Transaction tax

Heartland Express acquires Smith Transport, Inc. and

NORTH LIBERTY, Iowa, June 01, 2022 (GLOBE NEWSWIRE) — Heartland Express, Inc. (NASDAQ:HTLD) (“Heartland”), one of North America’s largest and most profitable truckload companies, today announced that it has acquired 100% of the capital of truckload carrier Smith Transport, Inc. dry vans and related entities (“Smith”), for an aggregate value of approximately $170 million.

Heartland Comments

Michael Gerdin, Chairman, President and CEO of Heartland Express, said, “We are proud to welcome Smith employees, customers and the Smith brand to the Heartland Express family. We are extremely happy to have on board a company with a rich tradition of trucking for over forty years. It is truly an honor to have Smith Transport join our team. The Smith Companies will continue to operate from Roaring Spring, Pennsylvania under the leadership of Todd Smith, President, with continued support from Founder and Legend Barry Smith. We were attracted to this opportunity for three main reasons: the safe and experienced professional drivers, the high level of service offered to a blue chip clientele and the depth of management that demonstrates the ability to continue to operate independently and profitably. . Our plan is to keep Smith the same business attractive to customers, drivers and other staff, while using our scale to deliver better shopping, more depth and beneficial cost savings. Our trucking experience runs deep at every level with long-time Heartland employees, the knowledge and experience of our Millis management, and now adding the Smith attributes to the team. This makes us even stronger as a combined company. The purchase price was funded with existing cash, and the addition of Smith should be immediately accretive to our earnings per share.

About Smith

Founded in 1982, Smith Transport is an asset-based truckload carrier headquartered in Roaring Spring, Pennsylvania, with terminals in Pennsylvania, Georgia and Indiana. Smith primarily provides dry van transportation and other specialty services in the Eastern United States. Smith’s customer base includes many Fortune 500 companies, including expedited transportation integrators, retailers, beverage manufacturers and home supply companies, many of whom have been customers for over 20 years. Smith operates a fleet of around 850 company tractors, with an average age of less than three years, and around 2,000 dry box trailers. The modern fleet should not require off-cycle investment.

Todd Smith, President of Smith, said, “As an employee-owned company, our goal was to find the best value and the best home for our employees for years to come. We’ve long thought Heartland was a great choice because of its regional presence, respect for professional drivers, and unparalleled customer service that reflects our own philosophies. With the ability to pay cash and invest in our headquarters, and Smith’s desire to remain an independent brand operated by the same people, the choice was clear. I’m thrilled to be working with Mike Gerdin and the Heartland team to make this a success for everyone.

Barry Smith, Founder and Chairman Emeritus of Smith said, “Building Smith Transport has been my life’s work, and I couldn’t have found a better home than Heartland for the Smith family. They provide us with long-term stability and the opportunity to grow into an industry leader, while maintaining our own culture and identity. I look forward to being part of the team to ensure a smooth transition.

About the operation

Heartland acquired 100% of the shares of Smith and related companies for a cash-free, debt-free enterprise value of approximately $170 million. Smith was an S corporation for tax purposes, and the transaction included an election under Section 338(h)(10) of the Internal Revenue Code, resulting in tax deduction benefits over periods of one to fifteen years. The purchase contract contains the usual terms and conditions. The Roaring Spring, Pennsylvania property was acquired from its owners in a separate transaction for $14 million in cash and includes both the trucking terminal and 375,000 square feet of retail space. storage rented to tenants. The enterprise value of the transaction, including real estate, reflected approximately 5x EBITDA adjusted to the estimated run rate and 8x operating profit adjusted to the estimated run rate. (1)

Advisors

Scudder Law Firm, PC, LLO served as M&A transaction and legal counsel to Heartland, while Utz & Lattan, LLC served as special ESOP counsel to Heartland. Smith’s financial advisor was Butcher Joseph & Co. Morgan, Lewis & Bockius LLP served as transaction advisor and McGuireWoods served as special advisor to Smith. Moore & Van Allen PLLC acted as counsel to the ESOP trustee.

About Heartland

Heartland Express, Inc. is an irregular route truckload carrier based in North Liberty, Iowa, serving customers with shipping lanes throughout the United States. Heartland focuses on medium-to-short regional freight, providing shippers with industry-leading on-time service so they can achieve their strategic goals for their customers. Since its initial public offering in 1986, Heartland has grown from approximately $20 million in revenue to one of North America’s largest, most profitable and best capitalized truckload carriers. Heartland has been recognized 18 times by Forbes magazine as one of America’s 200 Best Small Businesses, 17 times as one of America’s Best Truckload Carriers by Logistics Management magazine, and one of America’s Most Trusted in America by Newsweek magazine in 2022 More information about Heartland can be found on the company’s website at www.heartlandexpress.com.

(1) The terms “adjusted operating income” and “adjusted EBITDA”, as we define them, are not presented in accordance with GAAP. Our calculation adds the after-tax impact of amortization of intangible assets and certain other unusual items, including the excess gain on sale of equipment due to a strong used equipment market, and a substantial accrual for ESOP and other stock-linked compensation plans to reflect the value of the transaction. EBITDA is defined as net profit (loss) before interest, income taxes, depreciation and amortization. These financial measures supplement our GAAP results by evaluating certain aspects of our business, including the transaction. We believe that using these measures enhances comparability because they remove the impact of items that we believe do not reflect core operating performance. We believe that our presentation of these non-GAAP financial measures is helpful because it provides investors and securities analysts with the same information that we have used internally to assess transaction and operating performance. Smith’s base. Adjusted Operating Income and Adjusted EBITDA are not a substitute for their comparable GAAP financial measures, such as EPS, net income or other measures prescribed by GAAP. There are limitations on the use of non-GAAP financial measures. Although we believe they improve comparability in analyzing performance, they may limit comparability with other companies in our industry if those companies define these measures differently. Because of these limitations, our non-GAAP financial measures should not be considered measures of the income or discretionary cash available to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis. We cannot prospectively estimate the impact of certain income and expense items on run-rate-adjusted operating income or run-rate-adjusted EBITDA because these items , which could be significant, may be infrequent, are difficult to predict and may be highly variable. Accordingly, we do not provide a corresponding GAAP measure or a reconciliation to our estimate of such measures.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements can generally be identified by words such as “anticipates”, “believes”, “estimates”, “plans”, “projects”, “expects”, “hopes”, “intends”. , “will”, “could”, “may”, and terms of similar substance. In this press release, forward-looking statements cover matters such as expected earnings accretion, earnings operating and other financial measures, cost savings and other synergies, fleet age, operating plans and future operations. Forward-looking statements are based on the current beliefs and expectations of Heartland’s management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ. materially from those set forth in, contemplated by or underlying the forward-looking statements. Therefore, actual results may differ from those set forth in the forward-looking statements. Readers should review and consider the factors that could affect future results and other information disclosed by Heartland in its press releases, shareholder reports, annual report on Form 10-K and other filings with of the Securities and Exchange Commission. Heartland disclaims any obligation to update or revise any forward-looking statements to reflect actual results or changes in factors affecting the forward-looking information.