8-K
HEARTLAND EXPRESS INC (HTLD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 20, 2022
HEARTLAND EXPRESS, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 000-15087 | 93-0926999 | |
|---|---|---|---|
| (State of other Jurisdiction | (Commission | (IRS Employer | |
| of Incorporation) | File Number) | Identification No.) | |
| 901 HEARTLAND WAY, NORTH LIBERTY, IA | 52317 | ||
| --- | --- | ||
| (Address of Principal Executive Offices) | (Zip Code) | (319) 626-3600 | |
| --- | |||
| Registrant's Telephone Number (including area code): |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | HTLD | NASDAQ |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. Entry into a Material Definitive Agreement.
On August 21, 2022, Heartland Express, Inc., a Nevada corporation (the “Company”), and Heartland Express, Inc. of Iowa, an Iowa corporation (the “Buyer”), entered into a Stock Purchase Agreement (the “Agreement”) with TForce US Holdco, Inc., a Delaware corporation (“Seller Parent”), and TForce TL Holdings USA, Inc., a Delaware corporation (the “Seller”), to acquire Transportation Resources, Inc., a Missouri corporation (“TRI”) (such acquisition the “Transaction”). Seller Parent and Seller are subsidiaries of TFI International, Inc. (“TFI”). TRI operates as Contract Freighters, Inc. (“CFI”) and the Transaction includes all of TFI’s non-dedicated U.S. dry van and temperature-controlled truckload business, in addition to its CFI Logistica operations in Mexico. The term CFI does not include the CFI Dedicated or CFI Logistics U.S. brokerage operations, which are not part of the Transaction.
Pursuant to the Agreement, at closing, the Buyer will acquire all of the equity of TRI for an enterprise value of approximately $525 million in cash, subject to certain customary adjustments specified in the Agreement, including for working capital, cash, indebtedness, transaction expenses, and a claims reserve amount.
The Transaction is expected to close in the third quarter of 2022, subject to the satisfaction of closing conditions, including (i) the accuracy of the applicable counterparty’s representations and warranties in the Agreement, subject to certain exceptions and materiality thresholds, (ii) the applicable counterparty’s performance or compliance in all material respects with the covenants contained in the Agreement, (iii) each counterparty being ready to deliver specified closing deliveries, (iv) the absence of a Material Adverse Effect (as defined in the Agreement), (v) the satisfaction of all regulatory requirements, (vi) the absence of certain legal matters prohibiting the Transaction, and (vii) certain conditions regarding the financing of the Transaction.
The Agreement contains customary representations, warranties, and covenants by each party that are subject, in some cases, to specified exceptions and qualifications contained in the Agreement. The Agreement also includes customary indemnification provisions, including with respect to breaches of representations, warranties, and covenants and, in the case of Seller and Seller Parent, certain taxes incurred prior to closing and any cash, current assets or liabilities, indebtedness, transactions expenses, or claims reserve amount not taken into account in the calculation of the final purchase price.
The Agreement contains termination rights for the Buyer and the Seller, including if the Transaction is not consummated within 60 days after the date of the Agreement, which may be extended under the terms of the Agreement.
The foregoing description of the Agreement and the Transaction does not purport to be complete and is qualified in its entirety by reference to the Agreement, a copy of which will be filed with the Company’s periodic report for the applicable period.
Item 7.01. Regulation FD Disclosure.
On August 22, 2022, the Company issued a press release announcing the execution of the Agreement. A copy of the press release, as well as the presentation related to the Transaction, are attached hereto as Exhibit 99.1 and Exhibit 99.2, and are each incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| EXHIBIT | |
|---|---|
| NUMBER | EXHIBIT DESCRIPTION |
| 99.1 | Heartland Express, Inc. press release dated August 22, 2022 |
| 99.2 | Heartland Express, Inc. investor presentation |
| 104 | Cover Page Interactive Data File |
The information contained in Items 7.01 and 9.01 and the exhibits hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act:”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
The information contained in Items 1.01, 7.01, and 9.01 of this report and the exhibits hereto may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such statements are made based on the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results or events may differ from those anticipated by forward-looking statements. Please refer to various disclosures by the Company in its press releases, stockholder reports, and filings with the Securities and Exchange Commission for information concerning risk, uncertainties, and other factors that may affect future results.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized.
| HEARTLAND EXPRESS, INC. | ||
|---|---|---|
| Date: | August 22, 2022 | By:/s/Christopher A. Strain |
| Christopher A. Strain | ||
| Vice President-Finance, | ||
| Treasurer and Chief Financial Officer |
EXHIBIT INDEX
| EXHIBIT | |
|---|---|
| NUMBER | EXHIBIT DESCRIPTION |
| 99.1 | Heartland Express, Inc. press release dated August 20, 2022 |
| 99.2 | Heartland Express, Inc. investor presentation |
| 104 | Cover Page Interactive Data File |
Document
Exhibit 99.1
HEARTLAND EXPRESS TO ACQUIRE CONTRACT FREIGHTERS TRUCKLOAD BUSINESS FOR $525 MILLION
NORTH LIBERTY, IA – August 22, 2022 – Heartland Express, Inc. (NASDAQ: HTLD) (“Heartland”) announced today that it will acquire the Contract Freighters non-dedicated U.S. dry van and temperature-controlled truckload business and CFI Logistica operations in Mexico (“CFI”) from TFI International, Inc. (NYSE: TFII) (“TFI”), for a cash enterprise value of $525 million, subject to certain adjustments. The term CFI does not include the CFI Dedicated or CFI Logistics U.S. brokerage operations (“TFI Retained Operations”), which are not part of the transaction.
Highlights
•Acquisition will be Heartland Express’ largest, adding CFI’s storied brand, talented team, and cross-border expertise; CFI to continue under its existing brand, management, and terminal locations
•Company will be the 8th largest truckload fleet and 3rd largest irregular route, asset-based truckload carrier in the U.S., with estimated annual pro forma total revenue of approximately $1.3 billion and estimated annual operating cash flow of approximately $260.0 million, as well as estimated pro forma total assets nearing $2.0 billion as of June 30, 2022(1)
•Operating plan anticipates consolidated adjusted operating ratio(2) of 85% or better within three years and repayment of all indebtedness within four years after closing
•Transaction is expected to be immediately accretive to earnings excluding transaction costs
•Transaction value anticipated to be funded with existing cash and borrowing under new $550 million revolving and term loan agreement
Heartland Comments
Michael Gerdin, Chairman, President, and CEO of Heartland Express, commented: “We are thrilled to welcome CFI to the Heartland Express family of companies, where it will continue to operate from Joplin under its own brand and current leadership team. CFI has exactly what we look for as we expand – significant scale, a respected and recognizable brand, capable management, safe and experienced drivers, a strong asset base, and a complementary terminal network. CFI’s strengths in the north-south midwestern corridor will add to our driver and customer capability, and their cross-border expertise will help us capitalize on the expected long-term freight volume benefits of nearshoring activity by manufacturers. At the same time, we can offer the CFI people a home that is entirely focused on their core – high-service, irregular route, asset-based truckload freight transportation. Over time, we expect to gain meaningful synergies and operate our consolidated business on a larger scale at our historical margins.”
TFI Comments
Alain Bédard, Chairman, CEO, and President of TFI, said: “This transaction is a true “win-win-win” for TFI, for CFI, and for Heartland Express. CFI is a great company, but the U.S. irregular route truckload business has become a small part of our portfolio. CFI’s people have been a small part of big companies for the past 15 years, and we wanted to find them a permanent home with a leader in the asset-based truckload industry to show what they can accomplish. Heartland Express is a truckload industry leader, and they respect and support CFI’s brand, leadership, and drivers. Mike Gerdin and I were able to quickly see the benefits to all parties and come to fair terms. We could not have found a better match culturally and financially for this transaction, which will afford CFI the opportunity to flourish and allow us to redeploy capital and focus our U.S. based efforts on LTL, asset-light logistics, and specialized truckload units. We expect a smooth path to closing and wish our colleagues at CFI and Heartland Express only the best.”
About CFI
Headquartered in Joplin, Missouri, CFI provides dry van and temperature-controlled truckload services to major customers throughout the U.S. and into Mexico and Canada. CFI was a pioneer in the cross-border Mexican logistics arena and remains one of the sector’s largest and most respected supply chain partners, with operations at five major entry points from California through Texas. CFI Logistica provides asset-light truckload and less-than-truckload services in Mexico, in particular serving as a distribution partner for several large U.S. LTL companies.
CFI owns its headquarters which covers approximately 200 acres in Joplin, along with strategically located facilities in Laredo, TX, West Memphis, AR, Taylor, MI, Sanford, FL, and Nuevo Laredo, Tamaulipas, Mexico. These six locations will be acquired by Heartland and bring the total to 30 owned terminals across the U.S. and Mexico.
Approximately 2,100 tractors and 8,000 dry van and temperature-controlled trailers. All tractors and trailers are owned except 93 tractors and 136 trailers. In addition, CFI contracts with approximately 250 independent contractors who provide their own tractors.
About the Transaction
The enterprise value of the transaction is $525 million calculated on a cash-free, debt-free basis and subject to certain adjustments. Under the purchase agreement, Heartland Express will acquire 100% of the equity of Transportation Resources, Inc., the parent of Contract Freighters, Inc. and the Mexican entities comprising CFI Logistica. The purchase agreement contains customary terms and conditions, including regulatory approval, as well as purchase price adjustments for net working capital and retention by TFI of liability for all of CFI’s pre-closing auto and workers’ compensation claims. The transaction is expected to close in the third quarter of 2022 and be immediately accretive to earnings per share.
For the twelve months ended June 30, 2022, CFI generated approximately $575 million in total revenue. Heartland Express estimates the enterprise value approximates 5x run rate adjusted EBITDA.(2) The referenced period includes seven months of operations of the former D&D Sexton, certain costs associated with supporting the administrative functions of the TFI Retained Operations that will be phased out over time, the integration and subsequent exit of certain the TFI Retained Operations, and significant gains from selling excess equipment. Accordingly, this estimate is preliminary and subject to the completion of the carve-out audit of CFI’s historical operations, the completion of purchase accounting adjustments, the wind-down and replacement of transition services, and other factors. Actual results following a closing are likely to differ from this preliminary estimate.
Operating Plan and Synergies
Mr. Gerdin commented, “CFI will continue to operate from Joplin under its current leadership team and famous brand. Our first goal is to minimize changes experienced by drivers and customers. Next, we will work with CFI’s management to optimize the consolidated freight networks across Heartland Express, Millis Transfer, Smith Transport, and CFI, as well as enhance driver recruiting and retention, realize purchasing economies, and reduce overhead per truck. We believe CFI’s drivers will benefit from our extensive owned terminal network, in which we have invested millions of dollars to improve our drivers’ experience. As with every acquisition, our plan is to capitalize on each other’s strengths and improve consolidated profitability. Our goal is for our consolidated adjusted operating ratio(2) to be 85.0% or below within three years after the closing.”
Pro Forma Heartland Express
The acquisition of CFI, together with the recent Smith Transport acquisition, will make the consolidated Heartland Express group the 8th largest truckload fleet in the U.S. and 3rd largest based on irregular route, asset-based truckload carrier in the U.S. Pro forma expectations(1) include the following:
•Estimated annual total revenue of approximately $1.3 billion and estimated annual operating cash flow of approximately $260.0 million, as well as estimated total assets nearing $2.0 billion as of June 30, 2022.
•Approximately 5,550 tractors (including approximately 250 independent contractors) with an average age of approximately 2.0 years and approximately 17,800 trailers with an average age of approximately 5.6 years, substantially all owned.
•30 owned facilities, strategically located near almost every major population and freight center in the U.S., with significant opportunities to reduce leased facilities and improve the driver experience.
•Diversified freight basket with over 95% contracted capacity and no single customer expected to be greater than 8% of revenue.
Financing
The transaction and related expenses will be funded using a combination of balance sheet cash and borrowing under a new $550 million credit agreement to be entered into at closing of the transaction. The credit agreement is expected to include a $100 million revolving credit availability and up to $450 million in term loans. The credit facility will be unsecured, mature in five years, and contain customary terms and conditions, including financial covenants. Heartland has received commitments to fund the facility from a consortium of lenders, including joint bookrunners JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A. Immediately after the closing, Heartland expects to have a net leverage ratio of approximately 1.25x and approximately $160 million of cash and available borrowing under the credit facility.(3)
Investor Conference Call Information
Heartland will hold a conference call today at 10:00 AM CDT, to discuss the transaction. Interested participants and investors are encouraged to dial in at least 5 minutes early to ensure on-time admittance to the call. The dial in details are as follows:
Participant US Local / Intl 1: +1 (929) 272-1574
Participant US Local / Intl 2: +1 (857) 999-3259
Participant US Toll Free: +1 (800) 528-1066
Conference ID: 5699
Additionally, presentation materials will be available on Deal Roadshow as follows:
URL: https://dealroadshow.com
Entry Code: HTLD2022
Direct Link: https://dealroadshow.com/e/HTLD2022
Advisors
Scudder Law Firm, P.C., L.L.O. serves as transaction and legal advisor to Heartland.
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 through its brands Heartland Express, Millis Transfer, Smith Transport, and after closing,
CFI. Heartland focuses on medium to short haul regional freight, offering shippers industry-leading on-time service so they can achieve their strategic goals. 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 the Top 200 Best Small Companies in America, as well as being ranked by Logistics Management Magazine 18 out of the last 20 years as one of the Best Truckload Carriers in America. Heartland was also recognized as one of America’s Most Trustworthy Companies by Newsweek in 2022. More information about Heartland can be found on the company website at www.heartlandexpress.com.
Notes
(1) Pro forma expectations include a full year of CFI and affiliates, as well as Smith Transport and affiliates acquired on May 31, 2022. CFI’s financial results are accounted for under International Financial Reporting Standards (IFRS), consistent with TFI’s status as a foreign private issuer. Heartland expects to file carve-out audited annual and unaudited interim financial statements of CFI prepared in accordance with U.S. GAAP, and associated pro forma financial information, in the fourth quarter of 2022.
(2) The terms "adjusted operating ratio" and "adjusted EBITDA," as we define them, are not presented in accordance with GAAP. Our calculation (i) adds back the after-tax impact of intangible asset amortization, (ii) adds or subtracts certain other infrequent or unusual items, which may include, for example, gains or losses associated with the disposition of certain asset and certain transaction-related expenses, and which may vary over time, and (iii) calculates adjusted operating ratio as adjusted operating expenses less fuel surcharge revenue as a percentage of total revenue less fuel surcharge revenue. EBITDA is defined for this purpose as net income (loss) before interest, income taxes, depreciation, and amortization. These financial measures supplement our GAAP results in evaluating certain aspects of our business, including the transaction. We believe that using these measures improves comparability because they remove the impact of items that, in our opinion, do not reflect core operating performance. We believe our presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts the same information that we expect to use internally for purposes of assessing the transaction and our core operating performance. Adjusted operating ratio and adjusted EBITDA are not substitutes for their comparable GAAP financial measures, such as EPS, net income, or other measures prescribed by GAAP. There are limitations to using non-GAAP financial measures. Although we believe that they improve comparability in analyzing performance, they could limit comparability to 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 income or discretionary cash available to us 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 estimate on a forward-looking basis, the impact of certain income and expense items on run rate adjusted operating ratio or run rate adjusted EBITDA, because these items, which could be significant, may be infrequent, are difficult to predict, and may be highly variable. As a result, we do not provide a corresponding GAAP measure for, or reconciliation to, our estimate of these measures.
(3) Net leverage ratio is defined as the following, calculated with respect to Heartland and its subsidiaries on a consolidated basis: (a) total indebtedness minus up to $50 million of unrestricted cash, to (b) EBITDA for the most recently completed four consecutive fiscal quarters. For purposes of this ratio, “EBITDA” means net income, plus (a) interest expense, tax expense, depreciation and amortization, certain other noncash charges, expenses associated with the transaction described in this press release, and the projected amount of “run rate” cost and expense reductions related to such transaction, minus (b) certain non-cash gains.
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. Such 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 generally may be identified by words such as “anticipates,” “believes,” “estimates,” “plans,” “projects,” “expects,” “hopes,” “intends,” “will,” “would,” “can,” “could,” “may,” and terms and phrases of similar substance. In this press release, forward-looking statements cover matters such as expected closing dates, expected earnings accretion, estimated historical and pro forma financial information, estimated adjusted operating ratios and debt repayment, and predictions concerning other financial measures, synergies, operating plans, and future operations. Forward-looking statements are based upon 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. Accordingly, actual results may differ from those set forth in the forward-looking statements. Readers should review and consider the factors that may affect future results and other disclosures by Heartland in its press releases, stockholder reports, Annual Report on Form 10-K, and other filings
with the Securities and Exchange Commission. Heartland disclaims any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.
Contact: Michael Gerdin, Chief Executive Officer, or Chris Strain, Chief Financial Officer – (319) 645-7060
ex992investorpresentatio
Heartland Express to Acquire Contract Freighters Truckload August 22, 2022
Forward-Looking Statements This presentation 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. Such 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 generally may be identified by words such as “anticipates,” “believes,” “estimates,” “plans,” “projects,” “expects,” “hopes,” “intends,” “will,” “could,” “may,” and terms and phrases of similar substance. In this presentation, forward-looking statements cover matters such as expected closing dates, expected earnings accretion, estimated historical and pro forma financial information, estimated adjusted operating ratios and debt repayment, and predictions concerning other financial measures, synergies, operating plans, and future operations. Forward-looking statements are based upon the current beliefs and expectations of our 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. Accordingly, actual results may differ from those set forth in the forward-looking statements. Readers should review and consider the factors that may affect future results and other disclosures by Heartland in its press releases, stockholder reports, Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information. Non-GAAP Measures Adjusted operating expenses as set forth in the appendix is based upon operating expenses, net of fuel surcharge revenue and the gain on sale of a terminal property. Adjusted operating ratio as set forth in in the appendix is based upon operating expenses, net of fuel surcharge revenue and the gain on sale of terminal property, as a percentage of operating revenue excluding fuel surcharge revenue. Our estimate of run rate adjusted operating ratio also (i) adds back the after-tax impact of intangible asset amortization and (ii) adds or subtracts certain other infrequent or unusual items, which may include, for example, gains or losses associated with the disposition of certain asset and certain transaction-related expenses, and which may vary over time. These financial measures supplement our GAAP results in evaluating certain aspects of our business, including the transaction. We believe that using these measures improves comparability because they remove the impact of items that, in our opinion, do not reflect core operating performance. We believe our presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts the same information that we expect to use internally for purposes of assessing the transaction and our core operating performance. Adjusted operating expenses and adjusted operating ratio are not substitutes for operating expenses or operating ratio measured in accordance with GAAP. There are limitations to using non-GAAP financial measures. Although we believe that adjusted operating expenses and adjusted operating ratio improve comparability in analyzing our period-to-period performance, they could limit comparability to other companies in our industry if those companies define such measures differently. Because of these limitations, adjusted operating expenses, and adjusted operating ratio should not be considered measures of income generated by our business or discretionary cash available to us 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 estimate on a forward-looking basis, the impact of certain income and expense items on run rate adjusted operating ratio, because these items, which could be significant, may be infrequent, are difficult to predict, and may be highly variable. As a result, we do not provide a corresponding GAAP measure for, or reconciliation to, our estimate of run rate adjusted operating ratio. Special notices for forward-looking statements & non-GAAP measures 2
3 Compelling strategic rationale – Heartland + CFI Note: 1 All metrics PF for combination of Heartland, Smith and CFI; 2 Reflects revenue including fuel surcharge; 3 Pro forma for the Smith Transport and CFI acquisitions. Adjusted to include Smith results for the 11 months ended 5/31/2022 as the transaction closed on 5/31/2022 and June Smith results are included in Heartland reported figures; 4 Tractors includes owner operators NETWORK SYNERGIES AND OPTIMIZATION ◼ CFI’s strong north-south midwestern corridor and US-Mexico cross-border expertise capitalize on growing near-shoring volumes ◼ Network optimization and insourcing to Heartland’s own network SIGNIFICANT SCALE ADVANTAGE ◼ Formation of the 8th largest truckload player ◼ Creating the 3rd largest irregular route TL player ◼ Purchasing and administrative economies of scale ATTRACTIVE FINANCIAL CASE ◼ Transaction expected to be immediately accretive to EPS ◼ Consolidated adjusted operating ratio of 85.0% or below within three years after the closing ◼ Low pro forma net leverage of 1.25x with plan to repay all transaction indebtedness within four years after closing By the numbers1 $1,395mm LTM 6/30/2022 Revenue2,3 $260mm LTM 6/30/2022 Operating Cash Flow3 ~5,550 Tractors4 ~17,800 Trailers 30 Owned Facilities
4 Transaction overview PURCHASE PRICE ◼ Enterprise value of $525 million, plus cash, minus assumed debt, minus transaction expenses, plus retained pre-closing claims amount, plus or minus a working capital adjustment EXPECTED LEVERAGE ◼ Expected net leverage ratio of 1.25x immediate after closing ◼ Expect repayment of all transaction indebtedness within four years after closing STRUCTURE ◼ Purchase of 100% of the equity of Transportation Resources, Inc., the parent of Contract Freighters and the Mexican entities that make up CFI Logistica ◼ Contract Freighters non-dedicated U.S. dry van and temperature-controlled truckload businesses ◼ Transaction perimeter excludes CFI Dedicated business (historical Transport America and UPS Ground Freight dedicated truckload business) and CFI’s United States truckload brokerage business FINANCING ◼ Acquisition funded through mix of acquisition debt and cash on balance sheet ◼ ~$450 million 5-year Term Loan A ◼ ~$100 million cash from balance sheet ◼ ~$100 million new line of credit agreement (undrawn at close) EXPECTED EARNINGS ACCRETION ◼ Transaction is expected to be immediately accretive to earnings excluding transaction costs CLOSING ◼ Expected to close in the third quarter of 2022, subject to regulatory approval
5 CFI at a glance Key Stats (Est. July 2022 unless otherwise noted) CFI Truckload CFI Temp-Control CFI Logistics Brands Truckload Temp-Control Logistica Primary Services Over-The-Road Temp-Control Mexico: cross-border LTL, in-country TL LTM 6/30/2022 revenue (excl. FSC and eliminations) $409 million $36 million3 $31 million Top End Markets4 Geographies3 U.S. 100% - Mexico - 100% Retail (46%) Manufactured goods (21%) Transportation & Logistics (16%) Manufactured goods (26%) Transportation & Logistics (26%) Food & Beverage (42%) Manufactured goods (46%) Transportation & Logistics (36%) Food & Beverage (17%) 1 Excludes owner operators; 2 Represents LTM 6/30/2022; 3 Not pro forma, only includes D&D sexton revenue since November 2021; 4 Based on 2021 revenue mix Tractor count1 ~2,100 Trailer count ~8,000 Avg. length of haul ~800 miles Revenue2,3 $575mm ◼ Includes OTR operations of CFI, Transport America, D&D Sexton, and Midwest Coast, plus CFI Logistica ◼ Excludes the Dedicated operations of Transport America and TForce Freight (former UPS Ground Freight) and the U.S. brokerage unit of CFI, which are being retained by TFIRevenue, excl. FSC2,3 $477mm Age 7.0 yrs Age 2.0 yrs # of owner operators ~250 100% -
6 2021 truckload revenue ($ millions)1 Creating a top 10 player 3,526 3,374 1,900 1,789 1,568 1,457 607 1,304 1,101 1,000 734 689 607 574 555 526 521 494 474 440 526 189 0 500 1000 1500 2000 2500 3000 3500 #1 #2 #3 #4 #5 #6 #7 PF #8 #9 #10 #11 #12 #14 #15 #17 #18 #19 #20 4,098 3 1,323 2 8th Largest Truckload Carrier Note: 1 Rankings based on Transport Topics 2022 Top Truckload / Dedicated Carriers rankings, ranked by 2021 full year revenue including fuel surcharge; 2 Heartland pro forma revenue includes 2021 revenues from Heartland, CFI and Smith for illustrative purposes; combined tractors as of July 2022; 3 CFI revenue is pro forma adjusted and includes fuel surcharge and CFI Logistica revenues; 4 Based on company estimates; 5 Includes company drivers and owner-operators, except LSTR is 100% owner-operators; 6 Knight does not segregate irregular route revenue. Revenue includes irregular, dedicated, refrigerated, expedited, flatbed, and cross-border. Tractors include refrigerated, expedited, flatbed, and cross-border; 7 Landstar has 11,057 ICs, but not an allocation to van only. On a percentage of revenue basis, they likely have 7,700 ICs for van only; 9 Estimate of the pro forma impact of the deBoer acquisition; 9 Includes irregular route, regional, expedited, and temperature controlled. WERN provides revenue as net of FSC only 3rd Largest Irregular Route TL Player Heartland Express & Millis Transfer Smith TransportCFI 2021 irregular route truckload revenue ($ millions)4 2021 Revenue (including FSC) 2021 YE Tractors5 #1 KNX $4,0986 13,2006 #2 LSTR (Van Only) $3,526 ~7,7007 PF $1,395 5,550 #3 SNDR $1,115 ~5,3008 #4 USX $838 3,442 #5 JBHT $796 2,235 #6 WERN $7129 3,1059 2
WA OR ID MT ND SD MN WY UTNV CA AZ NM CO KS NE IA MO OK TX AR LA MS TN KY IN IL WI MI OH PA NY VT NH ME MA CT RI NJ DE MD DC VA WV NC SC GAAL FL BC BS SO SI CH CO NL TM DG ZA SL NA AG JA CL MI GR MX GJ QT HG DF MO PU TL VE OA CS TB CM QR YU 7 Uniting two highly complementary networks ◼ 80% of existing Heartland terminals are within 200 miles of the 25 largest cities in the US ◼ CFI provides complementary network, allowing Heartland to expand its presence throughout US and Mexico • 30+ drop lots • Opportunity to consolidate multiple drop lots, enhance driver amenities, insource maintenance • Top 3 through-trailer U.S./Mexico operator Pro forma company terminal locations Note: Map represents full network; Owned property flag may represent multiple facilities Heartland Network Heartland terminals Millis Training/terminals Heartland headquarters Millis headquarters HTLD & Millis joint Training/terminals CFI Network Service line headquarters Owned property Truckload Temp-Control Mexico Smith Transport headquarters
8 Attractive pro forma business profile ($ millions) Heartland Express & Millis Transfer & Smith Transport + CFI = Pro Forma Tractors1,2 ~3,200 ~2,350 ~5,550 Average age 1.9 yrs. 2.0 yrs. 2.0 yrs. Trailers1 Average age ~9,800 4.6 yrs. ~8,000 7.0 yrs. ~17,800 5.6 yrs. Revenue by Segment ◼ Truckload ◼ Temp-Control ◼ Logistica (Mexico) Commodity mix3 ◼ Retail ◼ Food & beverage ◼ Consumer ◼ Paper ◼ Auto ◼ Other Key Customers ◼ 1-5 ◼ 6-10 ◼ All others 100% 94% 4% 2% 40% 12% 19% 9% 3% 17% 37% 6%25% 10% 22% 39% 10%21% 6% 6% 19% 86% 8% 6% 35% 14% 52% 36% 9% 55% 25% 11% 64% Note: 1 Heartland & Smith tractor/trailer count as of 7/31/2022; CFI tractor/trailer count as of 7/31/2022 and includes leased tractors and trailers; 2 Includes Owner Operators; 3 Heartland commodity mix as of Q2 2022 and includes Smith; CFI commodity mix as of FY 2021
9 Track record of successful integrations and delivering results The Heartland difference Revenue Enhancement Operating ratio improvement Mid-90s Sub-80s At acquisition Today Significant improvement in operating ratio ✓ Network management across consolidated customer and driver base to enhance revenue per truck and manage unpaid miles ✓ Leveraged larger scale and purchasing power for tractors and trailers ✓ Capitalized on economies of scale at key vendors – fuel, tires, parts, and services ✓ Focused efforts on overall cost control and operating discipline MILLIS CASE STUDY 30% increase in revenue ex. FSC per tractor from Sept 2019 to July 2022
10 Delivering best-in-class cash flows and OR through cycle 82.9% 81.9% 84.0% 80.2% 78.9%3 2018 2019 2020 2021 LTM 2Q22 Heartland’s Adjusted Operating Ratio1,2 $147 $146 $179 $123 $1193 2018 2019 2020 2021 LTM 2Q22 Heartland’s Operating Cash Flows ($ millions) Note: 1 Operating Ratio calculated as Operating Expenses divided by Revenue before fuel surcharge; 2 Non-GAAP measure. Includes adjustment to remove gain on sale of terminal property in California sold in May 2022; 3 Reflects 1 month Smith financials following closing on 5/31/2022, and as a result, June actuals are reported within Heartland LTM 6/30/2022 results All transaction related indebtedness expected to be repaid within four years after closing
11 Key takeaways Creating a top 10 player in truckload and among the largest based on irregular route, asset-based truckload capacity CFI has strong north- south midwestern corridor and US-Mexico cross-border expertise Consolidated adjusted operating ratio of 85.0% or below within three years after the closing, consistent with prior integration track record Low pro forma leverage of 1.25x with plan to repay all transaction indebtedness within four years after closing Transaction is immediately accretive to EPS 1 2 3 4 5
S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L AppendixAppendix
13 Heartland operating ratio reconciliation Heartland historical standalone ($ millions) FY 2018 FY 2019 FY 2020 FY 2021 LTM Q2 2022 Revenue $611 $597 $645 $607 $640 Revenue, excluding fuel surcharge $526 $522 $584 $531 $539 Operating expenses 521 503 552 502 453 Less: fuel surcharge (85) (75) (62) (76) (101) Plus: gain on sale of terminal property1 0 0 0 0 73 Adjusted operating expenses1 $436 $428 $490 $426 $425 % operating ratio 85.3% 84.2% 85.5% 82.6% 70.7% % adjusted operating ratio1 82.9% 81.9% 84.0% 80.2% 78.9% Source: Company information and public filings 1 Non-GAAP adjustment. Excludes gain on sale of terminal property in California sold in May 2022