regional, dedicated carrier headquartered in Blenker, WI. The acquisition provided Schneider the opportunity to expand our tractor and trailer fleet primarily within our dedicated Truckload operations, as well as our company driver capacity. During the second half of 2022, the Company successfully transitioned equipment and employees from deBoer to Schneider, deBoer operations ceased, and equipment and drivers were deployed primarily within our Truckload segment.

The aggregate purchase price of the acquisition was approximately $34.6 million inclusive of certain cash and net working capital adjustments, and the assets acquired consisted primarily of rolling stock. The acquisition was accounted for under the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized on the consolidated balance sheets at their fair values as of the acquisition date. The fair values of net assets acquired were determined using Level 3 inputs, and the excess of the purchase price over the estimated fair value of the net assets resulted in $7.7 million of goodwill being recorded within the Truckload segment at the time of acquisition. Following the acquisition, purchase price adjustments of $1.6 million were made relating to deferred taxes and certain working capital amounts resulting in an adjusted goodwill balance of $6.1 million as of December 31, 2022.

Acquisition-related costs, which consisted of fees incurred for advisory, legal, and accounting services, were $0.3 million and were included in other general expenses in the Company’s consolidated statements of comprehensive income for the period ended December 31, 2022.

Operating results for deBoer are included in our consolidated results of operations from the acquisition date. Pro forma information for this acquisition is not provided as it did not have a material impact on the Company’s consolidated operating results.

Midwest Logistics Systems, Ltd.

We entered into a Securities Purchase Agreement, dated December 31, 2021, to acquire 100% of the outstanding equity of MLS, a dedicated trucking company based in Celina, OH, and certain affiliated entities holding assets comprising substantially all of MLS’s business. MLS is a premier dedicated carrier in the central U.S. that we believe complements our growing dedicated operations.

The aggregate purchase price of the acquisition was approximately $268.8 million inclusive of $5.7 million in net working capital and other post-acquisition adjustments received in 2022 and a deferred payment of $3.2 million made in January 2022. Proceeds from the total purchase consideration were used to settle $26.9 million of MLS’s outstanding debt as of the acquisition date.

The acquisition of MLS was accounted for under the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized on the consolidated balance sheets at their fair values as of the acquisition date. These inputs represent Level 3 measurements in the fair value hierarchy and required significant judgments and estimates at the time of valuation. Fair value estimates of acquired property and equipment were based on an independent appraisal, giving consideration to the highest and best use of the assets. Key assumptions used in the transportation equipment appraisals were based on the market approach, while key assumptions used in the land, buildings and improvements, and other property and equipment appraisals were based on a combination of the income (direct capitalization) and sales comparison approaches, as appropriate.

The excess of the purchase price over the estimated fair values of assets acquired and liabilities assumed was recorded as goodwill within the Truckload segment. The goodwill is attributable to expected synergies and growth opportunities within our dedicated business and is expected to be deductible for tax purposes.

Acquisition-related costs, which consisted of fees incurred for advisory, legal, and accounting services, were $1.9 million and were included in other general expenses in the Company’s consolidated statements of comprehensive income for the period ended December 31, 2021.

The following table summarizes the purchase price allocation for MLS, including any adjustments during the measurement period.

The above adjustments made during the measurement period ended December 31, 2022 were primarily related to working capital, property and equipment, leases, claims accruals, deferred taxes, and intangible assets. The fair values of identifiable intangible assets, including customer relationships and trademarks, were based on valuations using income-based approaches and Level 3 inputs. No material statement of comprehensive income effects were identified with these adjustments.

Combined unaudited pro forma operating revenues of the Company and MLS would have been approximately $5,816.0 million for the year ended December 31, 2021 and our earnings for the same period would not have been materially different.