Millis Transfer Acquistion (Notes)

Aug. 26, 2019

Business Combination Disclosure [Text Block]

Note 6. Acquisition of Millis Transfer

On August 26, 2019, Heartland Express, Inc. of Iowa (the “Buyer”) and Heartland Express, Inc., as guarantor, entered into an Acquisition and Merger Agreement with Midwest Holding Group, Inc. and Millis Real Estate Leasing, LLC (together, "Millis Transfer"). Millis Transfer is a truckload carrier headquartered in Black River Falls, Wisconsin, providing asset-based dry van truckload transportation services, including local, regional, and dedicated services.

Pursuant to the Acquisition and Merger Agreement, the Buyer acquired all of Millis Transfer’s outstanding equity (the “Transaction”). The Buyer paid $156.2 million of total consideration, including cash, restricted shares of the Company's common stock, and assumed indebtedness of Millis Transfer.

Total cash paid and common stock issued of $62.9 million was funded out of the Company’s available cash and restricted shares of the Company's common stock issued from treasury stock. The transaction included the assumption of $93.3 million of Millis Transfer's indebtedness of which $53.5 million was outstanding at September 30, 2019. Heartland expects to pay off the remaining debt by December 31, 2019. The Acquisition and Merger Agreement contains customary representations, warranties, covenants, escrow, and indemnification provisions.

The results of the acquired business have been included in the consolidated financial statements since the date of acquisition and represented 19.6% of consolidated total assets as of September 30, 2019, and represented 10.6% and 3.6% of operating revenue for the three and nine months ended September 30, 2019, respectively. Acquisition related expenses of $0.4 million and $0.5 million are included in the consolidated statement of comprehensive income for the three and nine months ended September 30, 2019, respectively.

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 Millis Transfer, as well as other intangible assets that did not meet the criteria for separate recognition. Goodwill and intangible assets recognized in the transaction are not deductible for tax purposes.

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



	(in thousands)
Trade and other accounts receivable	$	14,574
Other current assets	1,696
Property and equipment	121,151
Other non-current assets	802
Intangible assets	15,300
Goodwill	32,611
Total assets	186,134
Accounts payable, accrued expenses, and current portion of long-term debt	(30,381		)
Insurance accruals	(4,871		)
Long-term debt	(70,191		)
Deferred taxes	(17,814		)
Total cash paid and common stock issued	$	62,877



TOTAL PURCHASE PRICE CONSIDERATION	(in thousands)
Cash paid pursuant to the Acquisition and Merger Agreement	$	62,127
Common stock issued pursuant to the Acquisition and Merger Agreement	750
Total cash paid and common stock issued	$	62,877