Heartland Express, Inc. · NASDAQ:HTLD
Heartland Express — Merger or Acquisition (November 2013)
24 slides from Heartland Express's merger presentation, Nov 12, 2013
Slide 1: Acquisition of Gordon Trucking, Inc.
Acquisition of Gordon Trucking, Inc. November 11, 2013
Slide 2: Safe Harbor
Safe Harbor This presentation contains forward-looking statements relating to the expected results of acquiring Gordon Trucking, Inc., (“GTI”), future capital expenditures and debt levels, expected synergies, and financial goals. Forward-looking statements are usually identified by words such as "an
Slide 3: Transaction Overview
Transaction Overview 3 TRANSACTION HIGHLIGHTS • Heartland Express, Inc. acquired 100% of Gordon Trucking, Inc. of Pacific, WA (“GTI”) in a stock purchase with IRC Section 338(h)(10) election • $300 million approx. closing enterprise value includes $40 million in stock, $110 million in cash, and $150
Slide 4: GTI Overview
GTI Overview Seattle area headquarters, with strong western U.S. presence Approximately 2,000 tractors, which includes ~ 100 owner-operators 77% dry van and dedicated TL, with niche refrigerated, heavy haul, and brokerage operations Regional Strategy Short to medium length of haul Custom
Slide 5: Heartland Terminal Network
5 Phoenix Jacksonville Atlanta Kingsport Memphis Columbus Carlisle Chester Iowa City Denver O’Fallon Dallas 82% East, 18% West Strong Eastern Presence, Growing West Heartland Terminal Network
Slide 6: Combined Terminal Network
6 Green Bay Indianapolis Pontoon Beach Pacific Clackamas Albany Boise Medford Lathrop Rancho Cucamonga Salt Lake City Phoenix Combined 58% East, 42% West 82% East, 18% West Strong Eastern Presence, Growing West 77% West, 23% East Strong Western Presence, Growing East Combined Terminal Network
Slide 7: Focus on Markets
Focus on Markets 7 Refrigerated 14.4% Other 1.2% Dry Van Truckload 61.6% Logistics 7.0% Dedicated 15.8% Line of Business Commodity Mix < 100 100 to 399 400 to 699 700 to 999 > 1000 26.6% 39.5% 15.2% 10.9% 7.9% Length of Haul Consumer 12.0% Food 27.0% Beverage 16.0% Paper and Packaging 17.5% Retail 1
Slide 8: Superior Customer Service
Superior Customer Service 8 Chep 2013 Dedicated Carrier of the Year General Mills 2012 Dry Carrier of the Year Georgia Pacific 2012 One Way Carrier of the Year Quaker 2012 Regional Carrier of the Year PepsiCo 2012 West Regional Carrier of the Year Lowes 2012 Gold Service Award Kellogg’
Slide 9: Intense Safety Focus
Intense Safety Focus Heartland Average = 17.3% GTI Average = 24.6% 9 • WTA Safe Carrier of the Year 2007-2012 • TCA Safest Carrier 100 million miles + • TCA Driver of the Year 2013 • 2012 American Trucking Association Safest U.S. Fleet • TCA National Safe Fleet of the Year 2009, 2010, 2012 • Safest
Slide 10: Safety Focus Similar to Heartland
Safety Focus Similar to Heartland 10 Heartland Gordon Crete Schneider JB Hunt Celadon Con-Way Covenant Knight Werner Marten CRST Swift US Xpress CR England USA Truck 1.3% 1.8% 2.1% 2.2% 2.4% 2.6% 2.6% 2.8% 3.1% 3.1% 3.1% 3.3% 3.3% 3.5% 3.6% 4.8% Weighted CSA Score Metric (smaller is better!) Source:
Slide 11: Leading in Sustainability
Leading in Sustainability 11
Slide 12: Drivers Among the Best
Drivers Among the Best 12 630 drivers awarded for safety in 2013 120 current drivers have over one million accident- free miles with GTI Washington State Driver of the Year awarded 6 times Below industry average turnover 2007 2008 2009 2010 2011 2012 2013 Increasing Fleet Growth Current Driv
Slide 13: Drivers That Shine!
Drivers That Shine! Mg seecmamens, Dan Poorman awarded Overall Company Driver of the Year 2012 in North America 75" Anniversary of the Truckload Carriers Association Convention in Las Vegas theme was "Generations of Change," it's hard to imagine a more appropriate winner. — Steve Gordon
Slide 14: Fleet Pride
Fleet Pride 14 Average age: 3.25 years Added 250 new trucks YTD Delivery of 400 total new trucks 2013 Average age: 5.51 years Net add of 430 trailers YTD Delivery of 500 total new trailers 2013 Tractors Trailers
Slide 15: Blue Chip Combined Customer List
15 Blue Chip Combined Customer List * No Customer more than 8.5% of total
Slide 16: Asset-Based Truckload Leaders
Asset-Based Truckload Leaders Asset-Based Carriers * 1. Schneider National 2. Swift Transportation 3. U.S. Xpress Enterprises 4. Werner Enterprises 5. Heartland Express /Gordon Trucking 6. Knight Transportation 7. Crete Carrier Corp. 8. Con-way Truckload 9. Celadon Trucking Services 10. Covenant Tra
Slide 17: Combined Financial Snapshot
Combined Financial Snapshot 17 Heartland GTI Estimated Adjusted Combined Revenue before fuel surcharge 425,140$ 343,505$ 768,645$ Fuel surcharge revenue 109,962 89,539 199,501 Total operating revenue 535,102 433,044 968,146 Operating expenses, ex. deprec. and (gain)/loss 392,700 377,643 (1) 770,343
Slide 18: Code Section 338(h)(10) Benefit
Code Section 338(h)(10) Benefit GTI was an “S” Corporation (Most income taxes pass through to owners) Section 338(h)(10) election treats the transaction as an asset sale and liquidation Allows step-up of tax basis for depreciation of capital assets ~ $191 million tax basis in revenue equipme
Slide 19: Synergy Goal – Minimum $30 million
Synergy Goal – Minimum $30 million Major areas Optimize staffing and locations Maintenance programs improved and more insourced repairs Insurance programs Purchasing power Yield improvement/dispatch efficiency Earn-out strongly linked to consolidated adjusted EBIT goals to align all pe
Slide 20: Synergy Details
Synergy Details Facilities • Eliminate drop lots where overlap • Combine Phoenix service center • Use regional clusters to consolidate some management functions • Savings in rent, utilities, taxes, insurance, security Maintenance • In-source repairs and maintenance over combined network (helps Heart
Slide 21: Stockholder Perspective
Stockholder Perspective ~ $300 million closing enterprise value ~ 5.0x adjusted EBITDA, based on LTM September 2013 ~ 4.0x after considering NPV of expected future cash tax savings from Section 338(h)(10) election Strong alignment of Gordons with other stockholders $20 million earn-out rep
Slide 22: Appendix – Financial Information
Appendix – Financial Information 22 Red, White and Blue Across America! Two companies with great traditions come together to build an industry leading force in serving the top shippers in America, with the best CSA safety scores in the nation, and a relentless focus on employee success.
Slide 23: GTI Adjusted EBITDA
GTI Adjusted EBITDA This presentat ion contains EBITDA, Adjusted EBITDA, and Adjusted Operat ing Ratio, which are " non-GAAP financial measures" as that term is defined in Regulat ion G of the Securit ies Exchange Act of 1934. In accordance with Regulat ion G, Heart land has reconciled these non-GAA
Slide 24: GTI Adjusted Operating Ratio
GTI Adjusted Operating Ratio (DOLLARS IN THOUSANDS) (Unaudited) Estimated Twelve Months Ended September 30, 2013 Total revenue 433,045$ Total operating expenses 413,161 Operating Ratio (Total operating expenses/total revenue) 95.4% Total revenue 433,045 Less: Fuel surcharge revenue 89,539 Revenue ex
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