Acquisition of Interstate Distributor Co. (Notes)

9 Months Ended

Sep. 30, 2017

Interstate Distributor Co. Acquisition [Abstract]

Business Combination Disclosure [Text Block]

Acquisition of Interstate Distributor Co.

On July 6, 2017, Heartland Express Inc., of Iowa, (the "Buyer"), a wholly owned subsidiary of the "Company”, acquired IDC, a Washington corporation, for $94.0 million payable in cash, net of approximately $6.3 million of cash acquired. We believe the acquisition of IDC allowed us to grow our base of drivers and enhance our supporting staff of employees, expand and diversify our customer base, and improve our operating network of terminal facilities. In accordance with Internal Revenue Code Section 1361(b)(3)(C)(ii)(I) and (II), the transaction will be treated for tax purposes as a sale of the assets of IDC by the seller to the Buyer, immediately followed by the Buyer’s contribution of such assets to IDC under Internal Revenue Code Section 351. The Stock Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions. IDC was subsequently merged into the Buyer effective October 1, 2017.

The results of the acquired business have been included in the consolidated financial statements since the date of acquisition and represented 20.3% of consolidated total assets as of September 30, 2017, and represented 33.0% and 13.6% of operating revenue for the three and nine months ended September 30, 2017, respectively. Acquisition related expenses of $0.5 million and $0.9 million are included in the consolidated statement of comprehensive income for the three and nine months ended September 30, 2017, respectively.

The following unaudited pro forma consolidated results of operations for the year ended December 31, 2016 and nine months ended September 30, 2017 assume that the acquisition of IDC occurred as of January 1, 2016.

	Year ended		Nine months ended
	December 31, 2016		September 30, 2017
	(in thousands)
Operating revenue	$	938,007	$	590,794
Net income	$	54,222	$	34,148

These 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 periods presented or that may be obtained in the future.

The allocation of the purchase price is detailed in the tables below. The final purchase price allocation remains subject to other purchase accounting adjustments which may be identified, such as the final valuation of intangible assets, working capital adjustments, and income taxes, and therefore may differ materially from that reflected below. The goodwill recognized represents expected synergies from combining the operations of the Company with IDC, as well as other intangible assets that did not meet the criteria for separate recognition. All goodwill recognized in the transaction is deductible for tax purposes over 15 years.

ALLOCATION OF PURCHASE PRICE	(in thousands)
Cash paid (before netting $6.3 million cash acquired)			$	93,951
Allocated to:
Historical book value of IDC's assets and liabilities, net of cash acquired	83,903
Adjustments to recognize assets and liabilities at acquisition-date fair value:
Property, plant, and equipment	(33,349	)
Other assets	(2,822	)
Liabilities	9,546
Fair value of tangible net assets acquired			57,278
Identifiable intangibles at acquisition-date fair value			4,700
Excess of consideration transferred over the net amount of assets and liabilities recognized (goodwill)			31,973

Excess of consideration transferred over the net amount of assets and liabilities recognized, (goodwill), remains subject to other purchase accounting adjustments, which may be identified, such as the final valuation of intangible assets, and therefore may differ materially from that set forth herein.

The assets and liabilities associated with IDC were recorded at their fair values as of the acquisition date and the amounts are as follows:

	(in thousands)
Cash and cash equivalents	$	6,316
Trade and other accounts receivable	35,131
Other current assets	3,333
Property and equipment	71,964
Other non-current assets	1,244
Intangible assets	4,700
Goodwill	31,973
Total assets	154,661
Accounts payable, accrued expenses, and current portion of long-term debt	(31,884		)
Insurance accruals	(10,826		)
Long-term debt	(17,404		)
Other accruals	(596		)
Total consideration transferred	$	93,951

TOTAL PURCHASE PRICE CONSIDERATION	(in thousands)
Cash paid pursuant to Stock Purchase Agreement	$	93,951
Cash acquired included in historical book value of IDC assets and liabilities	(6,316		)
Net cash paid	$	87,635